Index for September 2021

Volume 20, Issue 9

  • (Wall Street Journal, Paris, 14 September 2021) The U.S., the European Union, South Korea and other wealthy nations are moving to forbid their export-financing agencies from supporting coal-fired power projects overseas, in an effort to end government support for a fuel that is one of the world’s biggest sources of greenhouse gases. The proposed ban, which will be made this week at the Organization for Economic Cooperation and Development, is part of the West’s campaign to push China, India and other big developing countries to take a tough position against coal ahead of the November climate summit in Glasgow, Scotland. China and India have resisted entreaties by the U.S. and Europe to commit to end subsidies for coal-fired electricity, raising fears that deadlock over the issue could result in the collapse of climate negotiations in Glasgow. The OECD, a Paris-based organization of 38 developing and developed economies, oversees an agreement governing export-credit agencies, which provide financing for overseas customers of the countries’ domestic companies. The U.S., the 27 nations of the EU, the U.K., Norway, Switzerland, Japan, Australia, South Korea, New Zealand and Turkey are signatories of the deal. In other news the US Treasury has instructed representatives at multilateral development banks to support clean energy projects over fossil fuels, putting the fate of several gas projects in the balance. Interestingly no news could be found on the OECD website today on the results of the OECD coal negotiations on September 15-16. The OECD web site divulges no results at all for searches re export credit and their ECA work page is burried very deep in their site map and shows no postings since September 8th. Indications are that there were differences over the definition of "unabated coal fired plants" to be banned, whether to include gas and mining or transport of coal. Further meetings are planned for October 12th and 20th. As world leaders met for a high level dialogue on energy at the UN in New York, 200 green groups urged them to embrace renewables and stop financing all fossil fuels.

  • (Urgewald, Berlin, 15 September 2021) A new report by the environmental organisations urgewald and Deutsche Umwelt-Hilfe (DUH) shows that the German government is supporting climate-damaging oil and gas projects with guarantees worth billions of euros. In the report, the organisations examine climate-damaging oil and gas-related export credit guarantees as well as untied loan guarantees (UFK guarantees) for the period 2015 to May 2021. During this time, the German government approved 144 export guarantees in the oil and gas sector with a total volume of more than 11.75 billion euros via Euler Hermes AG. Of the 28 countries in which oil and gas guarantees were granted, 15 are considered "not free", according to Freedom House. The report is based on data made available to the two organisations by the German government through a Freedom of Information Act request.

  • (Offshore Technology, London, 16 September 2021) Dutch floating production storage and offloading (FPSO) operator SBM Offshore has completed the largest project financing in its history, of the vessel FPSO Sepetiba, for a total of $1.6bn. SBM Offshore was established in 1862 and its main activity is to design, supply, install, operate, and maintain FPSO vessels. It accounts for over 1,660,000 [barrels?] of total fleet oil production capacity. The project financing was secured by a consortium of 13 international banks, with insurance cover from Nippon Export and Investment Insurance and SACE. The vessel has a processing capacity of up to 180,0000 (sic) barrels of oil per day, a water injection capacity of 250,000 barrels per day, associated gas treatment capacity of 12mmscm, and a minimum storage capacity of 1.4mmbbl. It will be moored in approximately 2,000m water depth and will be deployed at the Mero field in the Santos Basin offshore Brazil. The Libra block, where the Mero field is located, is under a production sharing agreement with a consortium comprised of Petrobras as the operator with 40% interest; Shell with 20%; TotalEnergies with 20%; China Southern Petroleum Exploration and Development Corporation with 10%; and China National Offshore Oil Corporation with 10% interest. Petrobras, a state-owned Brazilian multinational corporation in the petroleum industry, awarded a contract to SBM Offshore for the 22.5 years lease and operation of the FPSO for the Mero field in December 2019. The Guardian notes that carbon bombs, gigantic coal, oil and gas projects from around the world, if they go ahead, will raise global emissions and cause dangerous climate change.

  • (The Times, London, 20 September 2021) The UK's UKEF has been accused of exaggerating how many businesses it has supported, of undermining the national drive towards net-zero carbon emissions and of doing too little to help smaller exporters. MPs on the Commons’ international trade committee said that UK Export Finance had directly helped far fewer companies than its “headline figure of 549 businesses supported” in the 2020-21 financial year, with only 167 directly applying for finance and insurance. Global Trade Review also notes that the government inquiry into the work of UKEF has raised concerns over the agency’s concentration of support in certain sectors, ambiguous figures in its annual accounts, and potential exposure to environmental and human rights issues.

  • (Bizcommunity, Cape Town, 23 September 2021) A clear call to action to rethink the sustainability performance of the export finance market has come out of an International Chamber of Commerce (ICC) white paper. Released at a major event during United Nations (UN) General Assembly week and developed with the support of the Rockefeller Foundation and 16 leading banks, the white paper explores how the US$700bn export finance industry can significantly increase its contribution to the achievement of the UN Sustainable Development Goals (SDG) and the Paris climate accord.

  • (Energy Live News, London, 23 September 2021) The UKEF has committed to making all of its £50 billion capacity carbon-neutral by 2050 on a net basis. Through its new climate strategy, the country’s export credit agency will increase its support for clean growth, renewables and climate adaptation exports. UKEF currently has a £50 billion capacity to support UK exports through loans and insurance. Through the new agreement, this capacity will be entirely carbon-neutral by 2050 on a net basis. It hopes its actions can inspire more financial institutions to take action ahead of COP26 in less than 50 days. Anne-Marie Trevelyan, International Trade Secretary, said: “UKEF’s net zero pledge shows the UK’s climate leadership and is an encouragement for other countries to follow suit. Meanwhile, a South West Business Council survey of companies finds many are not prepared to tackle emmissions and many have yet to be convinced about the economic benefits of going green and want financial support to achieve it.

