(Reuters, Berlin, 25 July 2023) Environmental groups on Tuesday criticized Germany's draft policy on export credit guarantees as too vague and soft on financing for natural gas projects, as Berlin attempts a balancing act between climate protection and energy security. Germany supports exports by offering guarantees for non-payment caused by economic and political factors, helping companies to secure political backing for their projects and better financing terms. On Monday, the economy ministry published its first draft guidelines for such guarantees for the energy, transport and industry sectors, tying them to climate protection targets. The guidelines set three categories for future projects: a positive green for projects contributing to achieving climate targets that would be eligible for government support, a neutral white for projects that do not make a significant contribution to climate goals but would still receive support, and a climate-damaging red to be excluded from such guarantees. But the draft drew heavy criticism from environmental organizations, which argued that Germany was breaking its international commitment to ending public financing for fossil fuels by the end of 2022, by offering too many exemptions for natural gas projects. "These plans highlight the German governments' shameless disrespect of its international commitments and climate goals," Martin Kaiser, executive director of Greenpeace Germany, said. At the 2021 United Nations COP26 climate summit, 20 countries, including Germany, promised to stop public funding for overseas fossil fuel projects by the end of 2022. Environmental groups have raised concerns about Germany’s policy draft on export credit guarantees, stating that it is too vague and lenient regarding the financing of natural gas projects.
Index for July 2023
Volume 22, Issue 7
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(Price of Oil, Washington, 18 July 2023) Last Friday, the Export-Import Bank of the United States (EXIM) — the official export credit agency of the U.S.— insured USD 400 million in revolving credit facilities for global commodities trader Trafigura. The newly approved transaction will allow Trafigura Pte. to purchase liquefied natural gas (LNG) from U.S. exporters to sell primarily to European buyers. “It is alarming that Biden continues to break climate commitments to end international public finance for fossil fuels. Instead, he uses public money to prop up the dirty industry that fuels climate disaster and harms communities, while we suffer record breaking extreme heat. “Other countries like Canada, the UK, and France have kept their promise to end international public finance for fossil fuels, and are already shifting billions of dollars towards clean energy. There needs to be accountability for signatories like the Biden administration for going back on their word.”
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(Price of Oil, Washington, 11 July 2023) Italy’s export credit agency SACE has approved a $500 million guarantee in loans for the Talara oil refinery in Peru, once again breaking their commitment to end their international public finance for fossil fuels by the end of 2022. SACE is the biggest public financier of fossil fuels in Europe. Between 2016 and 2021, SACE supported EUR 13.7 billion in fossil fuels. A study by Oil Change International last year revealed that SACE is considering financing for international fossil fuel projects with emissions equivalent to more than 3 times Italy’s entire annual emissions. At the UN COP26 climate summit in 2021, 39 countries and financial institutions, including Italy, signed the Glasgow Statement, committing signatories to end their direct international public financing for fossil fuels by the end of 2022. Oil Change International’s Public Finance for Energy Database shows that G20 countries and the major multilateral development banks (MDBs) provided at least USD 63 billion per year in international public finance for oil, gas, and coal projects between 2018 and 2020. This is 2.5 more than their support for renewable energy.
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(BN Americas, Santiago, 7 July 2023) Although the energy transition and ESG issues are gaining traction, many banks and credit export entities keep financing oil and gas undertakings, such as floating production storage and offloading units (FPSOs) ordered by Brazil’s federal oil firm Petrobras. FPSOs are used for the production and processing of hydrocarbons, and for the storage of oil. This situation will not change much as demand for hydrocarbons will remain and a significant portion of oil companies’ decarbonization capital expenses comes from oil and gas revenues. Furthermore, the geopolitical context, with the war in Ukraine and gas supply in Europe, has reignited energy security concerns. Meanwhile, financial products like green and sustainability linked bonds, developed to support companies that do not operate in totally green areas, do not yield higher returns. According to Daniela Davila, a partner at Vieira Rezende law firm, new FPSOs are mainly financed by Asian financial institutions (banks and leasing houses) and export credit agencies from countries such as China, Japan, South Korea and Singapore, where shipyards that build the hulls/modules of the units are located. Some banks, such as BNP Paribas and HSBC, have announced their exit from this industry, while New York-based Nordea has shown less appetite for oil and gas. On the other hand, traditional offshore players like Norway’s DNB or Germany’s Deutsche Bank continue to support the sector. CNOOC and CNODC are also Petrobras’ partners in the Mero field, which will receive the Sepetiba unit this year and Alexandre de Gusmão in 2025. Banks from Japan, like Sumitomo Mitsui Banking Corporation and Japan Bank for International Corporation, often work with Japan's Modec, which signed several charter contracts of FPSOs under construction with Petrobras and one for Equinor’s Bacalhau field. Among other financial institutions with tradition in FPSO financing are the UK’s Standard Chartered Bank; DBS Bank, United Overseas Bank, Clifford Capital and Oversea-Chinese Banking Corporation from Singapore; China Investment Corporation; Korea Development Bank (South Korea); Maybank and CIMB (Malaysia); Société Générale and Natixis (France); and Mitsubishi UFJ Financial Group (Japan). Export credit agencies in the sector include China’s Sinosure, Nippon Export and Investment Insurance (Japan) and Sace (Italy).
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(Resiliance, US-UK-AU, 11 July 2023) The global energy crisis fueled by Russia’s invasion of Ukraine sparked widespread fears of a “return to coal” – yet, to date, there is scant evidence of this. Indeed, in the world of project financing, any supposed rebound has been illusory. The financing of coal power outside of China has now hit its lowest point since 2010, according to our latest figures in the Global Coal Project Finance Tracker (GCPFT). We found that for every $1 in coal project lending that reached financial close in 2022, another $14 earmarked for previously proposed projects was stopped. But, despite a myriad of economic, political and social headwinds that have slowed funding to the coal sector, project lending continues to display resilience, particularly in southeast Asia.
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(Environment Governance Institue, Seeta Uganda, 18 June 2023) Thirty four African environmental and human rights civil society organisations and 13 international supporters wrote the African Export-Import Bank (Afreximbank) in anticipation of the 30th Afreximbank Annual General Meeting (AGM) from 18th to 21st June 2023 to urge stronger environmental commitments and actions within the financial sector, noting that the impacts of climate change are increasingly evident across the continent, with vulnerable communities and ecosystems bearing the brunt of these effects, and yet financial institutions such as Afreximbank have continued to invest in the further expansion of fossil fuel projects, thus accelerating the climate emergency. Specifically, they note with great concern that across the region, Afreximbank has continued to support a list of finance fossil fuel projects, which contravenes Article 2.1(c) of the Paris agreement signed by all 54 African countries which calls on parties to make finance flows consistent with a pathway towards low greenhouse gas (GHG) emissions and climate-resilient developments.
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(Business Korea, Seoul, 4 July 2023) According to the Export-Import Bank of Korea’s loan and guarantee data by item and country on July 3, the state-run bank provided 488.2 billion won (US$375.7 million) in financial support in the form of loans and guarantees to the defense sector in the first five months of this year. The total amount of loans and guarantees provided by Korea Eximbank to all industries in the same period was 31.8 trillion won. Export finance for Korea’s defense exports accounted for 1.6 percent of the total export finance provided by Korea Eximbank this year. According to the Enforcement Decree of the Export-Import Bank of Korea Act, the state-run lender cannot provide credit to the same borrower for more than 40 percent of its equity capital. Korea Eximbank will thus be unable to afford to give additional loans and guarantees to Poland if it provides US$5 billion in support for the first batch. The amount of loans and guarantees provided by Korea Eximbank in connection with purchases of weapons signed from 2018 to 2021 ranged from 100 to 500 billion won per year. But the figure surged to the two trillion won range in 2022. Guarantees with Poland accounted for most of the financial support, in the US$2 trillion range. In addition to Poland, Korea Eximbank provided defense-related financial support to the United Arab Emirates (UAE), Egypt, and Indonesia in 2022.
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(Institue of Export & Int'l Trade, london, 20 July 2023) The Organisation for Economic Co-operation and Development (OECD) has modernised the terms of its Arrangement on Officially Supported Export Credits to allow export credit agencies (ECAs) covered by the arrangement, which includes UKEF in the UK, to extend more generous incentives for climate-friendly transactions. The OECD describes the Arrangement as a “gentlemen’s agreement” between participants, which include Australia, Canada, the EU, Japan, Korea, New Zealand, Norway, Switzerland, Turkey, the UK and the US. Under the new rules, UKEF will now be allowed to offer better or longer repayment terms and more flexible finance structures for more renewable and green transactions. The new OECD arrangement follows a proposal from EU countries to do more to encourage green trade and climate-friendly transactions. It includes an expansion of the scope of green or climate-friendly projects eligible for longer repayment terms (eligible under the “Climate Change Sector Understanding” or CCSU). These include projects related to environmentally sustainable energy production; CO2 capture, storage, and transportation; transmission, distribution and storage of energy; clean hydrogen and ammonia; low emissions manufacturing; zero and low-emission transport; and clean energy minerals and ores.
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(Pulse News, Soeul, 24 July 2023) The Export-Import Bank of Korea (Korea Eximbank) is gearing up to upgrade its traditional model of financial support for promoting exports of Korean companies to a new level with the introduction of Export Credit Agency (ECA) Version 2.0. The management strategy, termed ‘Beyond Core,’ aims to move beyond the core responsibility of supporting export expansion and evolve the ECA to adapt to the changing landscape. As part of this strategy, Korea Eximbank is considering activating limited investment operations. Similar to Japan Bank for International Cooperation (JBIC) and Export Development Canada (EDC), which have set up investment-specific subsidiaries for development finance in developing countries
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(India Times, New Delhi, 30 June 2023) Minister of Commerce and Industry Piyush Goyal on Wednesday urged Indian banks to provide MSMEs with improved and inexpensive loans in order to meet the aim of 1 trillion dollars in product exports. According to the official statement, the meeting was convened by the Department of Commerce in coordination with Export Credit Guarantee Corporation Limited, (ECGC) in New Delhi. The Commerce and Industry Minister also mentioned at the meeting that the ECGC might look into expanding the programme that was proposed for nine banks to all banks in order to improve the export credit offtake for MSME Exporters. The Commerce and Industry Minister further informed that in the next four months, all the ECGC services would be digitised so that physical interaction can be minimised, it added.
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(PES Media, Rochester, 5 July 2023) UK Export Finance (UKEF) has published its annual results for 2022-23, which show the government’s export credit agency provided £3.5bn in new, direct support for UK manufacturing exporters in the last 12 months. The financing has directly supported up to 34,000 jobs in the sector. Overall, UKEF provided £6.5bn in new direct support to UK exporters in 2022-23. The financing, provided through loans, guarantees and insurance policies. UKEF spent £1.1bn supposedly supporting the UK construction sector last year.
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(ZAWYA, Dubai, 11 July 2023) Cedar Rose, a Cyprus and Dubai based corporate data, credit, risk and compliance firm, has reaffirmed its longstanding partnership covering over 25 years of relationship with Sinosure, a prominent Chinese state-owned enterprise responsible for export credit insurance. Cedar Rose's services play a crucial role in enabling comprehensive risk assessments for Sinosure. By leveraging Cedar Rose's Company Credit Reports and analysis services, Sinosure gains access to a wealth of data, including company identification, structure, and financial information. These services are obtained through Cedar Rose's API, with a particular focus on the Middle East and North Africa (MENA) region. Antoun Massaad, Co-Founder and CEO of Cedar Rose stressed that “The partnership between Cedar Rose and Sinosure has proven valuable in de-risking trading activities, supporting Sinosure’s risk management practices”.
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(MINT, New Delhi, 6 July 2023) India plans to allow Sri Lanka up to 12 years to repay its debt to help ease the financial burden on the island-nation, India’s Export Credit Guarantee Corporation (ECGC) Ltd’s chairman-cum-managing director M.Senthilnathan said. Sri Lanka, facing its worst economic and political crisis in over seven decades, owes $7.1 billion to bilateral creditors— $3 billion owed to China, $2.4 billion to the Paris Club and $1.6 billion to India. Senthilnathan added that the National Export Insurance Account, managed by the ECGC, has received close to ₹4,500 crore worth of claims from exporters facing default in countries such as Sri Lanka, Zambia, Suriname and Ghana which faced extreme economic hardships after covid-19 and the Ukraine war. China has so far not joined the common platform of negotiators on Sri Lanka’s debt restructuring, though it has joined as an observer. In response to Sri Lanka’s request for long-term relief from major creditors like India, Japan, and China, the Chinese Exim Bank has agreed to grant Sri Lanka a two-year moratorium. It said it would support the country’s efforts to secure a $2.9 billion loan from the International Monetary Fund according to a report by Reuters.
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(Full Fact, London, 26 July 2023) Earlier this week Greater Manchester mayor Andy Burnham tweeted a screenshot of a UK government press release with the headline “UK announces £680m for new high-speed electric railway in Turkey”. Alongside the screenshot, Mr Burnham tweeted “So we can’t afford to keep our own ticket offices open - but we can afford to build a new line in Turkey?” Mr Burnham’s suggestion that the UK is financing a new railway line in Turkey is misleading—the £680 million figure used in the government press release refers to a loan provided by three banks (J.P. Morgan, ING Bank and BNP Paribas) which has been underwritten by the UK government’s export credit agency. The Italian, Austrian and Swiss export credit agencies are also providing reinsurance.
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(G3 Football, Hillside NJ, 14 July 2023) Wolverhampton Wanderers have recently made headlines for securing a £99 million loan from the UK government. While some may view this as a sign of financial trouble, experts argue that it is a shrewd move by the club. In this article, we will explore the details of the loan, why Wolves qualified for it, and its implications for the club. The loan was obtained by Wolves last year from the government agency UK Export Finance (UKEF). UKEF is the UK’s export credit agency and aims to ensure that no viable UK export fails due to lack of finance or insurance. Wolves qualified for the loan because they export a range of goods and services, including merchandise and football through the Premier League’s overseas broadcast rights.