Export finance rises bravely to the challenges
ECAs and export finance activity have been paramount to global trade and project success so far throughout the pandemic. Discussion on the key themes, topics, trends and essential detail are lined up for the TXF Export Finance Virtual World Fair later in October.
The Covid pandemic, the likes of which none of us have seen before, has shot a massive broadside through all our working lives, businesses, markets and economies, not to mention our social and family lives.
As tragic as this has been in many cases, on the business front we cannot simply stick our heads in the sand and wait for the pandemic to pass or a vaccine to appear. We all must remain engaged with our clients/customers, associates, partners, peers, stakeholders, and be proactive not just to maintain relationships, but to be totally on top of our businesses and activities, while also looking to ultimately expand our reach, networks and markets.
At London University’s School of Oriental and African Studies – where I studied many, many moons ago – the college motto is Knowledge is Power (Scientia potentia est), and this is something I have always taken with me. News, research, data, intelligence and discussion is where we gain much of this knowledge. Today, while we might not be able to travel or meet physically, to be on top of the game we must engage virtually. And for the export finance market the best place for this is through the TXF Export Finance Virtual World Fair series of six conferences taking place between 19-30 October 2020.
As during other major global crises, the export finance industry has once again risen to many of the challenges we are facing in international trade through this pandemic (see below). Official export credit agencies (ECAs) have stepped up to help exporting companies not only ride through these difficult times, but also provide financing for deals and projects coming through the pipeline.
As an example of some of the measures taken, most ECAs launched various programmes to mitigate the effects of the Covid crisis, including deferral of payments, refinancing options, credit lines and loans to keep exporters running. Certain governments have used ECAs as vehicles to help corporates better deal with the crisis, and some of the amounts involved have been substantial. For instance, a $6.9 billion support package for Fiat Chrysler was guaranteed by Italy’s Sace, an $817 million package for South Korea’s Doosan Heavy industries was backed by Kexim and the Korea Development Bank, and in July UKEF guaranteed £500 million ($642 million) of a £625 million loan from commercial banks for Jaguar LandRover.
Looking back at 2020 so far overall the export finance sector has held up surprisingly well considering the heavy impact of the Covid pandemic on international trade and projects. Within export finance though, sectors hit badly by the pandemic have of course been aviation and in some areas oil & gas financings have been postponed because of the drastic fall in the oil price earlier this year and the perceived outlook for upstream projects. Shipping financing (cruise ship sub-sector) is also an interesting one – see below.
If we look at the 2020 H1 edition of TXF Data's Export Finance market overview, released in late June, we see that during the period covered by this report, TXF Data recorded 129 ECA supported deals (a drop of 31 on H1 2019), covering $46.9 billion of financing (a drop of $7 billion on H1 2019) – this does not include the corporate finance backings such as those to Fiat Chrysler, Doosan and Jaguar as mentioned above.
Despite this relative robustness, overall ECA deal figures for the first half of the year are almost certainly down because of the impact of the pandemic with a good number of deals and projects stalled or held up for various reasons.
Somewhat ironically, oil & gas was the biggest industry in H1 2020, but far from defying the current market trend it was because of the large Ichthys LNG $8.2 billion refinancing in Australia. Were it not for this deal we would have seen a dramatic volume decrease in the sector.
According the TXF Data report: “Power, transport and infrastructure maintained healthy volumes and number of deals, and the big numbers in metals and mining during the first half of the year kept the overall volume of the market within the recent average. The telecoms sector returned to the market with a number of big deals in the mobile equipment space.” We can certainly expect the latter to be a pretty active sector in the future given the increasing communications and connectivity needs of almost every country.
The power sector in H1 2020 deserves a special mention – largely because of some of the trends we can discern. The TXF Data Report notes: “The power industry dropped slightly in H1 2020, mainly due to a slow start to the year for conventional power, accounting for just $1.7 billion. This is a significant retreat compared to an average of $6.5 billion for the same period in previous years.
