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  • The fundamental premise of an official export credit agency is that it is willing to take greater risk than the private sector market, and for longer exposure periods. We do that---and price accordingly. Exposure fees are market related fees that Eximbank charges for assuming either greater credit risk, or assuming a longer exposure period, or both. Exposure fees are determined first from a country fee level chart which allows an assessment to be made of credit risk up to eight risk levels for eight different types of borrowers for both the public and private sector, and secondly, from the exposure fee level table which uses the eight risk levels to identify a specific fee according to the term of the credit. Hence, an 8x12 matrix covering the eight fee levels and the maximum 12 year term. Fees range from 1/2% of the financed portion to 17% for a twelve year credit in the weakest long-term markets. Most typically, fees are in the 2-7% range. Importantly, fees can be financed. We will revisit this topic with case studies [in seminars with case studies].
  • Transcript

    • 1. Financing Environmental Exports Green Trade Network Summit Santa Cruz, CA September 19, 2008 Craig O’Connor, Director Office of Renewable Energy & Environmental Exports
    • 2. U.S. Ex-Im Bank
      • Independent agency of the U.S. government established in 1934 to finance the export sales of U.S.-made goods and services
        • has supported over $450 billion in exports
      • Main products include Direct Loans, Loan Guarantees, Export Credit Insurance, and Working Capital Guarantees
        • No minimum nor maximum project size.
      • Support for renewable energy and environmental exports mandated in Ex-Im Bank’s Congressional Charter.
      • Environmental Exports Program offers enhancements :
        • 15-year loan terms for renewable energy + water treatment projects
        • Capitalization of interest during construction.
        • Up to 30% local cost support within the U.S. scope of supply.
    • 3. Environmental Exports Program
      • Ex-Im Bank supported over $2 billion in U.S. environmental exports since establishing the Environmental Exports Program in 1994.
      • Last 3 years alone Ex-Im Bank has provided Working Capital Guarantees to Powerlight, Uni-Solar, GT Solar, SierraTherm, etc. = Export value of $315 million
      • Over the past 4 years, Ex-Im Bank has supported the export value of $326 million in water and wastewater treatment exports.
      • Ex-Im Bank is usually the most cost-effective source of financing for the purchase of U.S technology and services.
      • Ex-Im Bank often plays a critical early-stage role in helping small clean energy companies finance their operations.
      • With Ex-Im Bank’s early-stage intervention these companies can grow their international business, increase profitability, and ultimately attract significant equity investment.
      • Powerlight, GT Solar, Evergreen Solar, and Southwest Windpower are examples of companies that received early-stage financial support from Ex-Im Bank, and who went on to attract substantial equity investment.
    • 4. Export Credit Insurance
      • Enables U.S. exporters to offer short- and medium-term credit directly to their customers.
      • Export credit is an attractive substitute to cash-in-advance, letters of credit, and costly local bank financing.
        • Using Ex-Im Bank to insure a letter of credit instead of paying bank confirmation charges usually more cost effective.
      • Insures exports up to 180 days from date of importation of the goods; capital goods terms of 360 days-7+ years.
      • Multi-Buyer Insurance Policy covers short-term sales made by a exporter during a 12-month period - policy requires ALL export credit sales to be insured
        • Provides 95% commercial, 95% political coverage against buyer payment defaults, $0 loss deductible for small business
        • Special Buyer Credit Limits provided revolving lines for foreign buyers for a 1-year period.
      • Single-Buyer Insurance Policy covers short-term export credit sales made by a exporter to a single foreign buyer during a 12-month policy period.
        • Can support single or multiple shipments
    • 5. Case Study: Blue Sky Energy, Inc.
      • Blue Sky Energy, Inc . , Vista, CA, uses Ex-Im Bank’s Short-Term Insurance to offer “open account” credit to customers in Spain, Portugal, South Africa, Japan, etc.
      • Blue Sky Energy makes solar energy charge controllers.
        • Patented technology allows increase in power from PV energy systems
      • Blue Sky Energy’s use of Ex-Im Bank Insurance is supporting their growth in exports as overseas dealers offer credit to their customers.
      • Blue Sky Energy’s use of Ex-Im Bank Insurance provides risk mitigation on open account sales, and creates collateral for working capital borrowing.
      • Blue Sky Energy’s broker, Meridian Finance Group, active with Ex-Im Bank.
      • Financing is often THE critical factor in winning an export sale in emerging markets, open account has advantages.
        • “ Supplier credit” attractive substitute to buyer using L/Cs
        • Interest rates very high in many international markets
        • Increase order quantities to existing customers/distributors.
        • Enter new “risky” markets, attract new customers/distributors.
        • 80% of sales in Europe done on open account basis
    • 6. Case Study: Energy Recovery, Inc.
      • Energy Recovery, Inc. (ERI), San Leandro, CA has used Ex-Im Bank's environmental insurance since 2002, and has also used an Ex-Im Bank-guaranteed working capital line of credit.
      • ERI's patented PX system recovers energy from seawater desalination reverse osmosis systems at up to 97% efficiency.
      • ERI’s PX® technology has emerged as the industry standard solution for seawater desalination, specified by over 80 OEMs worldwide with over 6,130 PX® devices installed saving customers an estimated 580 MW of energy or $407 million a year in operating costs.
      • Ex-Im Bank’s Short-Term Insurance enables ERI to offer open account financing to international customers @ 1% cost for 120-day credit.
      • Ex-Im Bank’s Working Capital Guarantee helps ERI finance the build-out for export orders.
