Index for July 2016

Volume 15, Issue 7

  • (McClatchyDC, Washington, 12 July 2016) Lawmakers in the House of Representatives, including Rep. Kay Granger, R-Texas, moved Tuesday to assist the embattled federally charted bank for U.S. exporters. The House Appropriations Committee approved an amendment to a funding bill that effectively will enable the bank to approve loans of more than $10 million again. The bank board, with only two members, has been unable to get a quorum of three members out of five positions – as required by its charter – in order to approve large loans. “A backlog of more than 30 transactions worth more than $20 billion is stalled until Ex-Im regains its quorum,” Rep. Charlie Dent, R-Pa., told the Appropriations Committee on Tuesday. His amendment to allow a quorum to consist of two members for three years was approved as part of the appropriations bill that funds the State Department and other related agencies. “It would allow them to function with two board members,” Dent told McClatchy. Granger, the chairwoman of the subcommittee that oversees the bill, supported the amendment and it passed by voice vote.

  • (Export Import Bank, Washington, June 2016) In its June 2016 Report to the U.S. Congress on GLOBAL EXPORT CREDIT COMPETITION Ex-Im noted (on p.55) that in 2015, foreign ECAs acted aggressively to move business away from the United States to their countries. The most notable examples involved General Electric setting up agreements with foreign ECAs. The company signed a $6 billion memorandum of understanding with SACE (Italy) to support oil and gas exports. The company also signed a £7.7 billion (about $11.1 billion) memorandum of understanding with UKEF (UK) to support projects. Finally, GE announced plans to close a gas-engine production plant in Wisconsin and open a new facility in Canada to access EDC (Canada) support.  GE also announced on June 14 that it will use Coface financing to back its gas turbine projects in Saudi Arabia, Mexico, Brazil and other nations as the U.S. Export-Import Bank continues to languish without a sufficient quorum on its board of directors and told AFP on January 13, 2016 it plans to cut up to 6,500 jobs in Europe from the energy units it acquired from France's Alstom last year. "The restructuring plan will touch several European countries and impact potentially 6,500 jobs out of 35,000," a GE spokesman told AFP.

  • (Reuters, Paris, 27 July 2016) Airbus Group has agreed with European governments a process for regaining access to export credits, suspended earlier this year over flawed disclosures on the use of third-party agents to help to sell passenger jets, the company said on Wednesday. In a footnote in its half-yearly financial statements, the aerospace group said it was working with UK, French and German export credit agencies (ECA) to resolve compliance issues raised by the irregularities, which sources have said dated back years. Britain in April froze applications for government export credits for Airbus passenger jets and called in its Serious Fraud Office (SFO) after Airbus Group said it had discovered inaccuracies in applications for export support. French and German agencies quickly followed suit. A person familiar with the matter told Reuters recently that much work remained to be done in establishing a transparent framework, following what some industry observers see as a temporary breakdown of trust between Airbus Group and the European export agencies.

  • (EuroMoney Seminars, London, 4 July 2016) The aviation market is in an unprecedented situation with both the major aircraft manufacturers facing a shutdown in government export credit financing. Years of predictable and attractive financial returns have led to a staggering number of new entrants in the aviation finance market, allowing airlines and lessors to benefit from fierce competition among lenders and historically low interest rates. These developments are very good news for borrowers, which have been without European export credit agency (ECA) cover from Britain, France and Germany since April, following a UK government probe into overseas agents on export credit applications involving Airbus aircraft. The US Export-Import Bank (Ex-Im) has been unable to extend guarantees fully for more than a year.

  • (Global Construction Review, London, 8 July 2016) Chinese companies are playing huge role in bringing electricity to sub-Saharan Africa and can take credit for 30% of new capacity in the region, according to a study published this week by the International Energy Agency (IEA). While more than 635 million people still live without electricity there, Chinese companies channeling state funds into all different types of power stations will have brought light and power to around 36 million people by 2020. The sums are vast: the IEA finds that China invested around $13bn between 2010 and 2015 in power projects, as China’s contribution dwarfs that of any other non-African country. There is also a long-term strategy behind China’s powering of Africa. The industrialisation and economic development of the region is seen by Chinese stakeholders as important for eventually bolstering Chinese exports to the region, the IEA says. China’s approach to development assistance differs from OECD countries. For example, China is not covered by the Arrangements on Officially Supported Export Credits, which guides OECD countries in export credit financing. In the 2010-15 period, loans, credits and foreign direct investment from China into the sub-Saharan power sector amounted to around $13bn, around one-fifth (20%) of all investments in the sector. Most of this financing comes from the Export-Import Bank of China.

  • (Bloomberg, Johannesburg, 28 July 2016) Exxon Mobil Corp. is in advanced negotiations with Eni SpA over acquiring a minority stake in natural-gas discoveries off Mozambique, according to two people with knowledge of the talks. Exxon Chief Executive Officer Rex Tillerson discussed the plan with Mozambique President Filipe Nyusi last week in Maputo, the African nation’s capital, according to one of the people, asking not to be identified because the matter isn’t public. The U.S. oil major’s participation would potentially accelerate development of one of the world’s largest liquefied natural gas projects. [ECA Watch sources understand that six ECAs are reviewing the project with regard to potential ECA support. Meanwhile, a recent ISS report notes that Mozambique, which was poised to take off as the world’s third-biggest natural gas producer, is instead now teetering on the brink of a major sovereign debt default, which is threatening to jeopardise its eagerly anticipated gas-fired boom.]

  • (Tehran Times, Tehran, 14 July 2016) Iran’s Ministry of Energy and UK Export Finance (UKEF) signed a memorandum of understanding in London over financing Iranian water and electricity projects, IRNA reported on July 13. “All the Iranian energy projects which require foreign investment or finance should obtain UKEF’s insurance coverage,” Iranian Energy Minister Hamid Chitchian told IRNA after the agreement’s signing ceremony, hoping that the inked MOU would ease financing of Iranian projects by British companies. “Iran is in need of huge investments in power sector and plans to add 47,000 to 50,000 megawatts to its current capacity in the coming ten years,” said Iranian Energy Minister Hamid Chitchian. Meanwhile, the Russian government has approved an export credit to Iran for construction of a thermal power station and electrification of railways, Russian Environment Minister Sergei Donskoi said on July 13 and Russia’s Rusatom Service expects to sign a four-year service contract for Iran’s Bushehr nuclear power plant by the end of 2016. On January 16 the United Nations, United States and European Union lifted economic and financial sanctions on Iran that had been imposed in connection with the Iranian nuclear program.