# Presentation: 914655

## “Financing Renewable Energy”

**	**
**	****	**
**Craig O’Connor**
**Environmental Liaison Officer**

## U.S. Ex-Im Bank

**Independent agency of the U.S. government. **
**Established in 1934 to finance the export sales of goods and services produced in the U.S.**
**Since 1934, has supported over $400 billion in exports. **
**Supports short, medium, and long-term financing to **_**creditworthy**_** international customers both public- and private-sector; working capital guarantees to U.S. exporters.**
**Products include Direct Loans, Guarantees, Export Credit Insurance, Working capital Guarantees, Tied Aid Fund.**
***No minimum nor maximum project size.***
**Special initiatives for environmental exports, small business, and lending *****directly *****to municipalities in certain countries.**

## Environmental Exports Program

**Support for environmentally-beneficial exports, *****including renewable energy,***** mandated in Ex-Im Bank’s Charter. **
**Ex-Im Bank has Environmental Standards and Guidelines applied to each project considered under its Loan and Guarantee Programs.**
**Environmental Exports Program Consists of **_**pro-active**_** business development and enhancements to existing Ex-Im Bank programs.**
**Environmental projects are offered enhancements:**
**Maximum OECD repayment term  for Long-Term Loans and Guarantees of 10-15 years after project completion.**
**Capitalization of interest during construction.**
**Up to 15% local cost support within the U.S. scope of supply. **
_**RESULTS: **_**Transactions approved under the Program grew from **
**     ****13 in FY 1994, to 71 FY 2004, totaling over $2 billion.**

## Ex-Im Bank Value Proposition

_**What does Ex-Im Bank bring to the table?**_
**Ability to directly extend credits to municipalities, utilities, environmental companies, and government agencies**
**Ability to support small projects: No minimum project size helps smaller in-country deals...**
***AstroPower *****used Ex-Im Bank to extend a $9,000 credit line to a solar homes systems dealer in South Africa**
**Ability to support loan repayment terms of 12 years **
**Ability to support interest rates based on small spread over commercial banks cost of funds (U.S. $ LIBOR)**
**Ability to help leverage USAID, GEF and other donor funds**

## 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***** is usually more cost effective.**
***Example: Insurance costs 0.11% or $110 for a $100,000 sight letter of credit vs. $2,500 minimum bank confirmation charge.***
** **
**Supports repayment terms up to 180 days beginning from date of importation of the goods; capital goods terms of 360 days-7 years. **
**Only an invoice of the sale needed for short-term credit; Ex-Im Bank provides a promissory note to document medium-term credits. **
***Insurance lowers reserve requirements for commercial banks.***

## Southwest Windpower, Inc.

***Southwest Windpower, Inc*****., a small business in Flagstaff, Arizona that exports battery-charging wind turbines to more than 50 countries.**
***Southwest Windpower *****generates more than 50% of its revenues from export sales.**
_**Challenge**_**: *****Southwest Windpower *****needs to offer credit terms to small distributors in diverse foreign markets.**
_**Solution: **_**Ex-Im Bank’s Short-Term Credit Insurance enables *****Southwest Windpower *****to offer***** “open account” *****credit terms to its distributors that enables them to place larger orders.**

## Southwest Windpower, Inc.

***Southwest Windpower, Inc*****., is using Ex-Im Bank’s Short-Term Insurance to offer 3*****0-day “open account” credit terms***** to customers in Finland, Norway, France, and St. Lucia, among other countries.**
**Example: *****Southwest Windpower *****is extending a **_***$1,500***_** 30-day credit to Regis Electronics of St. Lucia.**
**Premium rate for 30-day credit is 0.75%**
**Replaces costly local bank financing and payment by L/Cs, enables customers to offer credit to *****their *****customers.  **
_**Begins a “virtuous cycle”**_
**increased open account credit leads to increased sales – for both *****Southwest Windpower***** *****and their foreign distributors***** -**
_**RESULT:**_** *****Southwest Windpower *****has been able to expand production and employment due to increased sales in emerging markets.**

## Case Study: Kimre, Inc

***Kimre, Inc.***** a maker of air pollution control filters uses Ex-Im Bank’s **_**Short-Term Insurance**_** to offer 60-day “open account” credit terms to customers in Europe and worldwide. **
**Premium rate for 60-day credit is 0.75%**
**Replaces costly local bank financing and/or payment by L/C’s, enables customers to offer credit to *****their *****customers.  **
**According *****Kimre’s***** Controller Ms. Elizabeth Mosca, **
**“****Ex-Im Bank’s Insurance has provided us with the ability to offer open account credit instead of L/C’s which are costly and time consuming. Second, the Insurance on our foreign receivables has enabled our bank to increase our credit lines which we needed to grow our business.” **

## Short-Term Credit Process

**1. 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.**
**2. The information requirements from the foreign company for credit limits are as follows: **
**$10,000 credit a favorable trade or bank reference.**
**$10,000-$50,000 credit a current credit report.**
**$50,000-$100,000 credit a current credit report plus a favorable bank or trade reference.**
**Over $100,000 credit a current credit report, latest 3 years financial statements, and references.   **
**3. Ex-Im Bank’s Loan Officer analyzes the application and makes a decision on the amount of credit to be supported.**

## Medium-Term Credit Insurance

**Covers **_**commercial losses**_** resulting from nonpayment for **
**such reasons as a buyer’s insolvency or failure to pay an **
**obligation within 6 months of the payment due date.**
**Covers **_**political losses**_** from certain specifically defined risks such as**
**war, cancellation of import or export license, currency inconvertibility**
**100% coverage of the financed portion of the loan against commercial and political default. **
**Repayment terms of 1-5 years, with 7-year terms for environmental projects or large projects over $350,000.**
**The credit must be evidenced by a valid and enforceable promissory note in the particular country. **
**Ex-Im Bank can provide the bank with a note to use. **
**The buyer makes a 15% down payment to the exporter.  **

