(Science X, Isle of Man, 5 December 2018) Even as China struggles to curb domestic coal-fired power and the deadly pollution it produces, the world’s top carbon emitter is aggressively exporting the same troubled technology to Asia, Africa and the Middle East, an investigation by AFP has shown. The carbon dioxide (CO2) emissions from these Chinese-backed plants could cripple global efforts to rein in global warming caused by the burning of fossil fuels—especially coal, analysts warn. “China is a world leader in terms of embracing the policy and investment needs to progressively decarbonise its economy,” said Tim Buckley, director of energy finance studies at the Institute for Energy Economics and Financial Analysis (IEEFA). “But internationally, China continues to invest in a range of coal project in direct contradiction to its domestic energy strategy.” China is not alone in peddling the most carbon-intensive of fossil fuels beyond its borders. As of last month, South Korea and its export credit agencies were positioned to back 12 GW of coal-fired power abroad, and Japan was behind another 10, according to a research note from Han Chen, international energy policy manager at the Natural Resources Defense Council.
ECAWatch Newsletter 12
Peru closes largest-ever ECA financing for state energy company
(Southern Heald, 12 December 2018) State-owned petroleum company Petroperú has closed a US$1.3bn export credit agency-backed financing as part of its US$5bn Talara refinery modernisation project. Deutsche Bank acted as facility agent for the syndicate, which also involves BBVA, BNP Paribas, Citi, HSBC, JP Morgan and Santander as initial mandated lead arrangers, underwriters and bookrunners. It is the largest-ever financing covered by the Spanish export credit agency, Cesce, and is the largest ECA financing arranged in Peru.
BBVA signs first green-certified credit with cover from Spanish ECA
(Global Trade Review, London, 30 November 2018) BBVA has granted a five-year €16.5mn loan to a hydroelectric project in Colombia with backing from Cesce, Spain’s export credit agency (ECA). The operation has been certified as “green” by consulting firm Aecom in line with the Green Loan Principles and the UN Sustainable Development Goals. According to the bank, this is the first credit with Cesce to receive this certification.
Saudi ECA supports Pakistan economy
(Dunya News, Islamabad, 29 November 2018) Finance Minister Asad Umar on Thursday said the government is committed to improving the fundamentals of economy and achieving sustainable and balanced economic growth. The secretary also briefed the meeting about the economic reforms which the Economic Advisory Council has approved. The meeting also discussed the export credit facility offered by Saudi Arabia envisaging the purchase of crude oil and or other petroleum product (s) of up to USD 3.24 billion per annum on a 12 month deferred payment basis.
Philippines edges towards procurement of Turkish combat helicoper
(Janes Defence News, London, 29 November 2018) The Philippines Department of National Defense (DND) has edged closer to a decision to procure the Turkish Aerospace Industries (TAI) T129 ATAK multirole combat helicopter to meet a long-standing requirement in the Philippine Air Force (PAF). The acquisition is expected to be facilitated through a government-to-government deal between the Philippines and Turkey, possibly involving credit provided by Turk Eximbank, Turkey’s official export credit agency.
Boeing Sees More Growth in Aircraft Financing Demand
(American Machinist, Cleveland, 9 December 2018) Boeing is forecasting strong demand for new commercial airplanes will continue in 2019, with deliveries by major OEMs totaling about $143 billion, and growing to $180 billion by 2023. The commercial-aircraft market’s strong fundamentals also are drawing new participants and investment in used aircraft. The figures and projections are presented in Boeing’s yearly Current Aircraft Finance Market Outlook report, a five-year forecast of the commercial aircraft sector’s financing trends. Boeing predicts that new-aircraft deliveries will be funded by commercial bank debt, capital markets, and cash. Aircraft leasing agents, which represent over 40% of commercial aircraft ownership now, will be supported by historically low financing costs. Export credit also will remain a critical funding source, particularly in the U.S., Boeing added. The JD SUPRA news service has pointed to three new developments in aircraft financing and leasing, AFIC, Balthazar and GATS, which have grown out of the recent drying up of export credit support for Boeing and Airbus financings.
