Index for July 2022

Volume 21, Issue 7

  • (IISD, Winnipeg, 30 June 2022) If countries signing on to the COP26 Statement on International Public Support for the Clean Energy Transition shifted their almost US$28 billion/year from fossil fuels to jump-start the energy transition they would more than double their international clean energy finance. All international public finance institutions have yet to substantially scale up their clean energy support to catalyze a globally just energy transition and support energy security in a time of crisis. If the export credit agencies, development finance institutions and government departments of governments signing on to the COP26 Statement on International Public Support for the Clean Energy Transition were to fully redirect their USD 28 billion a year in overseas public finance for oil and gas, they would more than double their international clean energy finance, from USD 18 billion a year to USD 46 billion. As noted in our June 2022 ECA Watch What's New, between 2018 and 2020, G7 countries provided US$100bn towards oil, gas and coal projects through their export credit agencies (ECAs) or development finance institutions – over four times their contribution towards clean energy. As noted in our June 2022 ECA Watch What's New, between 2018 and 2020, G7 countries provided US$100bn towards oil, gas and coal projects through their export credit agencies (ECAs) or development finance institutions – over four times their contribution towards clean energy.

  • (Oil Change International, Washington, 27 June 2022) German Chancellor Olaf Scholz and other G7 leaders watered down a commitment made in May by their energy, climate and environment ministers to end international public finance for fossil fuels by the end of this year, drawing a swift rebuke from climate and development campaigners. Six out of seven G7 members had already adopted a near-identical commitment to shift public finance at the 2021 UN climate conference. The ministerial commitment was notable for adding Japan as Japan is the 2nd largest provider of international public finance for fossil fuels, pouring $11 billion into dirty overseas fossil fuel projects each year. The G7 leaders’ statement adds new loopholes to the commitment and says that “with a view to accelerating the phase out of our dependency on Russian energy … investment in [LNG] is necessary” and that “publicly supported investment in the gas sector can be appropriate as a temporary response”. Soon after the G7 ministerials, signals already emerged of countries backsliding on their commitment. Japan claimed it could continue financing upstream oil and gas projects despite the G7 pledge, and Germany’s Chancellor Scholz stated that Germany wants to “intensively” pursue gas projects in Senegal.

  • (Politico, Washington, 27 June 2022) Biden and other G-7 leaders meeting in Germany on Sunday pledged to provide $600 billion in public and private financing for developing country infrastructure projects over the next five years, in a move aimed at countering China’s growing global economic clout. The United States will “mobilize” $200 billion of the public and private capital for the Partnership for Global Infrastructure (PGII), the G-7’s answer to China’s multitrillion-dollar Belt-and-Road infrastructure initiative that Beijing launched back in 2013. It is not clear what portion of the US $200bn support will come from EXIM.

  • (Reuters, Washington, 7 July 2022) The U.S. Export-Import Bank plans "aggressive" measures to restore its standing in the business community and to bump up credit volumes running at roughly a quarter of their levels from 2014 before it was hobbled first by Congress and then a global pandemic. In that span, EXIM faded in the minds of customers and foreign governments - and many simply never got to know it. Export-Import Bank President Reta Jo Lewis told Reuters. Republicans in Congress in July 2015 sought to permanently shutter EXIM, charging it was providing "corporate welfare" through cheap export financing for Boeing, General Electric, Caterpillar and other corporate giants. Its charter was restored after 4 months, but Republicans blocked EXIM board nominees for 4 more years, limiting it to loans of $10 million or less and shutting it out of the market for aircraft and major infrastructure projects. During the void, GE was among U.S. firms that turned elsewhere, agreeing in 2015 to move manufacturing of oilfield gas generator engines to Canada from Wisconsin, in a deal to access Canadian export financing. Meanwhile, China has continued to dwarf EXIM's efforts, providing $11 billion in official medium and long-term export credit in 2021, compared with $2.2 billion for the United States, according to EXIM's annual competitiveness report.

  • (Xinhua, Beijing, 28 July 2022) China's only policy-oriented insurer specializing in export credit insurance reported steady business growth in the first half of 2022. The China Export & Credit Insurance Corporation, also known as SINOSURE, had underwritten about 445.13 billion U.S. dollars worth of insured businesses during the period, up 11.8 percent year on year, according to the company. SINOSURE served nearly 164,000 clients in the first six months, a yearly increase of 15.2 percent, said the company. The company said it will make additional efforts to tide enterprises over difficulties and improve its digital services in the second half of the year, giving full play to its role in supporting exports and the Belt and Road Initiative.

