(TFX News, London, 22 December 2023) ECAs have looked to adapt their support for buyers and exporters in a high interest rate environment, revisiting and revamping older policies. The success of this evolution can be seen in the data – export finance is set for a record-breaking year. Greater flexibility brings diversification in financing instruments – the rise of untied support schemes for large corporates has continued with major new deals involving Trafigura, Siemens Energy and Gunvor. This has also given ECAs a prominent new geopolitical role. Realpolitik has driven ECAs into the world of energy security and they must now be more proactive than ever in their support for national interest. Reforms to the OECD Arrangement on Officially Supported Export Credits arrived after years of negotiation and debate. While the impact of these changes will only be truly felt over the coming year, the market has reacted with optimism. Tenors for large-scale renewables projects have been pushed out to up to 22 years while most other projects can now go up to 15 years. The premium rate curve has also been adjusted for obligors with high credit risk ratings. These changes increase the affordability of the ECA product at a time of economic turmoil. However, questions remain: how will ECAs balance their portfolios as longer maturities become the norm? Should the Arrangement set a common position on support for fossil fuel projects? Can ECAs plug the funding gap as critical minerals make headlines? The phrase ‘critical mineral’ has now become standard parlance as countries look to secure the green energy transition with a steady supply of metal. However, the mining industry continues to suffer from a chronic lack of investment. ECA financing is increasingly available for projects that are deemed significant for national security. Over the course of 2023 ECAs supported several project financings including the Kathleen Valley lithium deal and the Hybar rebar steel mill facility. Expect to see this deal flow rise over 2024 if ECAs can make good on their expressions of interest. Talks are under way for three new mines led by Cerrado Gold, while BNP Paribas will lead the financing for Vulcan Energy’s zero-carbon lithium project.
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ECAWatch Newsletter 12
PPIB Announces $2 Billion Financial Close of Thar Coal-Fired Plant
(ProPakistani, Islamabad, 14 December 2023) The Private Power and Infrastructure Board (PPIB) announced the $2 billion financial close of the Thar coal-fired power project, which is currently under Chinese management. The project’s main sponsor is Shanghai Electric Group Corporation, while the coal supplier from Thar Block-1 is Sino-Sindh Resources Limited (SSRL). The ICBC, China Development Bank, Bank of Communications Co. Limited, China Minsheng Bank Corporation, Postal Savings Bank of China Co Limited, and Agriculture Bank of China are the main sponsors while Sinosure, China’s premier provider of export credit insurance, was the insurer. The project, which has a power capacity of 1,320MW, is part of the China-Pakistan Economic Corridor (CPEC). This plant brings the total installed capacity of five commissioned Thar coal-based power plants to 3,300MW.
Türk Eximbank expected to provide exporters $41 billion in 2023
(Daily Sabah, Istanbul, 19 December 2023) The funding that Türkiye’s state-owned financial institution providing banking services to exporters extended this year is expected to reach $41 billion (TL 1.19 trillion) by the end of 2023, its chairperson said Tuesday. Export Credit Bank of Türkiye (Türk Eximbank) has provided $38 billion from January through November, General Manager Ali Güney said, adding that they supported 16,800 exporters, with the small and medium-sized enterprises (SMEs) ratio reaching 84%. “In 2022, we supported a total of 15,440 exporters, of which 81% were SMEs, while in 2023, the number of supported exporters increased to 16,800, with an SME ratio of 84%,” Güney told Anadolu Agency (AA). In another Daily Sabah article of 29 December, it was noted that Türk Eximbank had become a shareholder in the Africa Finance Corporation (AFC), the continent’s leading infrastructure solutions provider. Türk Eximbank’s first investment in an African entity makes it the first non-African sovereign shareholder in the AFC, it said in a statement.
At COP28, Export Development Canada joined Net Zero Alliance Despite Fossil Financing
(Environmental Defense, Toronto, 4 December 2023) At COP28, Export Development Canada (EDC) joined other export credit agencies to launch the Net-Zero Export Credit Agencies Alliances (NZECA), an alliance of international public finance institutions committed to reaching net-zero greenhouse gas emissions by 2050. However, EDC continues to provide public financing to oil and gas companies. In 2022, EDC provided around CAD $20 billion in public financing to oil and gas companies (which includes $12 billion for the Trans Mountain Expansion, or TMX, pipeline). So far this year, they have provided around CAD $12 billion (which includes $6 billion in loans for the TMX pipeline). “Crown corporation Export Development Canada has no place in a net zero alliance. Canada’s export credit agency continues to provide tens of billions each year to oil and gas companies, using publicly-back money to finance the companies and the activities that are fueling the climate crisis. Years of climate promises, including their own net zero commitment, have not made a difference.” said Julia Levin, Associate Directorof Environmental Defense in Dubai.
ECAs supporting billions in global trade form net-zero alliance facing civil society scepticism
(UNEP, Dubai, 4 December 2023) At COP28 today, 8 leading export credit agencies, in partnership with the University of Oxford, Future of Climate Cooperation, and the UN Environment Programme Finance Initiative (UNEP FI) launched the UN-convened Net-Zero Export Credit Agencies Alliance (NZECA), the first net-zero alliance comprising public finance institutions globally. In working to deliver net-zero economies by 2050, the NZECA will help decarbonise global trade and facilitate joint action from public and private finance. Combined, these ECAs supported an estimated US$120 billion in global trade in 2022 alone, providing finance and other services such as insurance and guarantees to facilitate local companies’ international exports. The export credit industry is hugely influential globally, with up to $28 trillion – comprising 80 to 90 per cent – of international trade relying on export financing, much of it provided by governments via export credit agencies and export-import banks. But NGOs note that a study by Net Zero Tracker found the bulk of “net zero” commitments from fossil fuel companies were meaningless as they either included no short-term emissions reduction plans, or did not fully cover scope 3 emissions (that is, the pollution released when a company’s products are used). Net Zero hopes/assumes that in the future technology will come along that can suck the carbon out of the atmosphere so that they can just keep going as it is until then.