“Renewables registered similar volume in the past six months than in the same period in 2019, accounting for $6.3 billion, which was one of the best years for renewables on record. The largest deal for power in H1 2020 was the $2.7 billion Changfang and Xidao Offshore Wind in Taiwan, which consolidates the success of the multi-ECA and multi-currency deal formula in the country despite its complexity.
“Two additional deals are expected to close before the end of the year in Taiwan with the support of different ECAs: Greater Changhua 1 and 2 ($1.9 billion) and Zhong Neng (approximately $650 million).
“The Thar Coal power plant ($1.4 billion) in Pakistan was the second biggest deal in power despite the restrictions on these types of projects in the industry. It was supported by China Exim and ICBC, reinforcing the financial support received by coal-fired plants in Pakistan from China. Back in January China Development Bank also acted as lead arranger for the $497 million Thar mine mouth power plant.”
It is also worth looking more closely at the telecoms sector, where at the start of 2020 export finance transactions reached $3 billion, the biggest volume in the past four years. TXF Data reports: “This was partly because of the $1.5 billion Verizon deal done by Ericcson, and two Reliance deals where Samsung was the exporter, worth $1 billion combined. The restrictions issued by the US government to Huawei's 5G technology could greatly benefit the European (Nokia, Ericcson) and the Korean (Samsung) exporters, and the ECA finance industry at the same time as these exporters are regular users of ECA support. On the satellite front the Amazonas 6 deal ($139 million) for Hispasat also closed during H1 of this year. The deal will finance just the satellite, not the launch.”
As I mentioned earlier, the cruise ship sub-sector also needs a closer look. TXF Data notes: “Although cruise lines were greatly affected by the Covid containment policies issued worldwide, it did not affect volumes very drastically, because two big deals (Silversea and Royal Caribbean) worth $2 billion together closed in January, and the industry had enough confidence in the sector to close another $2.5 billion deal in May with Royal Caribbean. This confidence is still there because many cruise lines have easy access to credit due to the traditional stability of the business and the borrowed cash that keeps them running until the situation has improved. ECAs also came to the rescue, applying some exceptional measures to relieve the cruise lines from the financial pressure such as payment deferrals and holidays. Consequently, a few small deals closed over the past few months to defer the payments of loans for ships.”
Support from ECAs so far through 2020 has been unwavering. Overall, JBIC and China Exim topped the ECA league table according to TXF Data. Looking at some of the biggest deals: the Ichthys $8.3 billion transaction involved Atradius, Bpifrance, Euler Hermes, Export Finance Australia, Kexim, Ksure and Nexi. The $5.15 billion refinancing for AMNS Luxembourg was backed by JBIC. The $3 billion Nigeria LNG project was backed by Afreximbank, Kexim, Ksure and Sace. Taiwan’s $2.7 billion Xidao Wind Power was backed by Atradius, EKF, Giek, Ksure, Nexi and UKEF. A full listing can be found in the TXF Data 2020 HI Export Finance Report.
Some highlights for the first day of TXF Export Finance Global Virtual
The TXF Export Finance World Fair Virtual runs from 19-30 October, and covers a series of six events: TXF Global (19-21 October); TXF Americas (22 Oct); TXF Future of Export Finance (23 Oct); TXF MENA (26-27 Oct); TXF Africa (28 Oct); and, TXF Asia (29-30 Oct).
Within the Global event starting on the 19 October we host our famous Head to head: export finance leaders’ session, where financing leaders in the sector outline their vision of how the export credit industry will evolve over the course of the medium to long-term. Joining us in this session will be: Catrin Fransson, CEO at Sweden’s SEK; Andre Gazal, global head of export finance at Credit Agricole CIB; Richard Hodder, global head of export & asset finance at HSBC; Edna Schoene, head of ECA-business at Euler Hermes; and, Michiel de Vries, global head of structured export finance at ING Bank. Moderator will be co-founder of TXF, Dominik Kloiber.
‘The global economic outlook – some good out of bad?’ will be delivered by Debora Revoltella, chief economist & director economics department at the European Investment Bank.
