(Latinvex, Miami, 24 April 2024) Milbank represented a consortium of export credit agencies and international lenders in connection with the $2.5 billion project financing for the $4.5 billion expansion of the Centinela copper mine in Chile and Mexican lending company MNJ Capital on a $500 million secured credit facility; Clifford Chance advised the lenders on a $500 million secured loan to Colombian investment manager Grupo SURA; Cleary Gottlieb represented Mexican glassmaker Vitro in a $100 million term loan with Netherlands-based ING Bank; Simpson Thacher represented Brazilian technology platform Brandlovrs Inc. in connection with an equity investment round led by Brazilian venture capital firm Kaszek and Arnold & Porter advised Canada-based Vela Industries Group in the acquisition of Chile-based fleet management, machine performance, and telematics software and hardware provider Samtech. Norton Rose Fulbright advises lenders on ECA-backed financing for two new LNG-powered ‘World Class’ cruise vessels for MSC Cruises.
Oil & Gas
China invites Uganda for talks on crude oil pipeline project financing
(Dispatch, Kampala, 5 April 2024) Uganda’s presidency confirmed that China has extended an invitation to Uganda’s Energy minister to visit Beijing for discussions on the country’s $5 billion 1,445-km (898-mile) crude oil pipeline project. This development offers hope for progress in Uganda’s efforts to secure Chinese financing for the pipeline, crucial for kickstarting crude production from oilfields discovered back in 2006. The potential involvement of Chinese funding gains significance as Western banks have refrained from financing the project following pressure from environmentalists, citing concerns over its impact on global carbon emissions. Prior discussions between Uganda and the Chinese export credit agency SINOSURE regarding potential funding for the project had been ongoing. However, several deadlines for concluding these talks had passed without reaching a resolution. Meanwhile, construction activities for the pipeline have commenced, involving the transportation of pipes and other materials to designated sites in both Tanzania and Uganda.
Trafigura bags US$560mn ECA-backed deal to supply gas to Japan
(Global Trade Review, London, 4 April 2024) Global commodity trader Trafigura has secured a US$560mn facility from Japan’s export credit agency and SMBC that will fund the delivery of natural gas to the East Asian country. The transaction, signed on March 27, comprises a US$390mn loan from the Japan Bank for International Cooperation (JBIC) alongside co-financing from SMBC worth approximately US$170mn. The deal, the latest in a spate of export credit agency (ECA)-backed transactions for major commodities traders, will finance the import of liquefied natural gas (LNG) into the Japanese market.
Public Enemies: Assessing MDB & G20 IFIs energy finance
(Price of Oil, Washington, 9 April 2024) This new report, “Public Enemies: Assessing MDB and G20 international finance institutions’ energy finance” looks at G20 country and MDB traceable international public finance for fossil fuels from 2020-2022 and finds they are still backing at least USD 47 billion per year in oil, gas, and coal projects. The findings reveal that the wealthiest G20 nations are the primary culprits behind continued investments in fossil fuels, with Canada, Korea, and Japan emerging as the worst offenders. The report also highlights where there has been momentum to end international public finance for fossil fuels, finding that if countries keep their existing commitments to end not only coal finance but also oil and gas finance, it would shift $26 billion annually out of fossil fuels by the end of 2024. Download the 38 page Report
ECAs continue to debate fate of Mozambique LNG project
(Global Trade Review, London, 17 April 2024) Financial backers are continuing to assess whether they should reaffirm their support for a multi-billion-dollar LNG project in Mozambique as operator Total looks to restart work. The project was suspended in 2021 after insurgents known as the Islamic State Mozambique attacked Palma, a town in the northern province of Cabo Delgado. Total declared force majeure and withdrew its staff from the nearby Afungi project site. But earlier this year, the French energy major announced its intention to restart the project, meaning its financial partners are also expected to confirm their commitment. A coalition of 124 civil society groups, including BankTrack and Friends of the Earth, have called on financial backers to reconsider their support of the project and urged them to withdraw their funding due to “the continuation of insurgent attacks and the failure of the Mozambican government and TotalEnergies to tackle the drivers of the conflict”. They also cite “ongoing human rights violations” and “irreversible climate and environmental impacts” as reasons to end support. The project is backed by a range of public and private financial institutions, including eight export credit agencies (ECAs) and 15 commercial banks. The ECAs involved are the Export-Import Bank of the United States (US Exim), UK Export Finance (UKEF), the Export-Import Bank of Thailand, Italy’s Sace, Japan’s Nippon Export and Investment Insurance (Nexi), the Export Credit Insurance Corporation of South Africa (ECIC), Atradius DSB of the Netherlands and the African Export-Import Bank (Afreximbank).