Norway joins 40-signatory partnership to end international public finance for fossil fuels
(Oil Change International, Washington, 2 December 2023) Norwegian Prime Minister Jonas Gahr Støre announced today that Norway has joined the Clean Energy Transition Partnership (CETP, sometimes called the Glasgow Statement) at the UN COP28 climate summit in Dubai. Boost for CETP which now boasts 40 signatories (including US, Canada, and many EU countries), shifting billions per year out of fossil fuels to clean energy. Norway – as a major oil & gas producing nation – boosts the initiative by joining, building momentum at the OECD level to create new rules to end international fossil finance across the OECD. This move from Norway bolsters an international campaign to adopt new rules at the OECD (the group of the world’s wealthiest countries) to end export finance support for fossil fuels. OECD countries supported fossil fuel exports by an average of USD 41 billion from 2018 to 2020, almost five times more than clean energy exports. The EU, Canada, and UK have tabled a proposal to end this finance. Having signed onto the CETP, Norway is now expected to deliver on the CETP’s commitment to “driving multilateral commitments in international bodies” by aligning with the UK, EU, and Canada in the push for oil and gas restrictions at the OECD.
Texas Gulf Coast communities speak out against Japanese ECA backed LNG development
(Oil Change International, Washington, 28 November 2023) Representatives of Friends of the Earth Japan & Oil Change International traveled to Texas & Louisiana in early November for a week-long tour, organized by Texas Campaign for the Environment, to witness & learn about the impacts of LNG development on local communities. The Japanese government is the largest global financier of LNG export terminals, providing 50% of international public finance, or $39.7 billion, for LNG export capacity built from 2012-2022, as well as projects under construction or expected to be built by 2026. In the Gulf South, Japan’s export credit agencies, the Japan Bank for International Cooperation and Nippon Export and Investment Insurance, provided $3.7 billion in financing for the Freeport LNG terminal & $4.5 billion for Cameron LNG in 2014. The Japanese & Korean governments are also rolling out plans to develop new ammonia & hydrogen production & export facilities globally including in Lake Charles & Corpus Christi. These projects would worsen the climate crisis & subject communities to further exploitation & harm. The proliferation of LNG projects & petrochemical facilities, coupled with regulatory failure to enforce environmental standards, have allowed the fossil fuel industry to severely pollute the air & water without consequence. Residents of Port Arthur & other communities on the Gulf Coast suffer from high rates of cancer, respiratory infections & migraines. Water security is also an issue. Industrial water use is prioritized over the needs of local residents. Despite the serious health and safety concerns with the Freeport LNG terminal, Japan’s export credit insurance agency NEXI is planning to support the expansion of the Cameron LNG terminal located on Calcasieu Lake in Louisiana.
EU adopts new package of sanctions against Russia
(Brussels Times, Brussels, 17 December 2022) The Council of the European Union (Council of Ministers) adopted on Friday a package of new measures intended to step up pressure on Russia in response to its ‘continuing war of aggression against Ukraine and the gravity of the current escalation against civilians and civilian infrastructure’. The EU will reinforce the sanctioning of investments by additionally prohibiting new investments in the Russian mining sector, with the exception of mining and quarrying activities involving certain critical raw materials. Export credit guarantees for investments in Russia have already been covered by previous sanction packages.
Blocking a Carbon Bomb: Tiwi Islanders prevent $4.7 billion Barossa offshore gas project in Australia
(Oil Change International, Washington, 14 December 2022) In a landmark decision in September, the Federal Court of Australia ruled that Santos Ltd, one of the world’s top 20 largest oil and gas companies, would not be allowed to drill in the Barossa gas fields off the coast of northern Australia. The Court ruled that Santos had failed to consult Tiwi Traditional Owners. Santos appealed the decision, but this was in vain. Two weeks ago, the appeal was rejected, further solidifying legal victory for the Tiwi Islander Plaintiffs. The Barossa project alone included over $1 billion USD in public finance support from the Japanese and Korean governments’ export credit agencies (ECAs), Japan Bank for International Cooperation (JBIC), Export-Import Bank of Korea (KEXIM) and Korea Trade Insurance Corporation (K-Sure). Santos and the Australian Government assured these ECAs that the project approvals were solid, even after Tiwi Island people had warned them about lack of free, prior and informed consent, and despite the fact that extraction from these wells would be completely at odds with Australia’s climate obligations.
Poseidon Principles: [Only] 7 of 28 banks in line with IMO’s GHG reduction target
(Offshore Energy Biz, Schiedam, 15 December 2022) Out of the 28 financial institutions reporting their emissions data in the third edition of the Poseidon Principles Annual Disclosure Report 2022, seven banks are aligned with the IMO’s ambition of halving shipping’s GHG emissions by 2050. The Poseidon Principles are a global framework for assessing and disclosing the climate alignment of financial institutions’ shipping portfolios pioneered in 2019 by Citi, Societe Generale, and DNB with the support of the Global Maritime Forum. The voluntary regulatory framework aims to accelerate the implementation of the sector’s green agenda while charting a path forward for banks to decarbonize their own portfolios as well.
