Using Export Credit Agencies in renewable energy projects Lars Kvamme Relationship Manager Latin American Desk DnB NOR Bank ASA Santiago, November 11, 2010

2 Agenda: a)DnB NOR Bank Chile b)Export Credit Agency financing c)The structure - Norway d)The CIRR

3 DnB NOR Bank Chile Branch with full banking license Established in employees Renewable Energy, Seafood, Shipping, Pulp and Paper and Nordic corporates

4 DnB NOR Bank Chile An ambitious energy bank in Latin America Chile branch focus mainly on renewables in Chile and Peru Nordic equipment is not a requirement for our participation But if there is Nordic equipment, we have the expertise to custom-make a solution including an ECA-element

5 DnB NOR Bank - International Corporates and Institutions Export Credit Agency financing Based on an OECD agreement that aims to ensure that all OECD countries offer their respective export industries identical financing terms Fixed interest rates determined by the OECD – the so-called CIRR (Commercial Interest Reference Rate). Quoted on the 15th day of every month A source of long-term funding for renewable energy projects with Nordic equipment and/or services (up to 18 yrs fixed rate) ECAs will always need a commercial bank to share the risk

6 DnB NOR Bank - International Corporates and Institutions We work with Export Credit Agencies worldwide…

7 DnB NOR Bank - International Corporates and Institutions The Nordic Guarantee institutions Offer long term guarantees for export of capital goods and ships to most countries Can cover commercial and sovereign risk The guarantees are issued on behalf of each country's government and can be used as security versus banks and other financial institutions to facilitate funding The risk premium is normally payable flat, up front Premiums will be based on buyer/project risk and sovereign risk

8 DnB NOR Bank - International Corporates and Institutions The Nordic ECAs

9 DnB NOR Bank - International Corporates and Institutions The structure - Norway Maximum financing is 85% of the contract value, while the Guarantee Institution depending on structure can cover up to 90% of the commercial and political risk of the loan. The additional part (10 % or more), must be covered by an other financial institution such as DnB NOR. Tenor: min 2 years, max 12 years (18 for renewable energy) Interest rate: CIRR Repayment in semi-annual, equal installments 100% Contract Value Up to 85% funding from Eksport- finans 15% prepayment Up to 90% (of loan) guaranteed by GIEK X% local bank/DnB NOR

10 The structrue - Norway 15% EQUITY 85% LOAN FROM EKSPORT- FINANS FINANCING or 30% LOCAL CONTENT GIEK 70-90% B A N K % or 100% bank 30% NORWEGIAN 40% FOREIGN 70% FOREIGN 30% NORWEGIAN

11 DnB NOR Bank - International Corporates and Institutions The CIRR Offer from governments to support the country's export industry Long-term financing of Nordic exports of capital goods Manage government supported financing on behalf of the authorities Current CIRR interest rate (USD) as per 15 th October 2010: <5 years: 1,94 % yrs:2,61 % 9-12 yrs:3,25 %

12 DnB NOR Bank - International Corporates and Institutions Potential Benefits Borrow at CIRR CIRR represents an option to obtain a fixed interest rate. In Norway the option is free of charge from acceptance to delivery Full flexibility between floating and fixed interest rates and between CIRR and commercial rates from acceptance to delivery The positive yield curve implies a subsidy element Lower arrangement fees compared to commercial market terms Cheap(er) funding Client / Borrower ECA institution Funding institution Guarantee premium Guarantee Reduced loan margin including commercial bank, institutional investors and government agencies (incl ECA)

13 DnB NOR Bank - International Corporates and Institutions The CIRR rates are fixed by OECD on the 15th of each month and incorporates data from the previous month. These rates are based on the applicable Government bond rates over that period The initiative to apply for CIRR usually lies with the exporter. The ECA will commit to offer the prevailing CIRR at the date of the application Delivery under contract and disbursement of post delivery financing Fixed CIRR commitment is received Maturity Linear repayment of CIRR tranche based on OECD guidelines Utilization of CIRR

14 DnB NOR Bank - International Corporates and Institutions CIRR Construction period Repayment period 6 m LIBOR ? ? Last delivery Last chance for accepting CIRR Application for CIRR Interest Rate Time Signing date Flexibility to choose Offer valid in max 120 days or by signing of contract

15 DnB NOR Bank - International Corporates and Institutions Points to keep in mind Remember to apply for CIRR before contract is signed Up to 120 days prior to signing Alternatively, one can make the contract subject to financing, which gives you the opportunity to apply afterwards What is the maximum delay of drawdown? E.g. Eksportfinans usually accepts drawdown up to 3-4 months after contractual delivery

16 Parties involved GIEK/DnB NOR Eksportfinans Norwegian supplier Commercial contract Loan Agreement Risk Disbursement when delivery has taken place Guarantee Buyer Lawyer Application Borrower = AGENT: DnB NOR

17 DnB NOR Bank - International Corporates and Institutions Why use DnB NOR? We are a strong bank – and present locally in Chile We are the no. 1 financial service provider in Norway and know the Norwegian ECA-system and the benefits therein Combination of the two Norwegian ECAs, Eksportfinans and GIEK, may lead to favourable pricing We have years of international experience in handling export credit facilities and dealing with the Nordic ECAs

18 DnB NOR Bank - International Corporates and Institutions Contacts: Rudy Hassam First Vice President Head corporate banking, Santiago branch (Chile Office) (Chile Mobile) Lars Kvamme Relationship Manager Latin America, Middle East and Africa desk In Santiago until Mid December (Norway Office) (Norway Mobile) (Chile Office) (Chile Mobile)