(Oil Change International, Washington, 19 May 2022) Today, 122 civil society groups are releasing letters to eleven government signatories to the Glasgow Statement on International Public Support for the Clean Energy Transition, laying out the actions they must take as soon as possible to meet their commitment. In their joint statement at COP26, 35 countries and 5 public finance institutions committed to end their international public finance for ‘unabated’ fossil fuels by the end of 2022, and instead prioritise their “support fully towards the clean energy transition.” The Glasgow Statement has the potential to directly shift at least USD $24 billion a year in influential trade and development finance from governments away from oil, gas, and coal. The $24 billion per year quoted above is from the open-access Public Finance for Energy Database (energyfinance.org), a project of Oil Change International. ECAs are consistently the worst public finance actors for the climate, providing 11 times more support for fossil fuels than renewable energy in 2018-2020.
Newsletter
Korean court dismisses indigenous challenge to Australian ECA gas project financing
(Global Trade Review, London, 25 May 2022) A South Korean court has dismissed an application by traditional owners in Australia for an injunction to prevent South Korean public finance institutions from supporting a proposed gas export project. Representatives of the Tiwi Islander and Larrakia indigenous peoples in northern Australia launched legal proceedings in March to stop the South Korea Export-Import Bank (Kexim) and export credit insurer K-Sure from extending A$964mn (US$725mn) in financing and insurance to the Barossa gas project. But this week Seoul’s Central District Court threw out the application,
Italy’s SACE joins major banks to reject finance for Total’s EACOP
(Banktrack, Nijmegen, 20 May 2022) The coalition to #StopEACOP celebrates this week’s news that five banks including Deutsche Bank, Citi, JPMorgan Chase, Wells Fargo and Morgan Stanley have confirmed they will not join the project loan to finance the East African Crude Oil Pipeline (EACOP). They are joined by the insurer Beazley Group and the Italian export credit agency SACE. This takes the number of banks that want nothing to do with the EACOP project loan to 20 and the number of insurers to eight. The list of banks rejecting the project includes seven of Total’s ten largest lenders. However Eacop’s executives from the Ugandan government and oil companies remained confident that the financing package for the project will be tied up in two months.
Aeroflot negotiating purchase of 8 ECA financed Airbus aircraft
(AssumeTech, Iceland, 21 April 2022) Aeroflot is considering the purchase of 8 chartered Airbus SE aircraft after the European Union provided a mechanism for lenders to dispose of some seized aircraft in Russia after the invasion of Ukraine, TASS reported. The planes operate under so-called finance leases, which the European Union created a penalty waiver this month by allowing payments from agreements signed before February 26. Financial leases refer in to new Airbus and Boeing aircraft, with export credit agencies guaranteeing approximately 85% of the amount lent to an airline by a banking association. Most of the approximately 500 foreign-owned aircraft blocked in Russia operate under operating leases in which airlines lease planes for a specified period and can return them to the owner after the contract has expired. Russia passed a law banning foreign-owned planes from leaving without state permission after the Ukrainian invasion imposed penalties on lessors for canceling contracts and trying to return their planes.
Swedish ECA studying new import guarantee fund
(Regeringen, Stockholm, 12 April 2022) Google translation. The Swedish Riksdag has proposed a budget amendment for 2022 that would authorize the government to issue guarantees of up to SEK 3 billion (US$305 million) for the purpose of insuring critical raw material imports for industry, to be administered by the Swedish Export Credit Agency (EKN). The new government guarantee is intended to support the green transition threatened by increased demand for critical raw materials and increases in raw material prices which have risen markedly since Russia’s invasion of Ukraine. The raw material guarantee would fall under EKN’s sustainability policy and hence EKN must take into account its guaranteeing of the environment, extraction of fossil fuels, human rights and working conditions, combating corruption and tax evasion and promoting sustainable lending to poor countries. As the credit guarantee is linked to the import of raw materials, unlike EKN’s other range of export credit guarantees, a new regulation is required and a Proposal for a new regulation went out for consultation on 25 March.
Sinosure scales up financial support for green industries
(Xinhua, Beijing, 17 April 2022) China Export and Credit Insurance Corporation (Sinosure) says it has stepped up support for the country’s green industries by providing more export credit insurance. Since the start of 2021, the company has insured over 150 green projects, with the sum insured reaching around 7.7 billion U.S. dollars. Sinosure has also strengthened its financial support to green projects under the Belt and Road Initiative and helped domestic companies explore overseas green and low-carbon markets. Take the photovoltaic industry as an example. Sinosure has helped facilitate the export of photovoltaic products worth over 130 billion U.S. dollars from 286 companies since 2005. Looking to the future, Sinosure will continue to explore green finance innovation, promote the integration of green finance and green industries, increase support for green industries and green projects, and give better play to the role of export credit insurance, the company said.
U.S. EXIM Bank formalizes Russia pullout; approves Sri Lanka, Albania, Iraq deals
(Reuters, Washington, 31 March 2022) The U.S. EXIM’s board of directors on Thursday voted to formalize the bank’s withdrawal from any further business in Russia and approved financing and to guarantee deals worth up to $381 million for Iraq, Sri Lanka and Albania. The board also voted to notify Congress of a proposed renewal of a $450 million credit guarantee to Citibank that backs a $500 million facility to allow 365 suppliers of aircraft maker Boeing to receive accelerated receivables payments related to export sales of Boeing aircraft. The formal closing of Russian business follows an announcement last week by EXIM and export credit agencies in Britain and Canada to withdraw all support from Russia and Belarus in response to Russia’s invasion of Ukraine. EXIM previously had an administrative hold prohibiting Russian business since Moscow’s annexation of Crimea in 2014. EXIM still has $410 million in prior credit exposure to Russia, primarily for aviation sector loan guarantees that were granted before Crimea’s annexation. Meanwhile, it’s not clear how many of the 500 or so foreign-owed planes stuck in Russia are potentially eligible for the exception, or which owners will be able to apply. Most of the aircraft are on operating leases vs fixed term rental contracts.
