Case Study Details - Playbook of Solutions

Description

Export Credit Guarantees (ECGs) are assurances to domestic companies against the risks associated with international export transactions and activities. They are provided by Export Credit Agencies (ECAs), which are usually government-owned but can also be private companies operating on behalf of the government. Export Credit Guarantees vary in type depending on the country and the institution. Typically, guarantees protect against bad debt losses for the exporter and/or the financing bank. In addition to Export Credit Guarantees, some ECAs may also offer direct loans.

Benefits

Export Credit Guarantees help mitigate the risk of non-payment from foreign buyers, therefore increasing investors’ confidence in engaging in international trade. They are especially relevant in countries where private insurers lack the risk appetite to engage, and pertinent in most emerging and developing economies. They cover political and commercial risks to overseas investments. By providing these guarantees, ECAs encourage export activities and facilitate international trade. They also serve as a crucial instrument for shaping public policy, as they provide targeted support to specific sectors and types of projects. Consequently, ECAs have progressively enhanced their developmental, environmental, and social safeguard standards.

The extensive scope and adaptability of ECG's export credit guarantees render them well-suited for a diverse array of initiatives, from small businesses to large-scale infrastructure projects. Moreover, they do not prevent the parallel participation of private insurers.

Case Study

Swedish Export Credit Corporation (SEK) leverages Export Credit Guarantee to finance solar projects in Angola

The use of Export Credit Guarantees was instrumental in getting off the ground a 2020 transaction for the supply of equipment and commissioning of solar farms in Angola, involving Hitachi ABB Power Grids and several other Swedish companies. The project included seven photovoltaic parks, totaling a capacity of 370MW. Two of the solar projects were connected to the main grid, while the rest helped rural areas reduce their dependence to diesel generators for electricity.

The Swedish Export Credit Corporation (SEK) financed the transaction, which was arranged by ING Bank and guaranteed by the Swedish Export Credit Agency (EKN), with an export credit of EUR 560 million, representing 85% of the project.

Loans extended over a long tenure (18 years) and were borrowed by the State of Angola represented by the Angolan Ministry of Economy and Finance. The triple-A rated Swedish Export Credit Agency (EKN) backing the transaction helped the Angolan government obtain favorable lending terms and made the overall project viable.

From the lender and guarantee provider’s perspective, the export credit guarantees allowed to enhance the Swedish content of the project and fulfill its financial goals, particularly in line with the Paris 1.5-degree agreement.

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