UK Export Finance: Finance support for UK Exporters

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1 UK Export Finance: Finance support for UK Exporters ABMEC Annual Conference th November Presentation title - edit in the Master slide

2 About UK Export Finance As the UK s export credit agency, we have nearly 100 years experience in helping UK companies export their goods and services overseas We play a central role in the Government s ambition to ensure that no viable UK export fails for lack of finance or insurance, working with our colleagues in the Department for International Trade We help UK companies and their clients acquire the funding required to win, fulfil and get paid for export contracts. We provide insurance and other financial support which complements what is available from the private market We support exports of goods, services and intangibles We operate within the conditions set out under the OECD Arrangement on Officially Supported Export Credits 2

3 Headline figures 2016/17 3 billion of support provided for 221 companies in 2016/17 alone 79% of exporters benefiting from our support are SMEs We connected over 350 companies with lead UK contractors for international infrastructure projects 14 billion of support provided over the last five years for UK exporters 3

4 What we do and how we do it 4 Presentation title - edit in the Master slide

5 Our products: (i) win contracts Win contracts Buyer Credit Guarantees Provision of guarantees against bank loans to overseas buyers of UK exports for up to 85% of the contract value, enabling the buyer to pay on extended credit terms, normally of between 2-10 years Direct Lending Facility Provision of loans directly (working with a bank as an agent) to overseas buyers of UK exports for up to 85% of the contract value, enabling the buyer to pay on extended credit terms, normally of between 2-10 years Overseas buyers of UK exports may require funding in order to spread the costs of their purchases in line with revenue generation. This can make it difficult for exporters to win contracts without an offer of long-term financing. Where there is a lack of commercial bank appetite for the provision of such funding, UKEF can offer funding support to the buyer for their purchases. These products involve long term loans, where the buyer of UK exports is the borrower. 5

6 Innovative support for project buyers Our long-term financing solutions, in the form of direct loans or unconditional guarantees to banks, allow buyers to spread costs of purchases of capital goods and services from the UK Repayment terms of 2-10 years (extending to 14 for project finance and 18 for renewable energy) Support for up to 85% of total contract value, provided there is a minimum of 20% UK content Additional capacity to provide direct lending with fixed interest rates Financing in a range of local currencies Flexibility to meet buyers requirements (including innovative products such as Islamic financing) UKEF charges a premium for its support based on OECD rates and calculated on a case by case basis, taking into account factors such as credit risk and loan tenor Premium is paid upfront and can be funded from the loan to spread the cost Premium is a one-off charge and is separate from the interest charged on the loan 6 3

7 Local currency financing Australian Dollars Chinese Yuan Icelandic Krona Malaysian Ringgit Peruvian Sol South African Rand UAE Dirham 7 Bahraini Dinar Botswana Pula Brazilian Real Canadian Dollars Chilean Peso Czech Koruna Danish Krone Egyptian Pounds Hong Kong Dollars Hungarian Forint Indian Rupee Indonesian Rupiah Israeli new Shekel Kenyan Shilling Kuwaiti Dinar Mauritian Rupee Mexican Peso New Zealand Dollars Norwegian Krone Omani Rial Polish Zloty Qatari Riyal Russian Ruble Saudi Riyal Singapore Dollars South Korean Won Swedish Krona Swiss Franc Thai Baht Turkish Lira Ugandan Shilling Uruguayan Peso Zambian Kwacha

8 Share Fairs to attract the UK supply chain UKEF-sponsored forum to bring together UK suppliers and overseas project sponsors and contractors Collaboration across HMG to deliver support to suppliers and contractors In coordination with relevant trade associations Real time engagement with procurement teams and prospective suppliers Recent share fairs have resulted in doubling of UK content in return for UKEF funding support 8

9 Mining Copyright In 2011 UKEF provided a US $270m credit line to the Brazilian steel company Gerdau Açominas SA to finance the supply of a combined plate and Steckel mill by Siemens VAI Metals Technologies Ltd In UKEF provided US $78.4m total loans to Siberian Coal & Energy Co. (SUEK) in Russia to support Joy Global Supply of long-wall mining equipment Four supplier credit guarantees provided in total In UKEF provided further loans to SUEK to support Joy Global 9