UKEF hands billions to projects linked to labour abuse and climate damage
(The Guardian, London, 31 March 2022) UK Export Finance used £5.24bn of taxpayer money to fund overseas energy and infrastructure ventures despite its own review raising concerns over labour abuses and environmental damage. Since 2019, UKEF has allocated £5.24bn of taxpayer money to projects with the potential to cause “significant adverse environmental and/or social impacts” in countries across the Middle East, Africa and Asia, according to calculations by the Guardian based on disclosures made by UKEF. Oil refineries, power stations, and a large-scale liquified natural gas (LGN) project are among the high-risk “Category A projects”, to receive funding recently. UKEF undertook environmental and human rights reviews of the projects ahead of granting the funding. Despite recommendations to mitigate labour abuses, six migrant workers employed on Middle Eastern projects backed by UKEF have revealed low pay, safety hazards, excessive working hours, and the denial of freedom of movement as persistent issues. Daniel Willis, policy and campaigns manager at Global Justice Now said that “Human rights considerations are an afterthought, and due diligence seems to be approached as if it is just a box to tick.” A review of an oil refinery upgrade programme in Kuwait, obtained by a freedom of information request, shows that UKEF knew of worker issues before it provided a $179m (£135m) support package in 2019. Employees and contractors were commonly working more than the maximum overtime hours allowed by legislation, and 87% of workers surveyed had not received an employment contract, according to the UKEF’s review. About 90% of workers at Kuwait National Petroleum Company (KNPC) had also been charged illicit recruitment fees to secure their jobs. Before awarding it $500m in 2019, a UKEF review flagged the Bahrain Petroleum Company (Bapco) oil refinery expansion project as having “forced and child labour and worker health and safety as potential project risks”.
UKEF faces further legal action over Mozambique LNG project
(Global Trade Review, London, 20 April 2022) Friends of the Earth says it will continue its fight against UKEF’s decision to provide US$1.15bn of support to a natural gas project in Mozambique, after a split judgement from two UK High Court judges. In a judgement handed down last month, Justice Stuart-Smith dismissed Friends of the Earth’s claim, ruling that UKEF’s assessment of the climate change impacts of the project was lawful. But the second judge hearing the case, Justice Thornton, found that UKEF had failed to take climate impacts properly into consideration and ministers who approved the financing package did not have access to enough information to make a decision. The project under development by Total includes two offshore gas fields and a liquefaction plant with capacity of some 13 million tonnes per year. UKEF is among eight other export credit agencies and 19 commercial banks financing the project, in what Total says is the largest project finance deal ever struck in Africa. When fully operational it is expected to significantly lift Mozambique’s contribution to greenhouse gas emissions, however its proponents say that it may lead to an overall shrinking of emissions because some buyers will use the exported gas to switch from fuel sources such as coal and oil. During the course of the judicial review, arguments focused on a climate change impact report produced by UKEF which was provided to ministers who had input into the funding decision. The report relied heavily on an assessment by energy consultants Wood Mackenzie and Wood Mackenzie acknowledged that the report had severe limitations due to the difficulty of knowing where and how the exported gas would be used. An internal UKEF email described the report as “very light and [it] makes high level assumptions”. Total suspended construction of the Mozambique project and evacuated workers after insurgent attacks in early 2021, delaying the expected start of production to 2025. The company’s chief executive Patrick Pouyanne told Reuters in February that the company plans to restart construction sometime this year.
LNG Exports Seen Benefiting From EXIM Financing
(Bloomberg, Washington, 13 April 2022) The U.S. Export-Import Bank approved a plan Thursday that could yield a flood of financing for U.S. energy ventures, including wind and solar projects, battery manufacturing and terminals to sell LNG overseas. The bank’s board voted 3-0 on a formal policy shift encouraged by the Biden administration that would extend support to domestic manufacturing and infrastructure projects that facilitate exports. The agency plans to prioritize financing for green projects, from renewable power ventures to clean energy manufacturing. The initiative would apply to non-energy ventures too, including the manufacture of semiconductors, biotech and biomedical gear. Environmentalists and natural gas advocates say the initiative could also bolster a host of LNG export terminals proposed from the U.S. Gulf Coast to Alaska, especially given the Biden administration’s efforts to supplant Russian energy in Europe with U.S. supplies. Shipments of U.S. natural gas have surged over the past few years. While advocacy groups for the U.S. LNG sector quickly welcomed the plan, saying it could help projects overcome funding challenges and support thousands of jobs, environmentalists expressed concern that new LNG financing could take money away from renewable energy. As the U.S. attempts to bring down the soaring price of energy, financing from a New Deal–era agency could be used to ramp up domestic gas production. It is planning those controversial investments with almost no opportunity for public review. Now, under pressure from LNG interests, Exim may double down on its investment in fracked gas through a domestic financing program President Biden has created to strengthen supply chains.
