All rights reserved. Copyright © 2008 Euler Hermes Kreditversicherungs-AG and PricewaterhouseCoopers AG WPG. Opportunities and development in the current global crisis Ute Kochlowski-Kadjaia, Euler Hermes Russia Moscow, April 21, 2010

page 2 Contents  Role and Function of Export Credit Agencies (ECAs)  Crisis Response – Consequences for ECAs  Cover Policy for Russia  Conclusion

page 3 Mandatary business Federal Export Credit Guarantees By order and for account of the Federal Republic of Germany as leading partner cooperating as partners to a consortium

page 4 Interministerial Committee for Export Guarantees (IMA) IMA AA Federal Foreign Office BMWi Federal Ministry of Economics and Technology (in charge) BMF Federal Ministry of Finance Experts - KfW IPEX-Bank - AKA Ausfuhrkredit-Gesellschaft - Representatives of export and banking Consortium Euler Hermes PricewaterhouseCoopers BMZ Federal Ministry for Economic Cooperation and Development

page 5 Definition Export Credit Guarantees Insurance against  the political / commercial risks arising abroad  involved in export business (or export financing)  transacted by an exporter domiciled in Germany  provided by the Federal Republic of Germany It requires  the payment of a premium in accordance with the risk involved and  an uninsured portion to be borne by the policy holder

page 6 Requirements for Export Credit Guarantees  Business that qualifies for official support –Export transactions (supply, works/services and financing contracts) of a German exporter with goods of mainly German origin involving non-marketable risks abroad  Criteria for the granting of cover are –that the transaction is eligible for support –that the risk is justifiable – that the terms of the contract are in accordance with common practice –that the provisions of the federal budget law are observed

page 7 NEWLY COVERED BUSINESS in Euro billions

page 8 TOP MARKETS FOR NEW GUARANTEES in Euro millions

page 9 Total: 15,156 EUR millions in Euro millions and in % BREAKDOWN OF SPECIFIC POLICIES BY TYPE OF SECTORS thereof: aircraft: 21% ships: 19% thereof: metal industry: 16%

page 10 Types of export guarantees – extract Cover facilities  Single export cover/tied loan cover (pre and post shipment)  Framework credit cover  Revolving buyer credit cover  Project financing  Structured financing including countertrade business  Cover in local currency  Cover against payment defaults for confirmed L/C  Whole turnover cover

page 11 Tied loan cover Export contract/delivery Foreign buyerGerman exporter German bank Loan contract Repayment Disbursement of buyer credit Foreign bank If necessary: buyer involvement in payment obligations Local contract Types of export guarantees I

page 12 Framework credit cover  Targets –Financial credits for smaller transactions –More flexible and quicker  Criteria for cover –Credit volume up to EUR 10m per single transaction –Currency framework and single contract must be the same –International standards e.g. consensus must be considered Types of export guarantees II

page 13 Revolving buyer credit cover  Contract between a German and a foreign bank to finance transactions between one German exporter and one foreign importer  Payment terms on short term basis (up to 12 months, in exceptional cases up to 24 months)  Policy period is one year and will be automatically extended if notice of termination is not given  Targets –Cover of short term credits –More flexible and quicker Types of export guarantees III

page 14 In general: Export guarantees are granted to promote German export goods, but…  … a product receiving a German certificate of origin is considered as German.  … foreign content is acceptable in principle. Local costs and foreign content can amount to 30% (base rate) of the contact value without any statements. Exceeding the base rate is possible under certain circumstances. Foreign Content Inclusion of non-German sub deliveries

page 15 Background  Main supply and subcontracting deliveries will be covered by one credit insurer  The value of the subcontracting deliveries will be reinsured by the credit insurer for goods sourced from his country  Resulting in –One policyholder –One credit insurer –One cover –One cover scheme = One stop shop Foreign Content – Reinsurance I

page 16  ASHR´A (Israel)  Atradius (Netherlands)  CESCE (Spain)  COFACE (France)  COSEC (Portugal)  ECGD (Great Britain)  EDC (Canada)  EFIC (Australia)  EGAP (Czech Republic)  EKF (Denmark)  EKN (Sweden)  FINNVERA (Finland)  GIEK (Norway)  KUKE (Poland)  NEXI (Japan)  ODL (Luxemburg)  OeKB (Austria)  ONDD (Belgium)  SACE (Italy)  SERV (Switzerland)  SID (Slovenia)  US Ex-Im Bank (U.S.A) German ECA: 21 reinsurance agreements with other ECAs Foreign Content – Reinsurance II

page 17 Contents  Role and Function of Export Credit Agencies (ECAs)  Crisis Response – Consequences for ECAs  Cover Policy for Russia  Conclusion