ECAs continue to favour fossil fuels over clean energy
(Global Trade Review, London, 10 April 2024) Export credit agencies (ECAs) in the world’s largest economies are still pumping billions of dollars more annually into fossil fuels than clean energy projects, fresh data shows, spurring calls for reform within the OECD Arrangement. ECAs in the G20 group of nations provided US$96bn towards fossil fuel projects between 2020 and 2022, finds a report published this week by campaign groups Oil Change International and Friends of the Earth. The US$32bn per year supplied by these institutions represents a 20% drop compared to the US$40.1bn yearly average from 2018 and 2020, figures show, highlighting efforts to reduce fossil fuel exposures. Yet the volume of ECA financing directed towards fossil fuels is still six times larger than that allocated to clean energy, which averaged US$5bn annually during this same period.
EU ECA fossil fuel phase-out tracker reveals Member States are lagging commitment to Paris Agreement goals in export credit policies
(Both Ends, Utrecht, 4 April 2024) The EU ECA fossil fuel phase-out tracker sheds light on the concerning lack of harmony between EU Member States’ export credit climate policies. The report was updated on April 17th, following new responses by Member States on their respective policies. Despite increasing global efforts towards sustainability, export credit agencies (ECAs) play a key role in providing loans, guarantees and insurance backed by public budgets to companies from their countries, including polluting industries. At present, ECAs continue to be the world’s largest international public financiers of fossil fuels, sorely misaligned with climate goals. In March 2022, during the French Presidency of the Council of the EU, Member States made a crucial commitment to end public finance through ECAs for fossil fuel energy projects by the end of 2023. Recent findings reveal that half of the 23 EU member states with ECAs are fulfilling their commitments, while the others lag behind. Our findings show that only eight EU Member States, such as Denmark, France and the Netherlands, have fully implemented policies to phase out public support for fossil fuel projects. Conversely, five countries, including Bulgaria, Estonia, Lithuania, Poland and Portugal, have no formal policy but claim not to finance such projects. However, a worrying trend is emerging, with 10 Member States failing to honour their commitments. Some, such as Croatia, the Czech Republic and Greece, have yet to establish a policy to phase out export credit support for fossil fuels. Others, such as Austria and Italy, have published policies that are not in line with climate science and the mandatory 1.5°C pathway.
JIBC provides US$3.3 billion to harmful Asian LNG projects
(Friends of the Earth Japan, Tokyo, 26 April 2024) From the straits of the Philippines to the coasts of the United States, Japan’s fossil fuel financing is harming the environment, climate, and communities at a time when the world is reeling from the ever-intensifying heat waves, floods, droughts, and typhoons brought by the climate crisis. While the world must phase out fossil fuels, as affirmed by the outcomes of COP28, Japan continues to funnel billions of dollars to liquefied natural gas (LNG) projects through its public institutions like the Japan Bank for International Cooperation (JBIC). In Southeast Asia alone, JBIC provided USD 3.31 billion to LNG projects that harm communities, derailing the region’s just transition to renewable energy. The Natural Resources Defense Council notes that “Japan stands out as one of the world’s top providers of public finance for gas, and the world’s largest provider of international public finance for LNG export capacity, providing $39.7 billion for projects built from 2012 onwards. Just in the two weeks ahead of Kishida’s meeting with Biden, Japan approved over $2.7 billion in financing for new gas projects, such as the controversial gas field in Australia, Block B gas project in Vietnam, the San Luis Potosi and Salamanca gas plants in Mexico, and financing to import LNG.”
Pentagon pitched EXIM Australian nickel investment
(Australian Financial Review, Washington, 8 March 2024) The Pentagon held discussions with Resources Minister Madeleine King about how it could co-invest in an Australian nickel project alongside the Australian government to help mitigate the impact of a glut undermining future critical minerals self-reliance. Ms King met with the under-secretary of defence for acquisition and sustainment, Bill La Plante, at the Pentagon on Thursday (Friday AEDT) to discuss options available following a collapse in the nickel price that has led to the closure and write-down of Australian projects. “The options around collaboration of government financing agencies with those out of America might be EXIM, or under the Defence Production Act,” she said. The Export-Import Bank is the export credit arm of the US federal government.
Ineos Receives UKEF Backing for Europe’s Largest Petrochemical Plant
(ChemAnalyst News, New York, 7 March 2024) In a significant development, the UK government has committed to providing a financial guarantee of EUR 700 million to Ineos, led by billionaire Jim Ratcliffe, for the construction of Project One. This ambitious project is poised to become Europe’s largest petrochemical plant in three decades. While financial details emerge, environmental groups are gearing up for a legal battle to halt construction, labelling the plant a potential “carbon bomb” that could escalate emissions and contribute to plastic production and waste. The financial backing from the UK government for Ineos’ Project One comes to light amidst growing environmental concerns and impending legal challenges. Detractors of the project view it as a significant contributor to carbon emissions and a catalyst for increased plastic production and subsequent waste. These concerns have prompted environmental groups to prepare for legal action aimed at preventing the construction of the plant.