  • (Bloomberg, Ottawa, 19 July 2022) Canada’s export credit agency is targeting a 15% cut to its financing portfolio for upstream oil and gas production by 2030. The target will include a 3% shift - against a 2020 baseline - in the composition of production to gas from oil, recognizing that the former may play a role in supporting energy demand during the transition to net-zero emissions. EDC, a government-backed lender, also wants a 37% reduction in emissions per passenger kilometer from its airlines portfolio by 2030. The new targets for two sectors that make up a sizable portion of the agency’s financing business are part of its broader push to achieve net zero by 2050. Meanwhile, UKEF claims to have spent “its first year without providing any support for overseas fossil fuel projects".

  • (Oil Change International, Washington, 15 July 2022) Today the Belgian export credit agency Credendo published a new policy to shift public finance out of fossil fuels and into clean energy. The policy is meant to implement a commitment that Belgium made alongside 33 other countries and 5 institutions at the United Nations climate conference in Glasgow last year. The group promised to end international public finance for fossil fuels by the end of 2022 and shift this money to clean energy. Though today’s new policy imposes additional restrictions on fossil fuel financing, it leaves loopholes for Credendo to continue financing new fossil fuel projects. According to the International Energy Agency, to maintain a 50% chance of limiting global heating to 1.5°C there can be no investments in new coal, oil or gas fields or Liquefied Natural Gas (LNG) infrastructure without stranded assets. Other research shows that on top of ending investments in new fossil fuel supply, 40% of already developed oil and gas reserves need to be left unextracted.

  • (Business Korea, Seoul, 29 July 2022) SK On, a battery business subsidiary of SK Innovation, has raised a total of US$2 billion for investment in Europe through official ECAS in Korea and Europe. The company plans to use the funds to finance the construction of its third European plant in Ivancsa, Hungary. The policy financial institutions that helped SK On to secure funds were Euler Hermes, a German trade insurance agency, Korea Trade Insurance Corp., and the Export-Import Bank of Korea. The three institutions provide guarantees or insurance for SK On in the process of getting loans from overseas banks. Germany’s Euler Hermes and Korea Trade Insurance Corp. will provide insurance worth USUS$800 million and USUS$700 million, respectively. The Export-Import Bank of Korea will offer a US$200 million guarantee. In addition, the Export-Import Bank of Korea will directly lend US$300 million to SK On.

  • (Global Trading Magazine, Dallas, 14 July 2022) The Export-Import Bank of the United States (EXIM) Board of Directors yesterday unanimously approved two transactions that will support U.S. exports to Cameroon and Brazil. Together, the two projects total more than $279 million, $74m for construction equipment in Cameroon and related goods and a guarantee for a $205.5 million loan from Citibank to Embraer S.A. in Brazil to support the export of U.S. manufactured aircraft engines and related components. Utilizing the production facilities of three U.S. exporters, General Electric, Honeywell and Pratt & Whitney, the transaction is expected to support approximately 1,200 U.S. jobs across the aerospace supply chain in North Carolina, Ohio, Arizona and Alabama. Since 1992, EXIM has generated more than $9 billion for the U.S. Treasury for repayment of overall U.S. debt.

  • (InsuranceDay, London, 4 July 2022) On November 5 2021, the OECD announced the minimum down payment requirement for the Arrangement would be cut from 15% to 5% for sovereign borrowers in developing markets.The change, which was implemented temporaryily for 12 months, stoked private market concerns that the impact on insurers could be longer term. Under the previous arrangement, official ECAs could only participate on the buyer credit portion of a given transaction, with a stipulation that the down payment portion (typically 15% of the value of the contract) should be provided by the private market. Normally, commercial banks that supply the loans for the down payment often then turn to the credit and political risk insurance market to cover the risk of default. The OECD has said this change is in response to a “clear market failure” caused by the ongoing Covid-19 crisis. In its view, the private sector was “very reluctant or even unwilling” to provide insurance cover for OECD Category II (low- and middle-income) countries, which in turn meant banks were unwilling to finance projects in these developing countries.

  • (Yorkshire Post, Leeds, 30 June 2022) British businesses received £7.4bn of Government support last year to help them secure export opportunities in 61 countries, according to the latest report from UK Export Finance (UKEF). The report concluded that finance provided by UKEF in 2021-22 supported 72,000 UK jobs and added a gross value of £4.3bn to the economy. Of those supported by UKEF, 83% were located outside of London and a record 81% were small and medium-sized enterprises, according to the organisation’s annual results. A spokesman said: “The £7.4bn – the highest level for 14 years – brings the total support over the last five years to £33.4bn. While proclaiming “its first year without providing any support for overseas fossil fuel projects", UKEF continued to promote a stalled US$1.5 billion LNG project in Mozambique following its 2020 backing of the project. As noted in our June 2022 ECA Watch What's New, between 2018 and 2020, G7 countries provided US$100bn towards oil, gas and coal projects through their export credit agencies (ECAs) or development finance institutions – over four times their contribution towards clean energy.

