UK Export Finance Products and Services Jonathan Leonard South Tyneside Manufacturing Forum UK Export Finance 05/02/2013

What do we want you to get from today's event? An increased awareness of UK Export Finance. Better understanding of our products and services. How they can potentially help your business to grow. The role of the regional Export Finance Adviser. Understanding of the roles played by the banks and insurers. What the application process looks like.

UK Export Finance Export and Investment Guarantees Act 1991 Trade Minister: Lord Green (same as UKTI) HM Treasury “Consent” controls activity Complement but not compete with private market Export Credit Guarantees Department 2011 - rebrand UK Export Finance operates under an Act of Parliament and with the oversight of HM Treasury. Minsters have set out that we are there to complement, not compete with, the private sector. Our short term trade credit insurance business was privatised in 1991 (sold to NCM; now Atradius). But after a gap of nearly twenty years, we recently returned to it when a lack of available capacity from the private sector became apparent. I will come onto this later. UK Export Finance 05/11/2012

Why have we introduced Export Finance Advisers across the UK? To get our message out to a wider audience. To work more closely with all the key parties in the regions e.g. Banks, Brokers, Chambers etc. Shorten the lines of communication between London and the regions. To make it easier for UK businesses to export overseas and.... Ultimately to help the UK economy.

Business activity Deals done range from c.£10k to £2.3bn £19bn exposure c£3bn new business annually Services, as well as goods, e.g. consultancy Expanded remit to cover all sectors; not just capital and semi-capital goods and related services Foreign content up to 80% Unconditional AAA guarantee UK Export Finance 05/11/2012

New short term products from the UK’s export credit agency Bond support scheme Export working capital scheme Short-term credit insurance (EXIP) Letter of credit guarantee scheme UK Export Finance 05/11/2012

Contract Bond Support Scheme Where a participating bank issues a contract bond (or procures its issue by an overseas bank) for UK export contract, we normally guarantee 50% of the bond if our minimum risk standard is met Up to 80% for advance payment and progress payment bonds UK Export Finance’s credit risk is on the UK exporter; willing not to share a bank’s fixed and floating charges but only share in contract-related security Fourteen banks participating UK Export Finance 05/11/2012

Export Working Capital scheme We provide guarantees to banks to cover the credit risks associated with export working capital facilities in respect of specific export contracts. UK Export Finance formally guarantees 50% of risk: useful where a UK exporter wins an overseas contract that is higher in value than is typical, or succeeds in winning more overseas contracts than it has done before Our credit risk is on UK exporter; willing not to share in bank’s fixed and floating charge, but only share in contract-related security Six banks participating UK Export Finance 05/11/2012

Export insurance policy (EXIP) Insures exporter against risk of not being paid or of not being able to recover costs of performing export contract due to specified events All sectors and up to 95% cover Can be introduced by broker Not for EU / rich OECD markets below 2 year risk horizon Not whole turnover business UK Export Finance 05/11/2012

Letter of credit guarantee Where a UK bank adds its confirmation to a letter of credit issued by an overseas bank for a UK export, we guarantee up to 90% of value of letter of credit Eight UK banks participating Limits in place for 305 banks in 38 markets Bank retains documentation risk Turning now to the ‘new’ products. The LCGS, as I mentioned earlier, was introduced in 2009. It brings extra capacity in order to benefit UK exporters, as the UK bank is able to confirm a letter of credit even if it doesn’t have risk appetite on the foreign issuing bank for the full amount. The exporter is protected against a default of the foreign buyer and the foreign bank. UK Export Finance 05/11/2012

Main markets Bahrain Sri Lanka UAE (Dubai / Abu Dhabi) Nigeria Indonesia Egypt Bangladesh Ukraine Russia South Africa Saudi Arabia The Philippines Oman Libya Trinidad & Tobago Papua New Guinea Kazakhstan Pakistan Venezuela Uruguay Malaysia Ghana Algeria Taiwan Brazil Turkey Iraq UK Export Finance 05/11/2012

Application Process For Bank Guarantee Products Please contact your regional Export Finance Adviser in the first instance who will be able to give you an early indication on whether your enquiry meets our initial criteria. Exporter and Bank then complete an application form and submit to UKEF along with: Last 3 years accounts Management accounts Business plan Cash flow & P&L forecasts UKEF undertake: Credit risk assessment UKEF provide a “commitment” to the bank and papers signed. Bank notifies UKEF when the bond is issued or finance drawn.

Application Process For Export Insurance Product Please contact your regional Export Finance Adviser in the first instance who will be able to give you an early indication on whether your enquiry meets our initial criteria. You can either apply direct using the application form on our website, or through your broker. If you are unsure of, or doubt the creditworthiness of your overseas buyer, you can ask UKEF to look at them on your behalf with a view to assessing their standing. UKEF will consider your application and if approved, will issue an offer letter and policy. Once the exporter has signed the policy, paid any premium required and we have countersigned the policy, cover is then in place.

Case Study – Pinnacle Re-Tec Ltd Regularly need to provide advance payment guarantees / bonds Previously, HSBC asked for ‘cash cover’ for 50% of the bond value Whilst pleased their bank supported them, tying the cash up for the period of the bond impacted cash flow Recently won contract worth in excess of £700k where an advance payment guarantee and performance bond was required UK Export Finance provided the bank with a guarantee for 80% of the APG and 50% of the performance bond No ‘cash cover’ was needed UK Export Finance 27/03/2012

Credit Insurance Finance Guarantees How to Apply UK Export Finance directly; or Insurance broker Finance Guarantees Bond Support, Working Capital Support, Foreign Exchange Credit Support, Letter of Credit Guarantee - speak to your bank Jonathan.leonard@uktinortheast.org.uk www.ukexportfinance.gov.uk 07818 570615 UK Export Finance 05/11/2012