page 18 Challenge for ECAs The major challenge for ECAs in a world characterised by a financial and increasingly economic crisis is to find a balance between…... a prudent and responsible administration of the German government‘s and taxpayer‘s money ► grant cover after a thorough evaluation of the risks involved …and the objective of promoting the economy, in our case especially German exports ► accept risks despite the global economic turbulences

page 19 Crisis response – Consequences on ECAs I During the crisis ECAs were forced to act counter-cyclically and flexibly.  Substantial increase in demand for ECA cover in combination with ECA related government action against the crisis  ECAs are approached by new customers and are getting involved in new industry sectors and/or buyer countries such as EU and other OECD countries Cover is sought for risks that used to be perceived as save

page 20 Crisis response – Consequences on ECAs II  Governments response with new/amended insurance products and cover policies in order to facilitate export finance  (Re-)Entry of ECAs in the field of marketable risks (short term cover for EU and OECD countries) due to restrictions of the private credit insurance market ECAs are extending their umbrella – rather than closing it

page 21 Crisis response – New and amended products I German Government launched a package of new cover regulations embedded in the Economic Stimulus Plan II.  Supplier Credit Guarantee –Increased percentage of cover up to 95 % to reduce refinancing costs  Credit Confirmation Risk Cover –Newly established instrument to stabilize L/C business –Banks can insure themselves against the risks involved in the confirmation of a letter of credit that has been issued to finance an export transaction by a German company

page 22 Crisis response – New and amended products II German Government launched a package of new cover regulations embedded in the Economic Stimulus Plan II.  Contract Bonding –Increased single limit of cover from EUR 80 to EUR 300 million to ease exporter’s liquidity position, as it helps to ease the pressure on the exporter’s credit line  Securitisation Guarantee in relation to the KfW Refinancing Program –Facilitating access to long-term funding for banks arranging Hermescovered transactions. –Banks sell their covered receivables (from existing and new loans) to KfW and make fresh funds available for the financing of new business covered under Federal Export Credit Guarantees

page 23 The crisis so far  Despite a double-digit decrease in German exports in 2009 as well as cancellations and postponement of many projects cover volume is expected to rise  Both standard and new products contributed to this result  During the crisis, ECA-covered financing has gained tremendous importance  ECAs have proved to be a reliable partner and will continue giving support to maintain and where necessary restore trust in global financial systems and trade relationships.

page 24 Policies regarding the analyses of banks I ► Apart from generally accepted banks, still case by case analysis ► No general rejection of any CIS country ► Detailed information regarding ownership structure ► In-depth insight into the respective bank‘s risk management

page 25 Policy regarding analysis of banks II ► Financial Statements (preferentially according to IFRS) for 3rd Quarter 2008 ► Securities portfolio ► Detailed overview of liquidity situation ► Exposure to currency risks -Matching Maturities -Proportion of ‘Loans to customers’ in foreign currencies and assessment of customers’ ability to pay back such loans ► Detailed overview of ‘Loans to Individuals‘ ► Exposure to real estate sector ► Impairment provisions

page 26 Contents  Role and Function of Export Credit Agencies (ECAs)  Crisis Response – Consequences for ECAs  Cover Policy for Russia  Conclusion

page 27 Russia – cover policy  Generally open for short-term transactions (examination of creditworthiness)  Criteria / securities for credit business transactions: -State guarantee -Corporate risk Additional securities not required in cases of excellent standing of the buyer -Bank guarantee Generally accepted banks: 15 banks such as VTB, Sberbank, Vnesheconombank, Gazprombank or Alfa Bank Other banks on a case-by-case basis (about 50 banks so far) In general involvement of the Russian buyer in the payment obligations  Premium category 4

page 28 Russia – cover volume for recent years (in million EUR)

page 29 German ECA underwriting volume (long term) for Russia by type of security %

page 30 Russia – recent experience ► Only very few covered banks have not been able to meet their obligations so far ► Strong effort by the Russian government to support system relevant banks ► Further consolidation of the banking sector is nevertheless to be expected in 2009 Russia will remain a major partner in the years to come

page 31 Contents  Role and Function of Export Credit Agencies (ECAs)  Crisis Response – Consequences for ECAs  Cover Policy for Russia  Conclusion

page 32 Conclusion Due to the current challenges and difficulties ECA-covered financing has gained tremendous importance. ECAs will be a reliable partner and will give support to maintain and where necessary restore trust in global financial systems and trade relationships. Russia and CIS will remain major partners also in the years to come.

page 33 Thank you for your attention! Further information is provided under: Hotline: +49 (0) 40/ Vorname Name Unternehmen Tel.: