Index for October 2023

Volume 22, Issue 10

  • The climate crisis can't be solved if export credit agencies continue to support fossil fuels. We, a group of concerned civil society organizations, call on governments to immediately end all export credit and other public support for fossil fuels.

  • (Oxfam America, Boston, 16 October 2023) This 51 page study assesses the alignment of the United States Export-Import Bank (EXIM) — the official export credit agency (ECA) of the US — with the country’s climate and development policy objectives derived from relevant Executive Orders (EOs), acts, guidance, and strategic policy documents. Export credit agencies (ECAs) like the Export-Import Bank of the United States (EXIM) are government-backed private or public agencies with a mandate to promote national exports through loans, guarantees, and insurance to domestic companies or foreign buyers. EXIM exerts great leverage by reducing the risk of private investments and, consequently, supports the expansion of specific industry sectors such as aircraft, manufacturing, and oil and gas. In developing countries, ECAs often finance large-scale energy infrastructure projects with significant lifetimes that disproportionately benefit carbon-intensive industries, increasing greenhouse gas (GHG) emissions (OECD n.d.). In fact, ECAs are the largest category of public finance institutions (PFIs) supporting fossil fuel investments. Between 2019 and 2021, G20 ECAs facilitated transactions amounting to $34 billion per year for fossil fuels, over 90 percent of which were for oil and gas. The share of clean energy transactions in ECA portfolios was considerably lower, with only $4.7 billion per year over the same period.

  • (EXIM, Washington, 22 September 2023) The Board of Directors of EXIM has approved 3 transactions in the energy and transportation sectors. The first transaction a direct loan for more than $57 million to EnergoNuclear S.A. to support pre-construction engineering and feasibility studies for the potential development of two nuclear reactors at the Cernavodă nuclear power plant complex in Romania. The transaction, issued under EXIM’s Engineering Multiplier Program, will support an estimated 200 new jobs in Texas and Illinois. The EXIM Board also approved a $594 million loan guarantee to the national railway of Kazakhstan, KTZ, to support the export of Wabtec locomotive and locomotive shunter kits to KTZ. The transaction will support an estimated 1,500 U.S. jobs. The final transaction approved by the Board was a $240 million guarantee of a loan to the Ministry of Electricity of the Republic of Iraq to finance the export of GE Energy products to support the repair and upgrade of operating gas turbines in ten locations in Iraq. The transaction is estimated to support approximately 500 U.S. jobs across California, Connecticut, Illinois, Ohio, Oregon, Massachusetts, and Nevada. [An aside re Iraq: A recent Brown University study found that the 2003-2011 Iraq war cost the US $2.9 trillion, over 500,000 lives, created 7 million refugees, nearly 8 million displaced persons and a legacy of ISIS like terrorism throughout the world. Pentagon spending since 2001 has totaled over $14 trillion, one-third to one-half of which went to defense contractors.]

  • (Devdiscours, New Deli, 8 October 2023) Indian exporters shipping goods to Israel may face higher insurance premiums and shipping costs due to the Israel-Hamas conflict, according to experts. For merchandise exports of India, the war may lead to higher insurance premiums and shipping costs. Indian ECA ECGC may charge higher risk premiums from Indian firms exporting to Israel, think tank Global Trade Research Initiative (GTRI) said on Sunday. ECGC Ltd (formerly Export Credit Guarantee Corporation of India Ltd) is wholly owned by the government of India. Mumbai-based exporter and founder chairman of Technocraft Industries India Sharad Kumar Saraf said the conflict may have an impact on Indian exporters in the short run. ''But if the war escalates, things may get bitter for our exporters of that region,'' Saraf said.