      • For ERI, exports to Australia, the Middle East, China, Europe and North Africa accounting for nearly 100% of the sales
    • 7. Short-Term Credit Process
      • The U.S. supplier submits the application along with the required information to
      • establish a credit limit for the foreign customer to Ex-Im Bank.
        • All applications can be done online!
      • The information requirements from the company for credit limits for the foreign
      • buyer are as follows:
      • $0-$100,000 credit reference from the Indian customer’s bank or supplier
        • http://www.exim.gov/pub/ins/pdf/eib99-14.pdf
      • $100,000 - $300,000 a current credit report + bank/trade reference
        • can be ordered from a number of credit reporting agencies by the U.S. exporter (see www.exim.gov/pub/ins/pdf/eib99-08.pdf)
      • $300,000 - $1,000,000 financial statement+ credit a current credit report plus a favorable bank or trade reference.
      • $1,000,000+ latest 3-years audited statements, credit report, references, etc.
    • 8. Loan & Guarantee Program
      • Guaranteed Loans made by commercial banks (U.S. or foreign) to a foreign buyer with a 100% unconditional repayment guarantee from Ex-Im Bank
        • Guarantee covers 85% of the U.S. content of the transaction.
        • Negotiated interest rates, usually a floating rate based on a small spread over 6-month U.S. dollar LIBOR rate
        • Banks may also arranged fixed interest rates via PEFCO
        • Banks often finance the 15% required cash payment
        • Guarantee available in major foreign currencies
        • Ex-Im Bank charges a 1-time flat Exposure Fee based on the country of the borrower + term of the credit
          • Example:
            • Major benefit for Mexico!! High Rating = Low Ex-Im Bank Fee
            • 0.32% per year for 15-year loan
    • 9. Loan Guarantee Process
      • 1. The Guaranteed Lender bank submits the application for Final Commitment under its Master Guarantee Agreement along with the required information to establish the credit limit for the foreign customer.
      • 2. The information requirements from the foreign company for Medium-Term credit limits are as follows:
        • A current credit report.
        • A current commercial bank reference.
        • Latest 3 years financial statements; interim statements if the latest year’s financial statement is older than 1 year.
          • Note: audited statements required for credits over $1MM
        • Copy of the export contract.
      • 3. Ex-Im Bank’s Loan Officer analyzes the application and makes a decision on the amount of credit to be supported.
    • 10. What Can Ex-Im do for “Small” Projects?
      • Ex-Im Bank can make a credit decision about a potential project in one of three ways:
      • 1)      Based strictly on the balance sheet of the borrower or a guarantor;
      • 2)      As limited recourse project finance with a special purpose company borrower and project cash flows as the source of repayment;
      • 3)      Or, as a structured finance transaction with the borrower’s balance sheet enhanced by special features.
      • Many projects are too large to be feasible strictly on a balance sheet… but too small to merit the time and expense associated with project finance transactions.
      • “ Structured” finance may be an alternative.
    • 11. Structured Financing: Korea Solar
      • Ex-Im Bank’s Loan Guarantee to City National Bank supported its 15-year, $7.8MM financing of the 1MW solar power project in Gwangju, Korea.
      • Powerlight (Sunpower), Berkely, CA, designed, developed, and deployed the solar power plant, located at the Kim Dae Jung Convention Center.
      • Ex-Im Bank used the “structured finance” approach to create a reasonable assurance of repayment and support the project.
        • No outside financial advisors, limited legal fees
      • Structure of the deal included:
        • 15-year guaranteed tariff rate for power sales
        • Corporate guarantees of two relatively small private-sector companies as project sponsors
        • Mortgage on the solar panels
        • Debt service reserve account
        • Financial covenants
    • 12.  
    • 13. Working Capital Guarantee
      • Ex-Im Bank provides a 90% repayment Guarantee for working capital loans, revolving or transaction based, made by commercial lenders to small businesses to finance export sales.
      • The Working Capital Guarantee serves as the collateral to the commercial lender by mitigating the risk inherent when the source of repayment for the loan is an overseas contract.
      • Enables exporters to finance materials, labor, and overhead to produce goods/services for export.
      • Enables exporters to cover standby letters of credit for bid and performance bonds, warranty bonds, and payment guarantees.
      • Enables the exporters to finance foreign sales receivables.
      • Most Working Capital Guarantees provided by Delegated Authority Lenders (see www.exim.gov for a list) without prior Ex-Im Bank approval.
      • Energy Recovery, Powerlight, MCWong Environmental, Aquatec Water are just a few CA companies that have financed export sales under this program.
    • 14. Case Study: SierraTherm
      • SierraTherm of Watsonville, CA received a working capital loan made possible through Ex-Im Bank’s Working Capital Guarantee Program (“WCGP”).
      • SierraTherm is using the working capital line to finance the export sales of their solar cell production systems to customers in Europe and Asia.
      • SierraTherm is a world leader in the design and manufacture of Conveyor Furnaces for Solar Cell Processing
      • Comerica Bank , an Ex-Im Bank delegated authority lender, provided the loan and will receive Ex-Im Bank's Guarantee when the loan is processed.
    • 15. Conclusion
      • Ex-Im Bank supports short, medium, and long-term financing to creditworthy international customers, and working capital guarantees to U.S. exporters.
      • Ex-Im Bank enables U.S. exporters to arrange the most attractive source of credit directly for their customers.
      • Ex-Im Bank’s programs provide the most attractive financing option for foreign small- and medium-sized firms to purchase of U.S. goods and services
      • Ex-Im Bank is interested in any size project.
      • [email_address]
      • Internet http://www.exim.gov

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