(EDIE, West Sussex, 3 December 2018) The [Parliamentary] Environmental Audit Committee (EAC) has launched an inquiry into the sustainability efforts being made by UK Export Finance (UKEF), following claims that the body’s financing of fossil fuels overseas is at odds with the aims set out in the UK’s Clean Growth Strategy. The Department has come under fire in recent years, with WWF arguing that the greenhouse gases (GHGs) emitted by the projects it supports in developing nations are inconsistent with wider UK policies on decarbonisation. Indeed, UKEF is estimated to have provided an average of £551m in support of fossil fuel production overseas each year between 2014 and 2016 – accounting for 99.4% of all financial support offered for energy projects over the three-year period.
ECAWatch Newsletter 12
Industry group lobbies Ottawa for EDC insurance against First Nation rights consultations
(Globe and Mail, Toronto, 25 December 2018) Canada’s largest industry and trade association has asked the federal government to insure foreign investors against the risk their projects might be derailed by [mandatory] consultations with First Nations. The suggestion from Canadian Manufacturers & Exporters, which represents 1,200 companies, was among the farthest-reaching in hundreds made to a once-a-decade federal review of the Export Development Act, which governs the activities of Canada’s export credit agency. Successive court decisions have affirmed the federal government’s duty to consult Indigenous peoples when its actions may adversely affect their rights, and accommodate them if necessary. This still-evolving body of law has imposed significant responsibilities on governments across Canada relating to Crown-sponsored mining, energy, infrastructure and other projects, as well as private-sector projects that require government regulatory approvals. Disputes over the adequacy of consultations can lead to litigation and projects can grind to a halt. “To a foreign investor who does not understand these complex consultative processes, and has no real way of participating in them, it presents a high risk that dissuades their investment in projects,” Canadian Manufacturers & Exporters wrote in its submission. “EDC, who could be better positioned to understand such situations, could provide assurances to the foreign investor through some sort of guarantee.” Canada’s Assembly of First Nations said in a statement. “If Export Development Canada considers providing guarantees and other assurances to foreign investors to secure investment in projects, Canadian taxpayers may be left on the hook for paying compensation for projects that do not proceed due to faulty consultation processes.” [ECA-Watch commentary: It would appear that Canadian business wants EDC, an official public corporation, to guarantee private foreign investors’ profits from potential violations of First Nations’ rights.]
Developing countries biggest installers of renewables
(PV Magazine, Berlin, 27 November 2018) In a new report, BloombergNEF notes a significant uptake in renewable energy in developing countries, which are clearly outperforming OECD countries. The trend is due to reductions in equipment costs and new business models that enable access to capital. Still, many emerging markets are also the biggest installers of new coal capacity. India and China alone, are said to account for 81% of newly added coal-fired power stations.
UKEF lines up new delegated supply chain finance (SCF) guarantees
(Global Trade Review, London, 7 December 2017) UK Export Finance (UKEF) has announced plans for a new invoice financing scheme for exporters in a bid to boost exports through supply chain efficiency. GTR has learned that the new scheme will allow an exporter to set up a supply chain discounting facility with its bank, through which suppliers can receive up to 95% of their payment on invoice submission. The facility will be based on an export contract and support will be based on the buyer’s creditworthiness. UKEF will provide the bank with a guarantee for up to 80% of the amount of credit provided through the facility. The finer details of the scheme, which is due to be launched next year, are still being ironed out. Earlier in the year, the export credit agency (ECA) launched the Bank Delegation scheme, which gives banks authority to issue UKEF guarantees for their customers simply by telling UKEF they are issuing the guarantee based on the banks’ own due diligence. [How UKEF will ensure compliance with its own international, WTO and OECD agreed due diligence requirements on human rights, environmental standards and corruption is not clear under this delegation of responsibility to private sector banks.]
Turkey to Acquire Four Russian S-400 Missile Divisions with ECA support
(Prensa Latina, Moscow, 28 December 2017) Turkey will acquire, for 2.5 billion dollars, four divisions of the modern Russian S-400 surface-to-air missile divisions, which will be delivered in 2020. The finance ministries of Turkey and Russia have concluded negotiations for the granting of an export credit to Ankara, Chemezov head of the Russian state conglomerate Rostec said. Turkey will pay an advance equivalent to 45% of the total and the Russian side will grant an export credit that will cover the other 55% of the contract. Ankara [a NATO member] received strong criticism and even threats from the United States for its decision to acquire the Russian arms. In other Russian ECA news, four Iranian banks have signed an “unlimited finance deal” with the Eximbank of Russia for public and private sector approved projects using Russian technical and engineering services.