In a keynote session, Susan Flanagan, president & CEO, GE Energy Financial Services will be interviewed by Tom Pycraft, senior producer at TXF on the subject of: ‘Leveraging private and public capital to accelerate the energy transition’. The session will cover how private capital providers are responding to funding energy infrastructure as countries continue to pursue a diverse energy mix. It will also explore how ECAs have stepped up to enable critical energy projects.
My editorial colleague Max Thompson, editor at TXF, will interview Roland Chalons-Browne, CEO at Siemens Financial Services in a fireside chat – ‘Industrial leadership in the age of Covid’. The chat will investigate how industrial leaders are gearing their organisations to aid the rebuilding of economies through infrastructure investment and project growth. It will also examine how they are responding to the demand for clean technology and sustainable finance, and which financial tools they will use to structure these projects.
On the private insurance front – ‘Winners and losers: private market insurance in the aftermath of Covid-19’, the panellists will look at how the market will be post Covid in light of the recent retractions in private market capacity. This soul-searching session involves Rachael Anstock, UK head of credit lines at Zurich; James Esdaile, managing director at BPL Global; and, Andrew Underwood, head of PRCB, UK & Ireland, Global Political Risk, Credit & Bond at AXA XL.
These are just some of the sessions from day one. Check the full programme HERE for more detail and the rest of the Global event as well as all the regional conferences.
Now time to get up to speed with the markets
Here's a selection of original TXF Subscriber articles recently published
Trade finance funds: Confidence grows as banks retreat
Alternative lenders cannot solely pick up the funding gap left by European commercial banks retreating from the commodity finance space in the Covid-19 epoch. But can bank-fund collaboration based on the different stages of the transportation of goods provide a viable deal template going forward?
Time for a reality check with oil & gas project financings amid Paris Agreement
The focus on the financing of oil & gas projects in light of reducing GHG emissions under the 2016 Paris Agreement has rightly intensified. But there needs to be a realistic discussion on the whole process, as cutting ECA funding will seriously damage many emerging markets. TXF also looks at the recent detailed article on this subject penned by Henri d’Ambrieres of HDA Conseil.
Mizuho reaffirms place in European commodities finance
Mizuho is sticking firmly with its European commodities clients in the wake of key commodity finance lenders - ABN Amro, BNP Paribas and Rabobank - announcing their exit from the sector, a source at the Japanese bank tells TXF
Myanmar's Middle Yeywa hydro PPP feasibility study underway
Norway-based SN Power is conducting feasibility studies for the $705 million 735MW Middle Yeywa hydropower PPP in Myanmar, with more activity expected in the coming months towards 2021.
Thessaloniki ringroad PPP tender launched
Greece’s Ministry of Infrastructure and Transport has launched the tender process for the Eastern Inner Regional Road in Thessaloniki PPP concession with a call for expressions of interest.
Mercuria returns to launch Asian RCF
Mercuria has launched its annual Asian revolver at $980 million. The deal is expected to reach financial close in November, with the deadline for bank commitments set for end of October.
World Bank invites EoIs from FAs for Delhi-Mumbai expressway
On 22 September, the World Bank requested expressions of interest from financial advisers for the INR825.14 billion ($11.187 billion) 1,275km Delhi-Mumbai expressway project in India. Firms have until 7 October to respond.
Satria PPP financing progressing
More details have emerged on the ongoing financing for the $550 million Satellite of the Republic of Indonesia (Satria) project.
EIB delays Gaza desal legal advisory deadline
The EIB has granted a deadline extension for the legal advisory role on the Gaza Central Desalination Plant and Associated Works Programme (GCDP). Bids were originally due on 17 September but the deadline has now been extended to 1 October this year, as per a request from bidders.
CAF seals AFD-backed loan for green LatAm projects
Latin American development bank CAF has sealed a further €100 million ($116.4 million) from the French Development Agency’s (AFD) line of credit for green projects in Latin America, bringing the total raised by CAF in this way to €250 million ($291 million).