Export finance sector shines through
The export finance sector has remained robust and resilient throughout the pandemic. TXF’s Industry Report and the Deals of the Year 2020 demonstrate this clearly. But what is the sector outlook for 2021 and beyond?
The export credit agency (ECA)-backed export credit sector may be a relatively small part of the overall global trade picture, but it is an incredibly important one which takes in a wide range of financing products from exporter working capital loans through to a range of export credits for capital goods and ECA-backed project finance. And through the pandemic commercial banks and ECAs have worked intensely to ensure that much needed capital goods export transactions, investments and projects reached fruition.
Each year TXF Research compiles an Export Finance Industry Report which surveys the market to assess how banks and ECAs are doing in the provision of these services within the export finance sector (see below for more detail). This year’s report runs to 64 pages and on the basis of results from the associated ‘heatmap’ TXF makes several Industry Choice Awards from the empirical data recorded.
Also at this time of year, TXF announces the best Deals of the Year from 2020, and within the export finance sector we make 10 awards, known as the ‘Perfect 10’.
As such – on Wednesday 14 April TXF will host a virtual awards ceremony to house both the Export Finance Industry Choice Awards 2020, and also the announcement of the Export Finance Deals of the Year (for ECA-backed deals closed during 2020).
So join us for all the glitz and glamour as we announce the top-rated and pioneering banks and ECAs in the export finance industry through the Industry Choice Awards and following this the Perfect 10 Export Finance Deals of the Year announcement.
To join this free event, please sign up here: https://industrychoiceawards.txfmedia.com/Account/Register
We’ll beam all the winning announcements straight to offices/home offices across the globe, zooming into some of the winners and explaining on how they were chosen through our market-leading research.
Industry Choice Awards
The TXF Industry Choice Awards are unique and ground-breaking. The results are part of the largest and most authoritative piece of research to date, with each award having been shortlisted and decided using TXF Research’s extensive research survey which collated over 450 responses from banks, ECAs and corporates, with thought-provoking qualitative insights from industry experts, and further contextualised with closed deal market information. Each Industry Choice Award therefore represents an accolade that is highly prized by the industry and an incredible achievement.
Within the export finance banking ‘heatmap’ of the Industry Report we reveal detail such as appetite for sustainable deals, customer service, fast deal execution, industry expertise, product offering, understanding of clients’ business etc. The results in the ‘heatmap’ come from client responses. And we will present awards for the top-rated banks, as well as most improved bank, most responsive bank to Covid-19, borrowers’ top-rated export finance bank etc
Perfect 10 Deals of the Year
TXF only presents 10 winning Deals of the Year within export finance, hence the Perfect 10. Results of the winning deals are decided through a combined approach of voting through our user-generated deals database www.tagmydeals.com where all the deals are housed within TXF Data, and also through an extensive assessment of the shortlisted deals by the senior editorial team.
There were some great deals this year (all deals are from 2020). Perhaps this is surprising given some of the challenges that many institutions faced through the pandemic – but many of these had been progressing for some time. Certainly many deals last year progressed more slowly and possibly some didn’t make it to closure, but the fact that so many good deals were finalised is testament to the robustness of the sector and the individuals and institutions working on the transactions and projects.
We will announce deals in the following categories: overall ECA-backed DoY, transport ECA-backed DoY, renewables ECA-backed DoY, energy financing ECA-backed DoY, shipping ECA-backed DoY, ECA/DFI-backed DoY, sub-Saharan African ECA-backed DoY, Asian ECA-backed DoY, European ECA-backed deal of the year, and Middle East ECA-backed DoY.
Looking ahead with export finance
As already noted the export finance sector has once again shown its resilience at a time when it is need most – and the Covid-19 pandemic has thrown up numerous new and difficult challenges for the export finance community to come to terms with and find workable solutions.
As is abundantly clear it is the aviation and the cruise sectors which have suffered most. Aircraft financing had already become a much smaller part of the export finance sector make up, but as we eventually start to emerge from the pandemic there may be a requirement with certain parts of the industry for ECA support in a limited capacity.
