Index for March 2016

Volume 15, Issue 3

  • (The Reporter, Addis Ababa, 12 March 2016) The long-awaited negotiation between Ethiopian Electric Power (EEP) and the Italian construction company, Salini Costruttori, has been finalized enabling the latter to commence with the building of the 2,200MW Gibe IV hydropower plant. The two institutions are also expected to formally ink an agreement shortly... Sources told The Reporter an Italian financial institution identified as Servizi Assicuative del Commerce Estero (SACE) has agreed to finance the project estimated at EUR 1.5 billion... The other massive Omo River hydroelectric power project–the 1,800-megawatt Gibe III–that was highly challenged by right groups in connection with indigenous tribes living around Lake Turkana was completed only a few months ago and has now started generating power partially. Construction of that dam began in 2006 with flagrant violations of Ethiopia’s own laws on environmental protection and procurement practices, and the national constitution. The project’s US$1.7 billion contract was awarded without competition to Italian construction giant Salini, raising serious questions about the project’s integrity. The Gibe III dam and expansion of large, irrigated plantations in the Lower Omo basin threatens the food security and local economies that support more than half a million people in southwest Ethiopia and along the shores of Kenya's Lake Turkana.

  • (The Market Mogul, London, 11 March 2016) Before the embargo, Iran was Germany’s most important European trade partner with almost $5bn in exports going to the country in the Middle East. Today, Germany wants to live up to earlier commercial successes after a considerable drop in exports during the trade embargo... Currently, there is no big European bank that engages in the financing of Iranian trade deals. European and specifically German banks are holding back export financing due to uncertainties in the market. One reason certainly is the missing due-diligence information about Iranian clients. More important, however, is the lack of export credit guarantees for the designated trades from Iran. Export credit guarantees are an essential part of German foreign trade policy, which protects German companies in the event of non-payment from its debtors. Many Iranian companies still hold old debt with German firms from trades before the embargo. Only when Iran has paid back its old debt of $560m are German banks willing to provide further export guarantees. While this issue should not be an obstacle, in the long run, it has and will certainly limit exports in the coming months.

  • (Trade and Export Finance, London, 9 March 2016) The Export-Import Bank of India (India Exim) last month signed a $150 million line of credit with Iran's Bank of Industry and Mine (BIM) to finance rail upgrades in Iran. The deal, which will finance the supply of 150,000 tonnes of steel railway tracks from Indian exporter State Trading Corporation, is Iran's first post-sanctions export finance agreement... The project is linked to a wider Chinese-backed project to electrify more than 900 kilometres of railway between the capital of Tehran and the north eastern city of Mashad.

  • (Houston Chronicle, Houston, 3 March 2016) The fight to empower a government agency that ensures U.S. companies can compete around the world, and even makes money for the taxpayer, is sadly not over. Ex-Im can't close any deals exceeding $10 million because of conservative opposition in the Senate... The Ex-Im bank is the latest victim of a conservative minority refusing to compromise. The bank board needs three of five directors to reach a quorum, but the chairman of the Senate Banking Committee refuses to fill one of three open seats... The lack of a quorum has held up six deals worth $2.6 billion so far.

  • (Seattle Times, Seattle, 22 March 2016) The obscure U.S. Export-Import Bank moved to center stage in Washington’s Democratic presidential contest, as Hillary Clinton and her allies chided Bernie Sanders for opposing the bank, which plays an outsized role in this state. Speaking Tuesday at the Machinists union hall in Everett, Clinton said “I just shook my head” when Sanders joined conservative Republicans in criticizing the bank as a vehicle for corporate welfare... In Washington state, the bank reports that 162 of the 238 exporters it has helped in the last decade are small businesses... But the vast majority of the bank’s help to Washington companies, in terms of dollars, has gone to loan guarantees for financing foreign buyers of Boeing’s planes. Since 2007, $64 billion of the bank’s $65 billion in insured shipments, guaranteed credit or loans disbursed for Washington companies has gone to help Boeing.

  • (Trade and Export Finance, London, 1 March 2016) The global volume of export credit agency (ECA) deals has fallen by nearly a third compared to 2014, according to TXF Data's 2015 Export Finance Report. In 2014 ECAs supported $119.33 billion of deals, but TXF's latest report reveals that the global total of all ECA transactions for 2015 was $84.63 billion – a drop of 29% year-on-year... Coface, the French export credit agency (ECA), was the single most active ECA in 2015 supporting a total of $7.73 billion worth of transactions while HSBC was the biggest lender of export credit agency (ECA) debt in 2015, signing a total of $4.54 billion of ECA-supported debt to borrowers... The report, which reviews all ECA transactions, calculates the most active ECAs by covered volume in 2015 by taking each ECA direct loan and guarantee and adding the total. The report only focuses on medium and long-term (MLT) debt and is based on deals submitted to report, which reviews all ECA transactions in 2015, calculates the top five lenders of last year by taking each bank’s individual exposure to every ECA deal and then adding the total. The report does not capture the most active bookrunners or arrangers of ECA debt but measures bank participation across all ECA-backed loans. HSBC topped the table with $4.54 billion, while Sumitomo Mitsui Banking Corporation (SMBC) was the second largest lender of ECA deals with $4.19 billion, Société Générale was the third largest ECA lender with $4.11 billion, ING Bank ranked fourth with $3.84 billion, and Crédit Agricole CIB was fifth overall offering $3.69 billion of ECA-supported loans to borrowers.

  • (Global Tade Review, London, 30 March 2016) A survey by members of the Berne Union and of the International Credit Insurance and Surety Association (ICISA) expect a mixed 2016 for trade credit insurance, with growth in premium income and insured turnover, but increases in claims and insolvencies in almost all regions... The joint survey was also an opportunity to highlight the increased co-operation between government-backed ECAs and the private sector... Kai Preugschat, secretary general of the Berne Union, explains: “We see increased co-operation between ECAs and private insurers, often with private members reinsuring ECAs. Private insurers have the advantage of the untied nature of their products, whereas ECAs are tied to the specific rules of their respective mandates.

  • (Trade and Export Finance, London, 23 march 2016) After two years of delays resulting from the war with Isis, French export credit agency (ECA) Coface last month provided its first ever guarantee in Iraqi Kurdistan to fund the purchase of turbines for the country’s Bazian power plant.

  • (Global Trade Review, London, 23 March 2016) UK Export Finance (UKEF) and the China Export & Credit Insurance Corporation (Sinosure) have signed a mutually beneficial framework agreement aimed at increasing UK and Chinese exports... The agreement will see the two export credit agencies (ECAs) co-operate in supporting contracts in third countries involving both UK and Chinese exports... The agreement will also facilitate co-operation between Chinese and UK firms as they compete for business in other countries. As such, UKEF and Sinosure will work together to identify opportunities for trade in capital goods, equipment and services involving co-operation between the two countries.

  • (Global Trade Review, London, 31 March 2016) UK Export Finance has adopted the Equator Principles, a global framework aiming to promote sustainable project financing. Introduced in 2003 and already adopted by 80 financial institutions, the Equator Principles are a risk management framework to determine, assess and manage environmental, social and human rights risk in projects... “This global framework will give UK exporters supported by UKEF confidence that environmental, social and human rights issues that may carry ethical or reputational risk have been given consideration as part of UKEF’s support to relevant projects. In adopting the Equator Principles, we do not anticipate any additional administrative burden to UK exporters applying for export finance support.