  • (Financial Times, Brussels, 29 October 2023) The UK and EU will push the world’s richest countries to end subsidies for foreign oil and gas operations and coal mining at a closed-door OECD meeting next month, according to people familiar with the matter. The proposal to cut off the biggest foreign source of public finance for fossil fuels is expected to spark heated negotiations at the OECD’s Paris headquarters. The move builds on a commitment by some OECD countries to align public finance institutions with Paris agreement goals to limit global warming to well below 2C and ideally 1.5C above preindustrial levels. But the effort to end subsidies for foreign projects will draw attention to the prevalence of domestic subsidies for oil and gas industries, even as a global deal to end fossil fuel production without the emissions captured at the upcoming UN COP28 climate summit looks increasingly unlikely. Ending export credit agencies’ provision of loans and guarantees for fossil fuel projects would be “an essential first step to keeping our international climate goals within reach”, said Nina Pušić, an export finance climate strategist at the US environment campaign group Oil Change International.

  • (Ukraine Recovery, London, 22 June 2023) The Ukraine Recovery Conference 2023 was co-chaired by the UK and Ukraine in London on 21-22 June 2023. The conference was a continuation of the cycle of annual events, with URC 2022 conducted jointly with Switzerland in Lugano. The conference focussed on mobilising international support for Ukraine's economic and social stabilisation and recovery from the effects of war, including through emergency assistance for immediate needs and financing private sector participation in the reconstruction process. URC 2023 showcased the strength and potential of the private sector in supporting Ukraine to “build back better”, working alongside a broad coalition of governments, international organisations and civil society. URC 2023 brought together Leaders, Ministers, and representatives of 59 states, 32 international organisations and international financial institutions, over 500 businesses, and 130 civil society organisations. Press articles this month (October) highlight Swedish, French, Dutch and Canadian support for aid to Ukraine: The Swedish government proposes to allocate SEK 333 million (about $30 million at the current exchange rate) for special export credit guarantees for companies trading with Ukraine; The French state-owned insurance company Bpifrance Assurance Export will insure French companies ready to invest in Ukraine and its recovery without waiting for the war to end; The Netherlands is allocating EUR 102 million for the third support package of assistance to Ukraine in 2023; Export Development Canada, without announcing specific funding has noted that it continues to closely monitor the situation in Ukraine, engage with Canadian exporters and qualified investors interested in the market and provide support through its suite of products.

  • (Anyuak Media, Warsaw, 12 October 2023) UK Energy Secretary Grant Shapps has made a visit to Ukraine to announce fresh financial support aimed at reducing the country’s reliance on Russia for its nuclear fuel supply. The UK will provide a £192m loan guarantee to Ukraine’s national nuclear company, Energoatom, through the UK’s export credit agency, UK Export Finance. As part of the agreement, UK-headquartered Urenco will supply Energoatom with vital uranium enrichment services necessary for nuclear fuel. Currently, nuclear power accounts for more than half of Ukraine’s electricity generation

  • (Business Wire, San Francisco, 9 October 2023) Ras Laffan Petrochemicals, a joint venture company owned 30% by Chevron Phillips Chemical and 70% by QatarEnergy, today announced that it has secured $4.4 billion to finance an integrated polymers facility to be located in Ras Laffan Industrial City, Qatar. The project financing comprises commercial and Islamic lenders and a group of export credit agencies. Finalizing the financing is a key milestone in the development of the 435-acre petrochemical project, which will include the largest ethane cracker in the Middle East and one of the largest in the world. The two companies also are constructing a joint venture integrated polymers facility on the Texas Gulf Coast, which is expected to be operational in 2026.  [No information is available on which ECAs are involved.]

  • (Global Trade Review, London, 4 October 2023) The African Export-Import Bank has agreed a US$300mn facility with Trident OGX Congo to bump up crude oil production in the Republic of the Congo. Other export credit agencies (ECAs) around the world have come under fire for continuing to finance the oil industry, most prominently the ECAs of western countries whose governments signed up to end international fossil fuel financing for new oil and gas projects. But some claim that global efforts to drastically scale back oil and gas production disadvantages African nations that have not yet reaped the economic benefits of fossil fuels, a tension borne out in the struggle over financing the East African crude oil pipeline. While western economies have had years to prepare for ESG requirements, Gwen Mwaba, director and global head of trade finance at Afreximbank, said that there was now “an expectation for Africa to fall in line immediately, when the reality is that we also need time to find our way on this journey. We should be given that space given how little we contribute to carbon emissions as a continent compared to the western world,” she said.

