(Oil Change International, Washington, 1 November 2022) OCI’s new report “At a Crossroads: Assessing G20 and MDB international energy finance ahead of stop funding fossils pledge deadline” looks at G20 country and MDB traceable international public finance for fossil fuels from 2019-2021 and finds they are still backing at least USD 55 billion per year in oil, gas, and coal projects. This is a 35% drop compared to previous years (2016-2018), but still, almost twice the support provided for clean energy, which averaged only $29 billion per year. ECAs were the worst public finance actors, providing seven times more support for fossil fuels than clean energy – at least $34 billion per year for fossil fuels and just $4.7 billion for clean energy. The report analyzes finance from OCI’s open-access database, and Public Finance for Energy’s Database (energyfinance.org), which have been updated alongside the release of this report. It tracks financial flows to fossil fuels and clean energy from G20 bilateral development finance institutions (DFIs), export finance agencies (ECAs), and the multilateral development banks (MDBs). The report from OCI and Friends of the Earth US has been endorsed by a long list of international civil society organizations.
ECAWatch Newsletter 11
Shipowners see growing benefits of Chinese leasing and trade finance
(Lloyd’s List, London, 23 November 2021) The shipping industry is going to rely more on Chinese financing as those vessels that fall short of environmental standards become less attractive for traditional lenders, executives say. Shipowners say China is important for finance when it comes to renewing and expanding fleets, and would play an instrumental role for those vessels that will soon become unfinanceable by traditional banks.
The push to net zero – Can project finance fuel investment in the Hydrogen market?
(Lexology, London, 18 November 2021) Discussion of hydrogen fuel has become increasingly prevalent over the past few years. The increased push to reach net zero targets, as highlighted in the Government’s newly published ‘Net Zero Strategy: Build Back Greener’, has brought hydrogen back into popular discussion. New technological innovations look to be making hydrogen energy cleaner, cheaper and more accessible for industry. This may be opening new doors for the element. How will this unprecedented scale of energy innovation investment be funded? Historically, groundbreaking energy technologies have relied upon significant government subsidies, supported by bankable project financing. Can hydrogen replicate the project finance model? If not, where will the money come from? The current funding for investments into hydrogen technologies is found largely in government or university research and development grants and corporate venture equity. There is very little hydrogen being funded through debt finance. Hydrogen, however, is an energy source that still requires significant investment; both in production (for example, developing effective and cost-viable carbon capture and storage facilities to accompany blue hydrogen production) and in delivery and use (for example, in getting gas infrastructure and networks, consumer products and energy storage ready to facilitate a hydrogen market).
Lithuania to get U.S. EXIM trade support as it faces China fury over Taiwan
(Reuters, Vilnius, 19 November 2021) Lithuania will sign a $600 million export credit agreement with the U.S. Export-Import Bank next week, Economy Minister Ausrine Armonaite told Reuters, days after China warned it would “take all necessary measures” after Lithuania allowed Taiwan to open a de facto embassy. China demanded in August that the Baltic state withdraw its ambassador to Beijing and said it would recall China’s envoy in Vilnius after Taiwan announced its office would be called the Taiwanese Representative Office in Lithuania.
UAE’s ADNOC secures $3bn loan from JBIC and 4 other banks
(Arab News, Jeddah, 18 November 2021) The Abu Dhabi National Oil Company (ADNOC) signed a $3 billion loan agreement with Japan’s export credit agency and four other lenders, Reuters reported citing JBIC. The Japan Bank for International Cooperation (JBIC) is providing $2.1 billion and Sumitomo Mitsui Banking Corporation (SMBC), the Tokyo branch of HSBC, Mizuho and MUFG are providing the rest, JBIC said in the statement. “This facility is intended to provide necessary support to ADNOC in ensuring stable imports of crude oil by Japanese companies,” JBIC said.