10 Mining Dints International is a specialist equipment supplier for frontier markets in Africa, with customers in the mining, oil and gas, construction and energy sectors across some 18 countries. Core to this offering is Dints ability to offer credit terms to their customers. When Dints won a contract to provide its innovative managed supply chain solution for one of West Africa s largest gold producers, UKEF worked with Dints bank to develop a bespoke made financing structure to support Dints business model This contract is a significant step into a new market for Dints, and UKEF s ability to provide innovative and flexible guarantee support has been instrumental in helping us win it we see a strong partnership going forward with UKEF support Geoffrey de Mowbray, CEO, Dints 10

11 Our products: (ii) fulfil contracts Fulfil contracts Export Working Capital Scheme A guarantee of up to 80% of the value of a working capital facility, to allow a bank to increase its capacity to lend to a UK exporter Bond Support Scheme A guarantee of up to 80% of the value of a contract bond (e.g. advance payment guarantees, performance or warranty bonds) to enable a bank to issue a bond without requiring as much of the exporter s cash as collateral, or to issue more bonds on behalf of the exporter Exporters need working capital to fulfil export orders, (e.g.) to buy raw materials, pay bills and pay staff. Additionally, buyers may require advance payment bonds or performance bonds, which often means exporters capital can become held up in deposits required by their banks. In these instances, UKEF can help companies access the working capital needed to fulfil a contract, whilst also giving them confidence to take on more contracts and increase their turnover. 11

12 Case Study: Working Capital Support Meltog is a Leeds based manufacturer of can-making equipment and waste recycling equipment used in industries including food packaging and recycling. New customer, a major food processing and packaging group based in Saudi Arabia Large order creating cash-flow pressures so Meltog had to explore its financing options. Having financial flexibility can make all the difference when looking to secure orders and Lloyds and UK Export Finance working together have provided a solution that works for us. Julian Heyworth, Managing Director, Meltog 12

13 Case Study: Bond Support Baldwin and Francis provide power solutions for hazardous environments including mining and oil and gas Purchasing frameworks for overseas contracts frequently dictate the need for advance payment, performance and warranty bonds in order to be able to take opportunities forward B&F s banking facilities have been increased to the level required through the use of UKEF s Bond Support Scheme The nature of our business means that we regularly require our bank to provide guarantees on our behalf to our export customers. The use of UK Export Finance by our bank means that we have the financial flexibility to progress opportunities where bank guarantees are required. Tim Roberts, CFO, Baldwin and Francis 13

14 Bank delegation Bank delegation is the new delivery model for UKEF s Bond Support Scheme and Export Working Capital Scheme Bank delegation permits the bank to put in place UKEF s guarantee, without the need for explicit UKEF approval, subject to simple criteria. Less duplication, increased efficiency Quicker and scalable Customer-friendly Delivered through a 21 st century digital service 14 Updating outdated documentation

15 Extending eligibility direct suppliers Bond Support and Export Working Capital Support can now be extended to tier 1 suppliers of UK exporters: The business must be based in the UK The BSS or EWCS must be in direct relation to a supply contract for goods and services to a UK exporter for export purposes The exported goods/services must have a minimum of 20% UK content (in either material or financial terms) 15

16 Our products: (iii) get paid Get paid Export Insurance Policy Up to 95% insurance against the risk of not being paid, either due to default by the buyer, or due to specified political, economic or administrative events Businesses may be concerned about risks associated with exporting, such as: Difficulty securing payment Political risk relating to the overseas market(s) UKEF can offer insurance to help manage these risks, even where the private market isn t able to. 16

17 Export Insurance Policy Get paid Single Risk Cover Designed to cover specific buyers/contracts, ~2% premium, up to 95% indemnity More difficult markets For non Europe/Advanced OECD countries where private market cover declined Increased confidence to trade Risk horizon of 24 months allowing pre and post shipment risk to be covered 17 Support growth with new partners in new markets and may support financing if needed

18 Case study: export insurance A B Graphic International a leader in the label printing industry, head office in Bridlington Typically trades without credit insurance but for new customer requiring significant levels of credit wanted to mitigate risk ABG was not able to secure cover in the private market for their Chinese buyer UKEF has provided cover for multiple orders since 2015 allowing ABG to develop a valuable trading relationship 18

19 UKEF in 2020: the scale of ambition UKEF s remaining capacity to support exports The amount of its 50bn risk capacity currently utilised 30bn 20bn UKEF s total capacity to support exports: 50bn 19

20 20 Connect with UK Export Finance

21 Thank you Paul Wright Export Finance Manager North, South and West Yorkshire T: E: 21 Presentation title - edit in the Master slide