  • (EKN, Stockholm, 15 September 2021) EKN launches a new credit guarantee to facilitate financing of green exports as well as green transition projects within Swedish exporting companies. The new guarantee covers the bank’s risk up to 80 percent instead of previously 50 percent, which increases the capacity for credit. It is offered to companies with direct or indirect exports that contribute to the climate transition. The assessment criteria’s will be based on the EU-taxonomy. EKN’s Green Guarantee covers both working capital and financing of a specific investment, in businesses contributing to the climate transition. In addition, a Scientific Climate Council, a group of academic experts, will provide advisory support to the Swedish Export Credit Agency (EKN) and the Swedish Export Credit Corporation (SEK) to assist aligning the Swedish export finance system with the Paris Agreement’s 1.5°C goal, according to a SEK press release. The climate council is the first of its kind in the world and will focus on issues such as the role of natural gas for the energy transition in low- and middle-income countries.

  • (IISD, Winnipeg, 16 September 2021) A UN Special Rapporteur has issued 2 reports on human rights in the area of hazardous substances. The report calls for phasing out subsidies and export credit and guarantees for fossil fuel extraction, plastics production facilities, and plastic-to-energy projects. One report addresses the stages of the plastics cycle and their impacts on human rights, and focuses on the right to science in the context of toxic substances. Marcos Orellana, the UN Human Rights Council Special Rapporteur on the implications for human rights of the environmentally sound management and disposal of hazardous substances and wastes, writes that the global plastics crisis reveals how every stage of the plastics cycle, including extraction and refining, production, transport, use, and waste. has adverse effects on the full enjoyment of human rights. The report (A/76/207) includes recommendations to address the negative consequences of the plastics cycle on human rights and integrate a human rights-based approach in transitioning to a chemically safe circular economy.

  • (ANSA, Rome, 14 September 2021) The global economy's rebound from the effects of the COVID-19 pandemic will see Italian exports return to pre-pandemic levels this year and grow further in the coming years, export credit agency SACE said in a report on Tuesday. SACE forecast that Italian exports would increase 11.3% this year, with foreign sales of Italian goods worth 482 billion euros. It said exports would then grow by 5.4% in 2022 and by 4% in 2023.

  • (Business Standard, New Delhi, 31 August 2021) Exim Bank of India has extended a line of credit of $100 million on behalf of the Indian government to the Africa Finance Corporation (AFC) to develop infrastructure in the continent and boost economic revival of countries in the region, infrastructure required for the revival of Africa's economies in the wake of the COVID-19 pandemic.

  • (Global Legal Chronicle, Rome, 2 September 2021) A syndicate of lenders, including Cassa Depositi e Prestiti, KfW IPEX-Bank, Société Générale, Banco Santander and Instituto de Crédito Oficial E.P.E. – ICO, provided a US$811 million syndicated credit facility backed by the Italian export credit Agency SACE, involving the securitization of Peruvian government-backed payment rights for the extension of Lima's Metro Line 2. The export credit agency-backed syndicated loan involved a securitization of RPI-CAOs and will be used to finance the development and construction of the Lima Metro Line 2 and is the largest RPI-CAO deal ever financed under a credit facility financing structure in Peru.

  • (Saudi Gazette, Jeddah, 3 September 2021) The Saudi Export-Import Bank (EXIM Bank) has signed an agreement with the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), to launch a special insurance product that helps Saudi banks to provide more credit facilities for the export of Saudi non-oil products, and enable them to increase their ability to enhance letter of credit received from foreign banks for the benefit of Saudi exporters.

  • (Bloomberg Opinion, 7 September 2021) In an opinion written for Bloomberg, the former Governor of the central bank of Afghanistan (DAB) notes: "There are optimistic suggestions that the hard-won integration of Afghanistan into the global economy will remain despite the ascendancy of the Taliban and the withdrawal of the U.S. A number of commentators have suggested that China — which the Taliban have declared their strongest ally — could become Afghanistan’s primary economic supporter and help the country stay part of the global system. That analysis is unrealistic. For one, it ignores the sanctions regime imposed by the international community on the Taliban... Afghanistan’s physical money supply will be impaired. This is because the central bank does not print its own currency: DAB typically receives afghanis produced by specialist firms overseas... I am relatively certain that these deliveries cannot be made... Second, the $7 billion Turkmenistan-Afghanistan-Pakistan-India natural gas pipeline project (TAPI) will likely not proceed. This pipeline would have brought 33 billion cubic meters of natural gas annually from the Turkmen Galkynysh field — the world’s second largest — to  Pakistan and India. It would have generated a few hundred million dollars in transit revenues for the Government of Afghanistan... As a result of the sanctions regime and security concerns, European companies will not be able to provide equipment or the financing. They will certainly not be able to obtain insurance for the project. For now, the project has to be assumed to be dead... Third, hopes to profit from the country’s mineral resources have to be scaled back — or abandoned... these projects requires international financing and more... The Taliban will face the same economic challenges as the previous regime — but under sanctions and with much less international financial support. Afghanistan’s new rulers must face this reality, form an inclusive government and adhere to international standards. Otherwise, they will further impoverish themselves and the Afghan people."