Presentation on theme: "INTERNATIONAL FINANCIAL CONSULTING EGTT Workshop, September 27-29, 2004 Montreal, Canada Are Export Credit Agencies and Other Traditional Sources of Infrastructure."— Presentation transcript:
INTERNATIONAL FINANCIAL CONSULTING EGTT Workshop, September 27-29, 2004 Montreal, Canada Are Export Credit Agencies and Other Traditional Sources of Infrastructure Financing Still Relative?
INTERNATIONAL FINANCIAL CONSULTING Based in Ottawa, Canada Clients in Over 30 Countries include Export Credit Agencies Government Departments Major Multilateral Development Banks UNEP Project Developers and Sponsors Global Expertise in Export credit insurance and finance International trade arrangements Structured Finance
Traditional Players in Developing Country Infrastructure Projects Host Country Governments Multilateral lending institutions Private Sector financial and insurance institutions Project Developers and Equity Investors Export Credit Agencies
Mandate To facilitate trade through risk taking To be Self Sustaining To not displace the Private Sector ECAs work closely with the Private Sector Banks and with Multilateral Institutions, with the Private Sector and Multilteral Insurers and Re-Insurers,
ECA Products Support Basic Products are: Export Credit Guarantees or insurance Political and/or commercial risk Investment Insurance Direct Lending ECAs may have the same basic mandate but different delivery structures can add complexity for RE developers and Host Countries seeking ECA support
ECAs are Significant Players Higher Risk Capacity Leader in assessing Political and Economic Country Risk Longer exposure terms than Private Sector Berne Union - US$455 Billion on 2001 US$395 in Short Term support US$ 60 billion in Long Term support However, ECAs have less than 1 % of their exposure in support of RE and EE Technology and Projects
The OECD Arrangement for ECAs Agreement between most OECD member countries setting out terms and conditions for official export credit support 30 year evolution Objective of arrangement is to minimize trade distortion and level the playing field Guidelines for minimum interest rates, minimum premium levels for countries, maximum repayment terms, first repayment start date, maximum amount of financing, local cost limits, tied aid environmental impact assessments, and a special scheme for project financing Special Sector Understandings extended repayment for aircraft, ships, and nuclear power, Extended repayment term for conventional power to 12 years repay, may include RE Change to the OECD Arrangement can be a long, slow process and requires government direction and case evidence
Traditional ECA Risk Review and Mitigation Technology Risks Commercial Risks Political Risks Legal and Documentation Risks Financial Risks ECAs have over 50 years of experience in dealing with these risks Therefore, why are RE and EE Technology Projects difficult for the ECAs to support?
Barriers to ECA Growth in RET Support Cognitive Barriers Low Level of Awareness and understanding Political Barriers Regulatory and Policy issues Government Leadership Analytical Barriers Availability of Quality Project Information Market Barriers Financial, legal and institutional frameworks ECAs are reactive, not proactive and respond best to demonstrated needs of their exporters and instructions from their shareholders
Can ECAs be Relevant and Innovative? UNEP ECA Annual Environmental Workshops 3 Categories of ECA Response to RE Identified Collective Change to International Agreements Longer Repayment Term More Flexible Local Cost Cover Relaxed Tied Aid Rules New ECA Products and Processes Bundling of RE Projects Support for CDM and JI Emissions Trading Shareholder and Government Direction Local Currency Cover Repayment Flexibility UNEP ECA Annual Workshop This Week in Rome
Can ECA Support Help Fill Gaps in RE Financing? Possible new ECA product areas to support RET Bundling of RE Projects To reduce transaction costs To Fast Track Small Scale CDM CDM and JI Projects To Support CER and ERU Trading To Monetize CERs and ERUs ECA Risk Appetite is not clear….yet
Bundling of RE and EE Projects Project 1 CER Buyer $ Offtaker Local currency Investors Lenders Host Country EPC Supplier Foreign Local Local Supply Foreign Project x Project 2 Project.. Lawyers, Financial Advisors Environmental and Insurance Advisors CDM Specialists, Fees and Agreements EVERYWHERE Bundle is 15MW Projects are All RET or mixed Foreign
ECAs Can Support Bundling Project 2 Project.. Project 1 Project x Same EPC Same Technology Same Sponsor(s) Same Lenders Same Investors Special Purpose Company Borrower O,O,M Projects Same CER Buyer Same Offtaker Host Country Projects Bundling Manager CDM Approvals EI Assessments ER Verification, Certification and Monitoring >or < 15MW ECAs
Can ECAs Support CDM/JI CERs? Project CER Buyer $ Offtaker Local currency Investors Lenders EPC Supplier Host Country ECA Cover ECA Role???