  • (BNAmericas, Santiago, 12 July 2022) Brazilian steelmaker CSN has secured a credit facility worth US$375mn with Italian export credit agency SACE as part of the expansion plan for mining arm CSN Mineração. The funds will be used to buy equipment from Italian firms. The credit facility involves a pool of banks led by BNP Paribas, with Crédit Agricole, Natixis Corporate & Investment Banking and Société Générale Milan Branch. The credit facility involves a pool of banks led by BNP Paribas, with Crédit Agricole, Natixis Corporate & Investment Banking and Société Générale Milan Branch.

  • (BPIFrance, Paris) This Bpifrance web page explains how national ECAs can cooperate to support projects involving exports from several countries, thus enhancing official ECA "subsidies" for corporate exporters. "Bpifrance Assurance Export interacts regularly with foreign export credit agencies at General Meetings and seminars of the Bern Union or at bilateral meetings, in the interest of exchanging and sharing best practices and expanding cooperation. With the internationalisation of production systems and increasingly frequent use of foreign sub contractors and providers, a single project can involve exports from several countries. For that reason, export support agencies have developed several forms of cooperation (joint insurance, co insurance, reinsurance) aimed at serving French exporters involved in a given project or contract in a third country. Thus, when certain contracts include a significant foreign content that make them ineligible for State support, insurance can be obtained through one of these mechanisms. Bpifrance Assurance Export has signed framework agreements with the majority of its peers. Where it does not already have a framework agreement with a given partner, a cooperation agreement may be entered into on a special purpose basis. Reinsurance is the most common form of cooperation used today.

  • (Project Finance International, London, 23 July 2022) The 367MW Formosa 2 offshore wind plant has achieved the first delivery of power to the Taiwanese grid, following the installation of 12 turbines. It will have 47 turbines when completed. The international lenders were BNP Paribas, Credit Agricole, Societe Generale, Natixis, ING, DBS, OCBC, MUFG, SMBC, ANZ Bank and HSBC alongside domestic banks CTBC, E Sun, Fubon Bank and KGI Bank, and institutional lender Taiwan Life Insurance. The export credit agencies are Credendo of Belgium, EKF of Denmark, K-Sure, and UKEF. The project, referred to as Haineng Fengdian, is off the island’s Miaoli County and is being developed by Japan’s JERA (49%), Macquarie’s Green Investment Group (GIG, 26%), and Taiwanese company Swancor Renewable Energy (25%).

  • (R and R Life, Manchester, 3 July 2022) Following French/Polish agreement in October 2021 to build 4 to 6 nucelear reactors, the French government has clearly stated its willingness to consider different ways to provide support, which is expected by the Polish side. Electricite de France (EDF) and the French government are open to discussions with the Polish government about who and what type of funding will be provided. EFF VP V. Ramany pointed out that France has a number of institutions that support such programs. "In debt financing, we have strong export credit insurance. This in turn helps in attracting banks to borrow for such projects. With regard to debt, we have, for example, the Public Development Bank SFIL, which can refinance debt at a relatively low cost." Poland generates most of its electricity from coal and was the only European Union member nation not to commit to climate neutrality by 2050 when the bloc set the target in 2019. But under rising pressure from the EU and with carbon emission costs surging, Warsaw is encouraging more investment in low emission sources.

  • (Construction Index, 29 July 2022) Standard Chartered has announced €104 million (£88 million) of social loan financing for the Republic of Côte d'Ivoire’s Ministry of Economy and Finance, to rehabilitate a critical transport route in the south of the West African country. The money will go towards upgrading a stretch of the coastal road connecting the country’s two main port cities, Abidjan and San Pedro, as well as improving a 93km section of road between the towns of Dabou and Grand Lahou. The financing is backed by the French export credit agency Bpifrance Assurance Export. The financing package has been structured by Standard Chartered in its roles as global coordinator and structuring bank, social loan coordinator, bookrunner and mandated lead arranger.

  • (Australia Mining, Canberra, 11 July 2022) The Australian Government’s export credit agency has given a conditional Letter of Support for the provision of up to $300 million of debt funding for the construction of TNG’s flagship Mount Peake vanadium-titanium-iron project in the Northern Territory. Export Finance Australia is administering the Australian Government’s $2 billion Critical Minerals Facility, which has been established to assist in funding critical minerals projects. Mount Peake is one of 15 Australian critical minerals projects identified by the Australian Government in its Resources Technology and Critical Minerals Processing: National Manufacturing Priority Road Map.

  • (Global Construction, London, 1 July 2022) Norwegian battery-maker Freyr expects the plant to be one of the biggest and most efficient in Europe, with 50% lower capital spending per GWh of capacity and more than 200% higher production per employee than conventional lithium-ion facilities. The Giga Arctic project, which will be Freyr’s first, was announced on Wednesday by Jan Christian Vestre, Norway’s minister for trade and industry.