  • (Argus Media, Cape Town, 3 October 2023) Chinese export credit agency Sinosure is slated to complete talks with Uganda and oil companies TotalEnergies and CNOOC this month to provide $3bn for the country's crude export pipeline EACOP, after western financiers pulled out due to environmental concerns, Petroleum Authority of Uganda director Ernest Rubondo said today.

     

  • (ReNews, Winchester UK, 17 October 2023) Northland Power and its partners have met all conditions and completed the NT$117bn (€3bn) financing for the 1 GW Hai Long offshore wind project off Taiwan. The financing will be provided by 16 international and local banks, including China Trust, Taipei Fubon Bank, Taiwan Life, Fubon Life, HSBC, Crédit Agricole Bank, Auspreci Bank, Sumitomo Mitsui Banking Corporation, Mizuho Bank MUFG Bank and Deutsche Bank. A high proportion of the funds in this joint loan case will be provided by local financial institutions. At the same time, Hai Long has obtained the highest credit guarantee ratio from Taiwan's history, provided by seven export credit agencies, including Export Development Canada (EDC), Japan Bank for International Cooperation (JBIC), Japan Trade Insurance (NEXI) and UK Export Finance Agency.

  • (Business World, Delhi, 3 October 2023) Reliance Jio, Indian telecom giant, has successfully raised nearly USD 2 billion (approximately Rs 16,640 crore), marking India's largest offshore loan in FY24, as reported by a media house. HSBC played a leading role in arranging this initiative, which is intended to finance the recent purchases of 5G network equipment from Nokia, a Finnish technology company. The report also reveals that Finnish export credit agency Finnvera has provided a similar insurance cover to safeguard Nokia, the supplier of Jio's 5G equipment and the global lenders associated with the telecommunications company. The inclusion of Finnvera insurance is expected to reduce Jio's overall funding costs for its 5G equipment. Such arrangements offer greater reassurance to global lenders and major 5G network suppliers involved in substantial deals.

  • (Livemint, Mumbai, 17 October 2023) Italy’s Export Credit Agency, SACE, brought together a hundred leaders in Mumbai to explore trade and industrial synergies. SACE is currently evaluating $1.6 billion of new projects to facilitate the green transition in India. These projects are expected to promote and grow trade and industrial synergies between Italy and India in a diversified range of sectors including green technologies & renewable energy, infrastructure, automotive, and steel amongst others. In this scenario, SACE brought together a hundred leaders from the Indian and Italian business and finance communities in Mumbai for its event, “Italy meets India - A Push towards a Sustainable Future", to explore new potential business opportunities between Italy and India. SACE has an overall transaction portfolio of $173 billion and a presence in India through its office in Mumbai since 2012,

  • (Global Trade Review, London, 25 October 2023) Germany has become the latest country to offer more attractive export credit guarantee pricing and conditions for climate-friendly transactions. In a policy scheduled to take effect from November 1, applicants for export credit support from the energy, transport and heavy industry sectors will be graded based on the alignment of their transactions to the Paris Agreement target of keeping global warming under 1.5 degrees Celsius. Export credit guarantees, investment guarantees and untied loans will be cheaper for transactions that support the 1.5 degrees goal. The down payment on local costs will also be waived, government coverage will be boosted from 95% to 98%, and German content will only need to form 30% of the overall transaction. Additionally, a surcharge on local currencies will be removed, meaning the premium paid will remain the same regardless of the currency used. Current pricing and terms will apply to transactions classified as compliant with the global warming limitation target. Those that are not aligned will be refused cover. Overall, the policy aims to make German export credit cover with developed countries climate-neutral by 2045 and with developing countries by 2050. Euler Hermes administers the export credit policy, overseen by Berlin’s climate and economy ministry.

