(Thomasnet, New York, 29 January 2024) The developer of the world’s first large-scale plant that will manufacture “green” steel has now secured some $7 billion in financing for the project to date, company officials announced. More than 20 lenders signed onto the debt financing, including the European Investment Bank, the Swedish Export Credit Corp., and numerous commercial banks. The new equity funding, meanwhile, came from the Microsoft Climate Innovation Fund and Siemens Financial Services, among others. H2 Green Steel recently disclosed new debt financing agreements worth $4.6 billion and said that its equity funding had increased by $325 million — up to $2.3 billion. It has also received a grant from a European Union energy innovation initiative worth about $270 million. H2, founded in Stockholm in 2020, aims to replace the use of fossil fuels in heavy industry with hydrogen fuel produced with renewable electricity, thereby slashing greenhouse gas emissions. The company says its steelmaking process reduces carbon dioxide emissions by up to 95% compared to conventional steel production, which uses blast furnaces fired by coke, a coal-based fuel.
Newsletter
Red Sea crisis: Indian shipping costs and times and export credit premiums up
(Financial Express, Noida, 18 January 2024) An Indian inter-ministerial meeting on Red Sea crisis on Wednesday has asked the Department of Financial Services (DFS) in the finance ministry to monitor the credit requirements of exporters and ensure that credit flows to them are maintained, a senior official said Wednesday. Different reports have said the conflict in the Red Sea is leading to increased shipping costs by 40-60%, insurance premiums by 15-20% and delays of up to 20 days due to rerouting of some ships away from Suez Canal. The cost and turnaround time of shipments have increased as two shipping lines including Maersk have stopped services but volume is not affected, the official said.He said so far there has just been time and cost impact, nothing else. In the rapidly escalating situation in the region the shipping rates on some routes have gone up by six times. Exporters fear that the impact could come in a big way if the situation does not normalise. The government may have to look at alternate routes. On its part the ministry of commerce has asked Export Credit Guarantee Corporation (ECGC) not to increase the premium on credit insurance and other related services.The insurance covers enable the banks to extend timely and adequate export credit facilities to the exporters. [Around 80% of India’s merchandise trade with Europe passes through the Red Sea and substantial trade with the US also takes this route. Both geographies account for 34% of India’s total exports. The Red Sea strait is vital for 30% of global container traffic and 12% of world trade.]
How to Deal with Sinosure as an Importer
(Global Trading Magazine, Dallas, 8 January 2024) An in-depth guide on handling the Sinosure export credit insurance services and getting deferred payments for your imports from Chinese suppliers. Payment terms in contracts with Chinese suppliers can require as much as 30% of the total up front as a hedge against the importer’s nonpayment, also known as its credit risk. The remainder of the payment is usually due before the Chinese exporter ships the goods. Sinosure, the China Export & Credit Insurance Corporation, is an official financial institution designed to help in cases like that. It provides export credit insurance to companies in China seeking to do business with foreign buyers without having to bear the risk of nonpayment. While Sinosure’s clients are the exporting Chinese companies, its business benefits importers outside of China by eliminating cash flow issues and extended delivery times. With this insurance safeguard, suppliers are more willing to extend deferred payment terms and trade turnover with their foreign partners, to the mutual benefit of both parties. In the year 2022, Sinosure ensured export credit worth more than $700 billion for approximately 240,000 Chinese exporters. This compares with only $2.61 billion insured that year by US Exim. Sinosure insures so much more because it is a key part of the country’s export drive, and it maintains a large sales and customer service network throughout China, whereas US Exim generally focuses on a few large-scale industries like airplanes, power generation, and infrastructure.
UKEF: Taxpayers underwrite French contractor’s Saudi project
(Construction Index, London, 5 January 2024) The UK’s export credit agency has guaranteed an Islamic Murabaha financing facility for the development of Six Flags Qiddiya City near Riyadh. UK Export Finance (UKEF) has guaranteed an Islamic Murabaha financing facility for £550m signed by Qiddiya Investment Company to finance the construction of the theme park. This is being undertaken by a joint venture led by Bouygues Bâtiment International of France and local firm Almabani General Contractors. UK Export Finance chief executive Tim Reid said: “Saudi Arabia’s ‘Vision 2030’ is hugely ambitious, and UKEF is determined to ensure that British businesses can benefit from the enormous exporting opportunities it offers.
UKEF underwrites financing for another section of Turkish high speed rail network
(Railway Gazette, Sutton, 22 January 2024) The UK government’s export credit agency UKEF has agreed to underwrite a €1·03bn loan arranged by Mitsubishi UFJ Financial Group for three Turkish companies to construct Turkey’s 140 km long Yerköy – Kayseri route modernisation scheme. UKEF has partnered with export credit agencies from Italy (SACE), which reinsured €249m of the guarantee, Poland’s KUKE, which reinsured €205m, and Austria’s OeKB (€176m). A separate €220m commercial loan from the Islamic Corporation for the Insurance of Investment & Export Credit makes the total financing package worth €1·2bn. [This is the third Turkish high-speed railway to be backed by UK Export Finance and its counterparts in Italy, Poland, and Austria. Combined, the projects amount to some 900km of rail. The two others are the Ankara-Izmir and the Mersin-Gaziantep lines.]