Ottawa offers $1.6B EDC backstop for energy sector as political tensions with Alberta fester
(CBC News, Ottawa, 18 December 2018) The federal government is promising more than $1.6 billion — most of it in loans — to support the ailing energy sector, but it’s unlikely to ease the heightened political tension between Ottawa and Alberta. Natural Resources Minister Amarjeet Sohi and International Trade Diversification Minister Jim Carr made the announcement in Edmonton this morning. The bulk of the money — $1 billion in commercial support — comes from Export Development Canada, the national export credit agency. It’s meant for oil and gas exporters who want to invest in new technologies and diversify their markets.
Australia’s secret arms deals with nations fighting Yemen’s bloody war
(ABC News, Sydney, 13 December 2018) The Australian Government has approved the export of dozens of shipments of military items to Middle Eastern countries embroiled in the bloody Yemen war, a conflict dogged by accusations of war crimes and indiscriminate civilian killings. Australia is exporting to the United Arab Emirates and Saudi Arabia. FOI documents reveal Canberra is attempting to ramp up Australia’s arms exports as part of a new defence strategy. Internal Defence Department documents obtained under Freedom of Information (FOI) and from parliamentary hearings reveal since the beginning of 2016, Canberra has granted at least 37 export permits for military-related items to the United Arab Emirates, and 20 to Saudi Arabia. They are the two countries leading a coalition fighting a war against Houthi rebels in the Middle East’s poorest nation, Yemen. Janes defence news service notes “The Australian government announced on 17 December that it will provide state credit to support two local companies’ efforts to export radars systems and patrol boats… this being the first time that the export credit system – officially termed the ‘Defence Export Facility‘ – has been utilised after being established earlier this year. A major milestone has been reached on Australia’s journey to become a top 10 global defence exporter, said a government statement.” Australian Defense News notes that “There has been a 48% increase in defence export applications received in the first quarter of FY 2018/19 over the whole of the last financial year.”
China and US DFIs/ECAs to battle for influence in African infrastructure lending
(Infrastructure News, Johannesburg, 3 December 2018) The battle for influence on the continent between Development Finance Institutions (DFIs) and Export Credit Agencies (ECAs) from China and the United States is set to heat up over the next decade in a fierce competition that could help Africa bridge its vast infrastructure gap faster than expected. This is according to new research from global law firm Baker McKenzie. Together with data provider IJGlobal the report, titled A Changing World: New trends in emerging market infrastructure, shows that development finance lending from state-backed institutions is the most important component of infrastructure funding in sub-Saharan Africa. The report further notes that China put US$8.7 billion in sub-Saharan Africa infrastructure projects in 2017 alone, while the US recently set up a new US$60 billion agency [USIDFC] to invest in developing countries. African Law and Business notes that competition between the US and China has been heating up within Africa. The US recently announced the establishment of a new development finance institution which will combine with the existing Overseas Private Investment Corporation (OPIC) and bring a USD 60 billion budget with the explicit intention of competing with China. The new institution will be able to invest in equity, whereas OPIC has been limited to debt only. TFX News has even speculated that the US IDFC “could eventually incorporate US Exim“.
Right problem – wrong solution: The Chinese ECA threat to the multilateral official finance system
(TFX News, London, 10 December 2018) Often priced at well below accepted market rates, Chinese official finance is a major hurdle to fair competition in the global export market. A growing number of governments are attempting to compete by circumventing OECD rules and blurring trade with aid. But adding more unfair trade practices risks the global official finance system self-combusting and ending any real chance of a lasting and fair resolution to the problem. While delegates dressed in matching stilettos and pinstripe suits would probably spice up your average OECD meeting, real ECA and DFI cross-dressing – the increasingly blurred lines between tied ECA support and untied multilateral/DFI support – is a serious and growing problem, and one that governments need to address. ECA/DFI cross-dressing is a reaction to a common issue for non-Chinese ECAs – how to compete with opaque official finance offerings from China, which has long been providing cheap debt, arguably at unrealistic market rates. During the past 10 years China has transformed itself from an aid recipient into the largest official financier of developing countries. But many OECD companies are rightly concerned about the completely unregulated official finance practices of China.