US EXIM focus on Africa
(JD Supra, Sausalito, 15 November 2021) Africa is a priority for Biden administration agencies the International Development Finance Corporation and EXIM. As of the end of 2020, DFC had invested approximately US$8 billion (approximately 25 percent of its total portfolio) across more than 300 projects on the continent. During 2009 – 2019, EXIM supported US$12.4 billion of transactions to sub-Saharan Africa,11 and the region is home to EXIM’s largest commitment to date. Moreover, EXIM is a long-time player in Africa, with experience dating back to the 1940s. The agency is currently open for business in 44 of the 49 countries across sub-Saharan Africa. In March 2020, it approved a US$91.5 million transaction for electrification in Senegal.12 Two months later, the agency approved its largest transaction to date: a US$4.7 billion credit (direct loan) supporting exports of US goods and services with more than 60 US suppliers to assist the development and construction of an integrated liquefied natural gas project on the Afungi Peninsula in northern Mozambique.13 EXIM made its commitment alongside those from almost 20 other ECAs and DFIs, which offered an aggregate of US$16 billion in loans.
U.K. to Set 1 Trillion Pound Post-Brexit Export Target
(Bloomberg, London, 14 November 2021) The U.K. will announce a new export target this week of 1 trillion pounds ($1.3 trillion) per year by 2030 as part of Prime Minister Boris Johnson’s move to overhaul its export strategy to show the benefits of leaving the European Union. A new “made in U.K., sold to the world” campaign will also be launched, as well as initiatives to boost overseas trade by providing export-linked loans and access to expertise and advice, the newspaper said. U.K. Export Finance, the government’s export credit agency, will be allowed to back larger loans for foreign or domestic companies that want to start shipping from the U.K., the Financial Times said, in a bid to attract foreign investment to the country. Previous Conservative governments in the U.K. failed to achieve the same export target by 2020, and the country only increased overseas sales to 689 billion pounds by 2019 before the pandemic hit.
Russian ECA Helps Bangladesh enter nuclear power age
(Eurasia Review, Albany, 13 November 2021) Bangladesh initiated its nuclear program in 2013 by signing a treaty with Russia that opened up a new avenue in their bilateral cooperation. At that time, the two countries signed a state export credit agreement to implement a nuclear project in Bangladesh. The work on the Rooppur plant started with the direct financial and technical cooperation of Russia. There are garment factories in Bangladesh which are producing in huge quantities. So, Bangladesh needs electricity. In 2009 the power generation was 3200 MW; now it has exceeded 20,000 MW. Two 1200-MW capacity reactors are being set up at Rooppur. Once the first nuclear power plant in Bangladesh begins production, it will kick-start another developmental revolution in the country.
International Chamber of Commerce proposes new framework for sustainable trade finance
(Reuters, London, 10 November 2021) The standard setter for global trade finance flows has proposed a new set of rules to define sustainability in the trade finance arena, worth some $5 trillion a year, an executive told Reuters. While governments and business sectors move quickly to set guidelines for some types of sustainable finance, there are no standards for trade finance. Those rules would apply to a third of global trade. Agreeing on a common rulebook could help direct more trade flows toward efforts that reduce climate-warming emissions and that also meet the United Nations’ development goals, said Andrew Wilson, policy director at the International Chamber of Commerce (ICC).
Russians Discuss Increased Engagement With Africa
(Eurasia Review, Albany, 10 November 2021) Russia’s weak economic presence in Africa has become a thing of concern for some experts in the country and they wonder why the nation is not aggressive with this like its ally, China. Smaller countries such as Turkey is visibly broadening its economic influence and so are a number of Gulf States. In July 2021, participants at the Association of Economic Cooperation with African States (AECAS), established under the aegis of the Secretariat of the Russia-Africa Partnership Forum (RAPF), agreed that lack of financial support was the major reason for this. The forum, which had in attendance some leading Russian companies and banks, discussed an effective system of financing projects and supporting investment in Africa. Nikita Gusakov, Head of the Russian Export Credit and Investment Insurance Agency (EXIAR), reiterated that Africa was a priority for the agency, outlining a number of deals that EXIAR has been involved in on the continent.