Indonesia – Dirty man of Asia deepens addiction to coal
(The Nation, Bangkok, 30 December 2017) Already the world’s fifth-biggest greenhouse gas emitter, Indonesia is leading Southeast Asia’s boom in coal-fired power. Already one of the world’s biggest carbon polluters because of deforestation, Indonesia has back-pedalled on a pledge to cap coal production. The government initially planned to reduce its coal production to 413 million tonnes this year, from 419 million tonnes in 2016. The figure was expected to fall to 406 million tonnes next year, before hovering at only 400 million from 2019. However, this year’s coal production has already reached 477 million tonnes, far outstripping last year’s 434 million tonnes. The boom is being bankrolled by foreign governments and banks, the Guardian reports. Activist group Market Forces examined 22 deals involving 13.1 gigawatts of coal-fired power in Indonesia and found that 91 per cent of the projects had the backing of foreign governments through export credit agencies or development banks. The majority of the money was coming from Japan and China, with the Japan Bank for International Cooperation involved in five deals and the Export-Import Bank of China involved in seven deals.
The UK arms trade with repressive regimes has no moral or economic sense
(The Guardian, London, 20 December 2017) As the spectre of Brexit emerges, so do the first meaningful signs of the Tory vision of “building a global Britain”. The Department for International Trade, set up by Theresa May to put some flesh on the bones of her slogan, has prioritised arms sales for Britain’s post-Brexit industrial policy. The DIT, which licences Britain’s exports guns, planes and bombs, has overseen a sharp spike in sales to repressive regimes, many of which it has identified as “priority markets”. The biggest of these is Saudi Arabia, which is using our arms to bomb into famine its political enemies in Yemen. Our arms export control regime clearly states that it is illegal for the government to licence weapons to nations that oppress their own people or violate international humanitarian law. When buyers cannot afford our weapons, the government subsidises loans for them through export credit guarantees; UK Export Finance, which is supposed to support all British exports, says 50% of the support it provides (in the form of loans or guarantees) was given to defence exports.
Senate Panel Rejects Trump’s Nominee to Lead Export-Import Bank
(New York Times, Washington, 19 December 2017) Two Republican senators broke with their party to block President Trump’s nominee to lead the Export-Import Bank, a setback for the White House that reflects deep divisions in the Republican Party over the role that the government should play in steering the United States economy toward prosperity. The nominee, Scott Garrett, a former representative and a Republican from New Jersey who had wanted to see the government’s export credit agency shuttered, was rejected by the Senate Banking Committee in a 13-to-10 vote. Since 2015, the agency has been hobbled by a lack of personnel necessary to approve projects over $10 million, formerly the bulk of the agency’s work. An estimated $42.2 billion worth of deals are stuck in the pipeline waiting for approval, which could support an estimated 250,000 American jobs, a spokeswoman for the Export-Import Bank said. Some of the biggest Ex-Im customers are General Electric, Boeing and Caterpillar, Some senators and the Trump administration have threatened to pull the other board nominees, leaving the bank without a quorum and barred from financing deals over $10 million and Boeing to fend for itself. However, in 2017 the Aircraft Finance Insurance Consortium has supported more than $1 billion of new airplane deliveries and Boeing has 661 firm orders for 2018, in addition to 6,600 backorders. Meanwhile it has been said that Boeing is upset that Garrett was getting help throughout the nomination process from Dan Murphy, a lobbyist for a high-powered Washington firm that counts Airbus among its clients.
Kuwait Seals US$6.245bn ECA-Backed Corporate Transaction
(Bonds & Loans, London, 5 December 2017) Kuwait National Petroleum Company’s (KNPC) US$6.245bn ECA-backed loan was a triumph for the company’s Clean Fuel Project and the region’s credit markets, setting a new record for the largest ECA-backed corporate loan to date. The Project involves modernisation of the Mina Al Ahmadi and Mina Abdullah oil refineries of KNPC located in Al Ahmadi Governorate, south of the country, to make their products meet stringent environmental requirements. Total debt financing for the Project is estimated to be around US$10bn. The financing package is supported by 7 ECAs: Atradius Dutch State Business N.V., Export-Import Bank of Korea (KEXIM), the Japan Bank for International Cooperation (JBIC), Korea Trade Insurance Corporation (K-Sure), Nippon Export and Investment Insurance, SACE, and UK Export Finance. JBIC and KEXIM extended direct financing to KNPC while the other agencies provided cover to commercial bank lenders involved in the transaction.
Africa – a new frontier for Floating LNG projects
(LNG Worldshipping News, London, 4 December 2017)) Floating LNG (FLNG) is opening new offshore gas basins for LNG development in Africa. The ownership structure of Africa’s new LNG production and the willingness of international oil companies to deploy new technologies will drive the commoditisation of LNG and cement its growing role as such in the global trading of energy. Uniquely, FLNG vessels will provide the first liquefaction plants in Mozambique and Cameroon and the technology is also expected to lead an expansion of capacity in Equatorial Guinea, Senegal and Mauritania. Italy’s Eni and its partners took a final investment decision on the 3.4M tonnes a year (mta) Coral FLNG scheme off Mozambique in June 2017. The project will be the first of this type to have as much as 60% of its cost funded on a project-finance basis, backed by 15 international banks and guaranteed by five export credit agencies. The financing was provided in the form of covered loans from five export credit agencies (Italy’s Sace, China’s Sinosure, Japan’s Ksure, South Korea’s Kexim, and Portugal’s BPI) and two direct loans (one provided by Kexim, the other by an unnamed ‘commercial bank’).
