(UK Parliament, London, January 2019) The Terms of Reference, membership, witness submissions, witness guidelines and the calendar of the UK Parliament's Environmental Audit Committee inquiry into UK Export Finance are now available online.
Index for January 2019
Volume 18, Issue 1
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(Nikkei Asia Review, Tokyo, 9 January 2019) Trading company Toyota Tsusho and the Japan Bank for International Cooperation are joining forces on a port project in Angola that will be the largest of its kind for Japanese businesses. The plan is to raise 70 billion yen ($643 million) from both public and private lenders in Japan to help the African country fund the endeavor. The move comes as China steps up infrastructure development in Africa amid concerns that it is saddling developing countries with excessive debt. Toyota plans to use Japanese equipment and materials to construct the port facility through a contract with the Angolan government, which will receive loans from export credit agency JBIC and other entities. To encourage private lenders to participate, Nippon Export and Investment Insurance is to insure the amounts they offer. The Japanese move is being seen as an attempt to challenge China’s dominant position in Angola.
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(AzerNews, Baku, 11 January 2019) A consortium for the Trans-Adriatic Pipeline (TAP) construction has successfully completed the financial closure of the project in 2018, receiving 3.9 billion euros. “The European Investment Bank (EIB), recognizing the important contribution of TAP to improving the security of energy supply in Europe, allocated 700 million euros for the implementation of this project. Reportedly, 17 commercial banks provide financing along with the EBRD and the European Investment Bank (EIB). Part of the financing is covered by export credit agencies - Bpifrance (450M Euros), Euler Hermes (280M Euros) and Sace (700M Euros), merchant banks (635M Euros) and EBRD (1 billion Euros). Costs have previously been funded by TAP’s shareholders: BP (20%), SOCAR (20%), Snam (20%), Fluxys (19%), Enagás (16%) and Axpo (5%). There have been incidents of protests by both local citizens and government officials against the Trans Adriatic Pipeline.
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(Afreximbank, Cairo, 17 January 2019) The African Export-Import Bank (Afreximbank) has signed a facility agreement lending $170 million to Egypt-based conglomerate Orascom Investment Holding (OIH) to assist the company expand its pan-African activities in pursuit of its short and medium-term expansion strategy. the transaction was a significant opportunity for OIH’s targeted investments in companies across Africa to support their transformation, increase their production capacity and produce higher quality exports through better value addition, especially in the agro-processing sector. Afreximbank has approved more than $67 billion in credit facilities for African businesses since 1994. Orascom Investment will explore business and investment opportunities referred to it by Afreximbank in such countries as Rwanda, Togo, Eretria, Nigeria and Sao Tome.
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(Reuters, Sydney, 18 January 2019) The expansion of Papua New Guinea’s giant gas project is turning up the heat in the Asia Pacific project finance arena, with a slew of jumbo financings set to emerge from Oceania in the next 18 months. Stakeholders in the Papua New Guinea Liquefied Natural Gas project are in discussions with export credit agencies and commercial banks for up to US$9.8bn of debt to fund the next phase of the project, in what will be the region’s biggest project financing since 2010. Another major deal is also in the works as Australia Pacific LNG prepares to refinance US$3bn of project debt. JP Morgan has been named financial adviser. The long-awaited expansion of the PNG LNG project is estimated to cost around US$12bn-$14bn and involves construction of three new gas processing units, called trains, at the Papua New Guinea LNG plant. It is the largest resources-related borrowing in Oceania since March 2010, when the PNG LNG project raised US$14bn in initial funding from ECAs, commercial banks and lead sponsor and operator ExxonMobil. The US$1.95bn commercial portion attracted 17 banks. PNG LNG is already operational.
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(Bloomberg, London, 17 January 2019) Satorp, the joint venture between Saudi Aramco and Total SA, hired Sumitomo Mitsui Banking Corp. and Riyad Bank to help raise funds to develop a petrochemical facility in the kingdom. Financing for the $5 billion Amiral project is expected to be arranged from banks and export credit agencies. The facility will be in Jubail in the eastern province where the JV already operates a refinery and will convert fossil fuels into building blocks for plastics. Saudi Arabia is seeking to transform its oil-dependent economy by developing new industries, and is pushing into petrochemicals as a way to earn more from its energy deposits. The Amiral complex will be able to produce 2.7 million tons of chemicals annually and will be completed by late 2023 or early 2024. Aramco, as Saudi Arabian Oil Co. is known, owns 62.5 percent of Satorp, while Total holds the rest.
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(Macauhub, Macau, 11 January 2019) The government of Mozambique has been involved in the last few weeks in intense negotiations with seven countries to secure funding for one of its largest natural gas projects and overcome scepticism about whether it will honour its debt commitments. The Rovuma Area 1, in the Rovuma Basin, involves an estimated investment of US$25 billion. The talks involve seven Export Credit Agencies (ECAs), including Japan (JBIC), China (China ExIm), South Korea, USA (US-Exim), Germany [sic] (Atradius) and Italy (Servizi Assicurativi del Commercio Estero – SACE). The ECAs are evaluating the possibility of funding the Rovuma Area 1 project, which is operated by Anadarko which has been the subject of multiple environmental cases. In discussing the risks of the LNG project, the government has ignored the threat posed by armed insurgent attacks in Cabo Delgado. Most international analysts believe that they will not threaten the projects; but the state’s inability to control the attacks affects the country’s image as a safe investment destination and a place for expatriates.