Many people had written the cruise sector off some 10 months ago as vessels languished in ports. Some of the big cruise lines have managed big restructurings on existing financings, and we can expect to see a number of FIs perhaps trim their portfolios as we begin to see a resumption in cruise activity. And, it would seem that the appetite for cruises has certainly not gone away, with many cruise lines reporting heavy booking as we come out of the pandemic with forward bookings into 2022 and 2023 looking very strong. So, ECA business in this sector could, perhaps surprisingly, rebound quite well. This will benefit some of the European ECAs.
As for other vessels – container vessels, bulk carriers, tankers – gas and specialised – there will most certainly be an uptick. The container industry is ‘all at sea’ currently (excuse the ridiculous use of this phrase), and it is clear that shipping lines need to get their fleets in order to meet what is appearing to be a surge in demand across the industry. Indicators may be clearer once containers are in their proper locations around the world – as everything has been messed around by Covid and the Suez blockage.
Bulk carriers and possibly specialised tankers could see a surge in demand in line with the commodity surges we are currently seeing and can expect through the next few years. But the shipping lines need to establish some crucial aspects first – such as best fuel supply. There is much at stake.
The green energy transition and the continued rise of the renewables sector will, over the coming years, see a drastic change to the way many ECAs and banks operate within export finance. We have already seen many FIs drop out of financing coal and now we are seeing others either pull back or announce the cessation of financing of fossil fuel projects.
According to TXF Data, Africa was the second most active region globally for ECA support by total debt volume in 2020 ($35.3 billion). And here one of the biggest deals of 2020 was the $14.9 billion debt financing for Mozambique LNG. UK Export Finance is one of the ECAs involved of course, but as of March this year UKEF is no longer allowed to finance fossil fuel projects due to policy from the UK government.
Personally, I think this is a mistake as there needs to be a decent period of transition for emerging markets which are reliant for now on long-term, relatively cheap ECA-backed financing to help them pull themselves out of poverty and improve basic infrastructure. And, it is not as though a country such as Mozambique can just switch to solar, wind or geothermal energy. The export of LNG for many African producers is going to be vital for export revenues for many years to come and ECAs ought to be there as part of that help.
Big changes will take place elsewhere in the world with renewables as we move forward, with Europe, Asia, and North and Latin America, in particular having leading parts. Many DFIs are also playing a part in these projects, and it is the DFIs largely who have been the first group to pull away from fossil fuel projects. That is very much to be expected. But for ECAs – they are supposed to be there to help their exporters, and a healthier way to act would be to accept some degree of energy transition for emerging markets.
A couple of other aspects of interest of real consideration to the ECA sector going forward is the projected growth of economies and significant fiscal stimuli being put in place by some countries.
The IMF (as of last week) predicts that the global economy will grow by 6% this year – but this was its second forecast in three months. But hey, its almost a guessing game at the present time anyway! And growth next year is predicted to be around the same. But what is perhaps more concerning is that advanced economies are very much predicted to do much better than emerging markets. This makes it more essential than ever that ECAs and DFIs are there for projects and capital goods exports to the EMs.
In addition, both China and the US are pushing forward with some hefty infrastructure spends over the coming years. While domestic, these are of limited immediate interest for other countries exporters and ECAs – but they are significant as international industrial tie-ups could be part of part of the equation in some sectors.
In the US, President Joe Biden’s $2.3 trillion infrastructure investment strategy is designed to target multiple sectors across the US including: $621 billion for transportation infrastructure and resilience, which involves $135 billion for improving roads and bridges, $190 billion for modernising public transport, $80 billion for passenger and freight rail services, $174 billion for incentivising growth in the electric vehicle industry, and $42 billion for upgrading ports, waterways, and airports. The huge list of course goes on and on, but it does provide a good example of how the biggest advanced economies intend to face the next few years on the infra front.
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