ECAs support €1.08 billion green loans for Cadeler
(The Asset, Hong Kong, 3 January 2024) Oslo-listed offshore wind turbine installation company Cadeler has raised €1.075 billion (US$1.19 billion) via two syndicated green financing facilities with backing from export credit agencies (ECAs). The revolving facilities will be used to refinance Cadeler and Eneti’s existing debt, as well as finance merger-related costs. Ancillary lines have been set up to support the project-related letter of credit (LC) needs of the company, and term facilities will finance the upgrade of cranes on two of Cadeler’s O-Class offshore installation vessels. The financing for the crane upgrades has ECA backing from the Export and Investment Fund of Denmark (Eifo). A facility amounting to €425 million, which is backed by the China Export & Credit Insurance Corporation (Sinosure), will be used to finance the acquisition of two new X-Class wind turbine installation vessels currently under construction in China.
JBIC financing for two gas power projects in Mexico would violate the G7 agreement
(JACSES, Tokyo, 30 January 2024) The Japan Center for a Sustainable Environment and Society notes that two gas-fired combined cycle power projects in Mexico are now under consideration for financing by the Japan Bank for International Cooperation (JBIC). One is in San Luis Potosi and the other one in Salamanca. When Japanese NGOs asked the consistency of these two projects with the agreement reached at G7 Elmau Summit to end new public financing for fossil fuel energy, JBIC did not provide specific rationale on its judgment that the policy of the Mexican government is consistent with the 1.5 degree target. If JBIC provides support, it is highly likely that it constitutes a violation of the G7 agreement, thus JBIC should stop consideration for financing. JBIC placed these two projects on its list of projects under consideration for financing on November 2, 2023.
Amid Corruption Charges, Groups Demand EXIM Halt Payments to Trafigura
(Friends of the Earth, Washington, 23 January 2024) Civil society and environmental groups today requested that the US Export-Import Bank withdraw funding from the Trafigura Group, a major global commodity trader. In December, Bloomberg reported that Trafigura was charged with corruption and bribing elected officials in Angola. In an open letter to EXIM, asking the bank to halt its payment of $400 million to Trafigura, a financing agreement that was approved in July 2023. This letter questions EXIM’s due process in analyzing funding recipients and its method of reconsideration when corruption is revealed. This comes on the heels of both the United States and Swiss governments launching investigations into the company’s affairs. Despite this, EXIM last year gave Trafigura the massive financing of $400 million to purchase liquefied natural gas, a decision the groups charge was made based on flawed environmental damage assessments. EXIM is soon expected to approve $660 million for the Gas to Energy Project in Guyana, despite similar concerns from activists. In 2023 the institution funded nearly $1 billion for overseas oil and gas development, violating President Biden’s 2021 Executive Order.
Biden Administration Faces Pushback on Another Gas Project, This Time Overseas
(New York Times, New York, 26 January 2024) Even as the Biden administration, under pressure from environmentalists, hits pause on its approval of a major natural gas export terminal in the United States, it faces another big gas decision overseas. A $13 billion natural gas export project in Papua New Guinea led by TotalEnergies and Exxon Mobil is on a shortlist of projects set to receive financing from the U.S. Export-Import Bank, or Ex-Im, which supports American businesses around the world.The Papua LNG gas project would join a portfolio of oil and gas projects the bank funds, including an oil refinery in Indonesia and an oil tank project in the Bahamas. The bank is also considering financing an offshore pipeline and natural gas plants in Guyana. Some climate activists see a big contradiction between climate actions the government is taking in the United States versus around the world. “He’s done so much at home,” said Friends of the Earth’s Kate DeAngeli, but he “can’t claim to be a climate champion when the U.S. is propping up this fossil fuel infrastructure all over the world.”
EXIM Lent Nearly $1 Billion to Fossil Fuel Projects in 2023
(New Republic, New York, 28 December 2023) President Joe Biden pledged to stop financing such projects overseas, and yet the U.S. Export-Import Bank continues to do so. While much of the country was occupied last week with holiday travel and time with family, a little-known government agency approved a $90 million guarantee for ING Capital to finance a liquified natural gas export facility in Texas. All told this year, that agency—the U.S. Export-Import Bank—has approved nearly $1 billion in fossil fuel lending, including $100 million for expanding an oil refinery in Indonesia and $400 million of insurance for revolving credit facilities to help commodity trading giant Trafigura purchase LNG. Not long after taking office, in January 2021, President Joe Biden signed an executive order which tasked the bank and other federal agencies with identifying “steps through which the United States can promote ending international financing of carbon-intensive fossil fuel–based energy.”