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(Eakinomics, Washington, 17 January 2019) The Export-Import Bank is due to be re-authorized in September 2019. The re-authorization of Ex-Im in 2015 became a pitched battle over whether it was an appropriate role for the government. While the arguments against market intervention make sense, until other countries scale back their use of ECAs, the Ex-Im Bank is a necessary evil to level the playing field. The decline in Ex-Im activity is clear in the graph (below)... there are about $30 billion in ECA activity in the G-7 and $50 billion among the BRIC countries. The bank is unable to approve any transactions greater than $10 million in value because it has not had a quorum of 3 voting board members since 2015. Given the lack of a quorum, as of Summer 2018, there are $43 billion in transactions awaiting approval. The administration resubmitted the nomination of Kimberly Reed to be president of the Ex-Im Bank and for Spencer Bachus III, Judith DelZoppo Pryor and Claudia Slacik to serve on its board of directors. All had been previously nominated by the administration, and the Senate Banking Committee had favorably reported them, but the full Senate did not take up their nominations.
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(News Today, Chennai, 4 January 2019) The Indian government has to provide three per cent [export credit] interest subsidy to merchant exporters, entailing an expenditure of Rs600 crore (US$84 million), to enhance liquidity with a view to boosting outbound shipments. Sectors that will be benefited from the decision include agriculture, textiles, leather, handicraft and machinery. The interest equalisation or subsidy scheme for pre- and post-shipment rupee export credit started on 1 April, 2015 and will end in March 2020. Other news sources indicated that interest subsidies had dropped from Rs434 crore in 2017 to Rs197 crore in 2018 (US$60m to US$28M). The Union Cabinet in mid-Janurary committed to infusing US$840 million into the Exim Bank over 2 years and doubling its authorized capital from US$1.4 billion to US$2.8 billion (Rs10,000 crore to Rs20,000 crore)
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(NEXI, Tokyo, 18 January 2019) Nippon Export and Investment Insurance (NEXI) has decided to provide reinsurance on export credit provided by UK Export Finance (UKEF), the export credit agency of the United Kingdom of Great Britain and Northern Ireland (UK), for export of one Rolls Royce-powered Boeing 787-8 aircraft to Avianca S.A.. The provision of this reinsurance is based on the reinsurance agreement concluded between NEXI and UKEF on August 30, 2017.
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(Kyiv Post, Kyiv, 8 January 2019) The Export-Import Bank of the United States has reopened its programs for Ukraine after a five year pause, the Washington-based U.S.-Ukraine Business Council stated. Through ten months of 2018 bilateral trade between Ukraine and the U.S grew slightly to $3.1 billion, in comparison to 2017’s $2.84 billion yearly total, according to official statistics. Leading U.S. exports to Ukraine in 2018 were coal ($655 million), motor vehicles ($260 million) and civilian aircraft ($217 million). In the same 10-month period, Ukraine’s top exports to the United States were iron products ($707 million) and sunflower products ($27.3 million).
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(Jane's Defence Weekly, Singapore, 25 January 2019) The Indonesian Air Force (TNI-AU) has completed a study on the country's aerial refuelling requirements and has proposed the acquisition of two new airframes for the service, outlining a budget requirement of about USD500 million, proposing that the funds be drawn down from foreign defence export credit loans. Jane's first reported in January 2018 that the TNI-AU had begun a preliminary study to compare the A330 multirole tanker-transport (MRTT) from Airbus and the KC-46A Pegasus from Boeing. Russia's four-engine Ilyushin Il-78 was also later included in the study.
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(TASS, Vienna, 29 January 2019) Nord Stream 2 AG, the operator of the Nord Stream 2 gas pipeline construction project, is conducting negotiations to attract project financing worth 6 bln euros. Chief Financial Officer Paul Corcoran told reporters "We are still in discussions with export credit agencies." The Nord Stream 2 pipeline is expected to come into service at the end of 2019. The pipeline is set to run from the Russian coast along the Baltic Sea bed to the German shore. It will go through the exclusive economic zones and territorial waters of five countries - Russia, Finland, Sweden, Denmark, and Germany, thus bypassing transit countries of Ukraine, Belarus, Poland and other Eastern European and Baltic states. Each of the pipeline’s two stretches will have a capacity of 27.5 bln cubic meters. The total cost of the project has been estimated at 9.5 bln euro. Nord Stream 2 AG, with Gazprom being the only shareholder, is the operator of the Nord Stream 2 pipeline construction project. Gazprom's European partners in the project are Germany’s Wintershall and Uniper, Austria’s OMV, France’s Engie and Royal Dutch Shell.