UK Export Finance Support for Projects in Africa. Andrew Barton Senior Manager Financial Markets Unit

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1 UK Export Finance Support for Projects in Africa Andrew Barton Senior Manager Financial Markets Unit

2 Background 2 UK Export Finance (UKEF) is the operating name of Export Credits Guarantee Department (ECGD) the UK s official Export Credit Agency (ECA) Founded in 1919, as the world s first export credit agency a renaissance year for UKEF voted ECA of the year by a leading trade publication. UKEF can assist overseas buyers who require loans to finance the purchase of supplies of goods and/or services from UK exporters by lending up to 85% of contract value UKEF provides repayment guarantees of up to 100% of the value of the loan to a lending bank, or lends directly

3 The DLF Financing Process 3

4 Accessing UKEF Funding 4 Our role is to support UK exports, so contract funded must be with a corporate entity carrying on business in the UK Shareholder nationality of contracting party is not relevant Liberal foreign content rules - Minimum 20% UK content - Up to 80% from third countries For corporates we need to see the last three years of audited accounts. For public buyers, we need to ascertain status, budget and legal capacity to borrow UKEF can also consider cover on a Project or Structured Finance basis (PF/PPP)

5 Cost of Cover/Premium 5 UKEF charges for the services it provides Premium is determined on a case-by-case basis OECD sets the bench mark rates Premium is based on credit risk and length of contract performance, and repayment terms Can be paid up front or partially financed Premium is separate from the interest rate which is paid on the loan - Floating rate when bank guarantee - Fixed rate when direct lending

6 UKEF Direct Lending Facility 6 Under the scheme, UKEF will, usually, work with a partner bank in the market to deliver funding Interest rate payable by the buyer is a fixed rate, known as the Commercial Interest Reference Rate (CIRR) CIRRs are based on Government bond yields for the currency concerned Current CIRRs* for repayment terms of 8.5 years + USD 2.67% GBP 2.28% Euro 1.20% Yen 1.07% *Rates as of February 2015

7 The Inaugural DLF Partnership Panel 7

8 DLF DEAL PIPELINE DLF Deal Pipeline involves: Over 40 live enquires 23 separate exporters Deal sizes range from $3m to over $500m Exports to 5 continents Over a third of all potential DLF enquires involve exports to Africa 8

9 Credit Terms 9 OECD Arrangement sets terms - by market and contract value Normal maximum is 10 years credit (repayment) plus any construction period Willing to look at capitalising interest during construction period Flexible terms for Project Finance (14 years credit) Other exceptions: Ships: 12 years credit Non-Nuclear Power Plant Projects: 12 years credit Railway Infrastructure: 14 years credit Water/ Renewables: 18 years credit Nuclear Power Plant Projects: 18 years credit

10 Case Study: Hospitals Ghana Real example: Exporter: NMS Infrastructure Limited Project: To deliver 7 district hospitals, including medical supplies and an integrated IT system Borrower: Ministry of Finance & Economic Planning Contract Value: $175 million 10

11 Case Study: Sales in North Africa UKEF provided an export insurance policy to cover the risk of the buyer not paying and enabled JCB to build its relationship with confidence. The help from UKEF enables us to trade on open account terms in challenging markets. As a result, we can accept orders, build the machinery and send shipments on credit terms that are helpful to the dealer. David Barton, Group Export Finance Manager, JCB

12 Benefits of UKEF Financing 12 Additional source of long term funding for projects Financing for up to 85% of the contract value Flexible UK content requirements Depending on project structure, loan can be repaid over the agreed period plus any construction period Potential grace period for interest payments during the construction period Competitive floating interest rate (reflecting UK Government guarantee to lending bank) Competitive fixed rate where UKEF lends directly Possibility of guaranteeing bond issues for larger contracts Portion of risk premium due to UKEF can be paid out of the loan

13 Tel: +44 (0) , or Customer Service: Tel: +44 (0) For further information please visit: This document has been prepared for information purposes only and does not constitute legal, financial or investment advice; nor does it constitute an offer or commitment of any kind of the part of the Export Credits Guarantee Department to provide any form of support or assistance; and it is not intended to create any legally binding obligations.

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