2011 508 accessible version - Export-Import Bank of the United States

While those factors holding down the Projec t Finance activity of other ECAs may benothing more than n atural fluctuations of ca se sizes (i.e., same nu mber of deals withsmaller contract values), there a re some very basic and powerful drivers underlying themushrooming volume of project finance an d structured finance transactions at Ex-Im.The six core factors that characterize Ex-I m Bank’s competitiveness in project financetransactions are:1) An easily accessible and lowest cost tool in direct loans.2) A generally unlimited exposure per project/country;3) Financing of local cos ts (up to 30% of the amount of U.S. export contracts,plus 30% of the foreign export contrac ts when co-financing with a foreignECA is available) 1 ;4) Liberal willingness to utilize the projec t finance flexibilities provided by theOECD Arrangement with respect to pricing and repayment terms;5) Liberal willingness to capitalize interest during construction; and6) A reasonable and pragmatic commercial approach to project analysis and riskmitigation.Despite consistent Ex-Im Bank excellence on these aforementioned fronts, each year Ex-Im Bank does register reports from export ing community members that note that dealscan be hindered by a range of non-financial requirements that are unique to Ex-Im.Those factors include the Bank’s content po licy, shipping requirements, and economicimpact analysis (see the Foreign Content, U.S. Shipping Requirements, and EconomicImpact sections in Chapter 6 for more detail ). These policies ca n and reportedly havenegatively impacted actual and potential 2 Project Finance transactions more than othertypes of transactions because of the unique nature of project finance deals. Specifically,Project Finance sponsors are able to choose fr om several different sourcing alternatives,making the cost and quality of competition th e most sensitive and in tense factor in thefinancing decision. Any extra costs or delays associated with a financing source cancause the project sponsor to look elsewher e for fun ding. Additionally, the desire ofproject sponsors to minimize the number of sources of financing gives an advantage toother ECAs with less restrictive content or shipping requirements.1 The OECD rules permit local cost support of up to 30% of the contract value and capitalized interestduring the construction period. Most of these tools are used most often in PF transactions (though notexclusive to Project Finance). All of th e G-7 ECAs use such rules. However, Ex-Im makes a distinctio nbetween foreign content and local costs, treating them separately, and will sup port a maximum of up to15% foreign content AND 30% local costs. G-7 ECAs generally consider the level of support on the totalnon-domestic content (foreign and local) on an aggregate basis. As a result, if a G-7 ECA’s content policystates that it will allow up to 50% non-domestic content, and if the local costs are maximized at 30%, theforeign ECA will limit the eligible foreign content to 20% of the export contract. (See Chapter 6C fordetails).2 The distinction between potential cases brought to Ex-Im Bank (as opposed to actual cases supported byEx-Im Bank) is an important one. Potential cases are those transactions which are brought to Ex-Im Bankand worked on by the Bank but which are not ul timately supported by the Bank. Potential cases do no tinclude transactions that could have come to Ex-Im, but did not.49