  • (IATA, London, 26 October 2023) Airline finances were a major focus at the World Financial and World Passenger Symposiums. Airlines generally raised more money than they needed during the pandemic and so have good liquidity on the whole, but it is estimated that the industry will need to invest about $5 trillion or some $175 billion per year to achieve its goal of net zero carbon emissions by 2050. Yet the 2023 profit for airlines will be just $10 billion and that is following three years of heavy losses. Clearly, aviation will need to access finance to support its sustainability initiatives. Increasing demand and sustainability mean that money is being spent and airlines are reluctant to raise more capital at the moment because of the high interest rates. Airlines will therefore soon start to access finance again. It is expected that in the United States bond issuing markets will be the most active element. In China and Asia-Pacific, local banks will, as usual, be the main sources for financing while other areas will look more at sale and leaseback as well as export credit agencies.

  • (Vanguard, Lagos, 4 October 2023) THE African Import Export Bank, Afri-Exim Bank, in collaboration with the Infrastructural Concession Regulatory Commission, ICRC, have approved a $1.2 billion loan facility to rehabilitate the moribund Burutu Port in Burutu, Delta State, Nigeria. An official of Afri-Exim Bank,  Mr. Hope Nyongo, disclosed that the Business Case for Burutu Port has been prepared by the ICRC and encouraged investors with similar projects to take advantage of Joint Project Preparation Facility to develop such facilities. He stated: “Because of the typical nature of the maritime and the lack of internal capacity, we have a facility called the Joint Project Preparation Facility initiated by Afri-Exim for port related development in Africa.

  • (Mirage News, London, 17 October 2023) Delegations from seven African nations joined leading UK companies and investors to advance partnerships that promote economic growth and jobs. Organised by UK Export Finance (UKEF) - the UK's export credit agency - and DMA Invest, the Forum brings together prominent representatives from Benin, Cameroon, Cote d'Ivoire, the Democratic Republic of Congo, Guinea, Senegal and Togo to discuss new trade and investment opportunities with their UK counterparts that will benefit British businesses. It forms part of the Prime Minister's priority to grow the economy.

  • (Global Trade Review, London, 24 October 2023) [In an article sponsored by CITI, GTR has published an overview of export finance by Richard Hodder, head of export agency finance at CITI.] "In today’s world of escalating environmental concerns and shifting global economic priorities, export credit agencies have the potential to play a pivotal role in advancing the transition to cleaner energy sources and sustainable development... “In terms of the energy transition, the sheer volume of financing that will be required to drive it, as well as the large size of individual projects, will necessitate a diversity of funding sources – and ECA support will be key,” says Hodder. “Looking at the enquiries across our network, we expect ECA demand to grow and remain at sustained high levels over the next decade.” [Citigroup Inc. hired HSBC Holdings Plc’s Richard Hodder in June 2023 to lead its export agency finance business as the Wall Street giant seeks to expand its trade operations.]

  • (Price of Oil, Washington, 30 October 2023) As Organisation for Economic Co-operation and Development (OECD) delegates prepare to meet in Paris from November 6-10, over 250 civil society organizations (CSOs) from 30 countries published an open letter calling on negotiators to support an end to OECD export finance for fossil fuels. Signatories include Amnesty International, Greenpeace International, and Friends of the Earth International. The Financial Times (FT) has revealed that the UK and the EU will put forward proposals for doing so, with Canada planning to back the UK’s proposal. These efforts can end the USD 41 billion per year flowing to fossil fuel projects from government-run OECD export credit agencies (ECAs). The OECD Arrangement on Officially Supported Export Credits sets rules that all OECD country ECAs must follow.

Volume 2, Issue 10

  • (Zawya, Dubai, 11 October 2023) The Egyptian government is currently negotiating with several international financing institutions to secure a $2.1 billion concessional loan for the implementation of the second high-speed rail line, two government officials told Asharq Business. The potential lenders include, the Italian Export Credit Agency and the German state-owned KfW Bank, one source noted. On a related note, five international firms are competing for a deal on supplying 21 trains for the first phase of Alexandria metro project at an estimated cost of up to $400 million, the sources said. The companies are the French Alstom, South Korea’s Hyundai, Spanish CAF, China’s CRRC, and Russian-based Transmashholding.