## Medium-Term Insurance Process

**1. The U.S. supplier or their bank submits the application along with the required information to establish a credit limit for the foreign customer to Ex-Im Bank.**
**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 and an interim statement if the latest year’s financial statement is older than 1 year.**
**Note: audited statements required for credits over $1MM    **
**3. Ex-Im Bank’s Loan Officer analyzes the application and makes a decision on the amount of credit to be supported.**

## Medium-Term Credit Standards

**Positive Operating Profit over last 2 years**
**Positive Net Income over last 2 years**
**Positive Cash-Flow-From-Operations (latest year)**
**EBITDA/Debt Service greater than 150%**
**Total Liabilities/Total Net Worth less than 175%**
**Ex-Im Bank Exposure/Total Net Worth less than 40%**
**Borrowers that meet these standards very likely to be approved. **
**If the borrowers misses one or more of the standards, **
**Ex-Im Bank will conduct further analysis of the borrowers’ business **
**to determine whether to grant approval.**

## 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 spread over 6-month U.S. dollar LIBOR rate**
**Loan fully transferable, can be securitized**
**Banks often finance the 15% required cash payment**
**Guarantee available in major foreign currencies**

## Hotel V Centenario: Dominican Republic

**U.S. Ex-Im Bank supported a $680,000 5-year loan guarantee to finance an energy efficiency project for the Hotel V Centenario.**
**The loan was made by Union Planters Bank (Florida) at an interest rate of 1⁄2% over US$LIBOR, Ex-Im Bank 1-time 5.52% flat fee.**
**The project included new water-cooled chillers, cooling towers, a variable frequency drive and a computerized energy management system plus installation, training, and engineering services. **
**The project will reduce and manage the energy consumption of the Hotel and upgrade the hotel's current air conditioning system.**
**The Hotel operates a 200 room facility.**
**The energy savings achieved from the project resulted in a payback less than the 5-year term of the loan.**

## Case Study: BP Solar in Argentina

**Ex-Im Bank’s  **_**Environmental Enhancement Program**_** enabled *****BP Solar*****  to finance a $753,090 sale of 1,500 photovoltaic energy panel systems.**
**The borrower is EJSEDSA, a private utility that is responsible for supplying electricity to rural areas of Jujuy Province.**
**Ex-Im Bank supported enhancements to the Loan:**
**maximum allowable OECD repayment term of 6 years**
**capitalized interest during construction **
**supported an additional 15% local cost. **
**The transaction will finance the purchase of solar home systems and will be supplemented by a grant from the World Bank and the Global Environmental Facility to the government of Argentina.**
***Allfirst Bank *****made the loan to EJSEDSA at a floating interest rate based on a small spread over the LIBOR. **

## Case Study: Facileasing, S.A.

**PNC Bank, Pittsburgh, PA arranged a 5-year loan for *****Facileasing, S.A., *****Mexico City, to purchase $1 million in U.S.-made equipment.***** ***
**The equipment includes a desalination plant, **_**solar panels**_**, laundry equipment, and golf carts which *****Facileasing, S.A *****will lease to the  Hotel Marival – Cancun on 5-year lease payment terms.**
***Facileasing, S.A, *****based in Mexico City, ***** *****offers both finance and operating leases with payment terms ranging from 12-60 months.**
***Facileasing, S.A.’s *****customers include both Mexican and U.S. and other multinational companies, in the food, pharmaceutical, and printing sectors.**
***Facileasing, S.A. *****retains title to the leased assets for the entire term of the lease.**

## Case Study: Philippines Geothermal

**Direct Loan of $49.7 million to the sponsor Ormat Leyte Co. Ltd., to build, own and operate four geothermal plants 530km from Manila. **
**Philippine National Oil Company signed a contract with Ormat to purchase power from the new plants, supply power to them. **
**Ormat provided 25% in equity totaling $16.7 million with Ex-Im Bank supporting the remaining 75% as the sole senior lender. **
**During the construction phase, loans provided by a syndicate of banks with Ex-Im Bank providing a political risk guarantee. **
**Project has a number of important strengths: **
**The contract between Ormat and the PNOC, whose commercial obligations fully supported by Government of the Philippines.**
**Ormat equipment has a record of reliable performance.**
**The engineering evaluation showed the geothermal fields to be a reliable power source, generating a high capacity of steam.  **
**Project's revenues mostly denominated in U.S. dollars to cover dollar-based fixed charges such as debt service.**

## 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.  **

## What Makes a Financing “Structured”?

**Structured finance involves elements of both corporate and limited recourse project finance.  Like corporate finance, it involves full recourse to the project sponsor’s balance sheet. **
**Like project finance, it involves special features to enhance the credit of the borrower, including (but not necessarily limited to) one or more of the following: **
******  ****Special purpose accounts, including offshore payment accounts, escrow or reserve accounts, or other accounts that would be subject to Ex-Im Bank’s control;**
**2.****  ****Covenants and default provisions such as financial ratios or debt service coverage requirements that would, if violated, prevent payment of dividends to the sponsors;**
**3. Insurance requirements that might be more strict than those typically applicable under corporate insurance policies; **
**4. **** ****Letters of credit or other sources of funds that would be pledged by the sponsor to Ex-Im Bank through a bank or other third party.**

## Case Study: Structured Finance

**1.   Northrop Grumman wins contract to supply equipment/services to Sakaeronavigatsia (SAK) of Georgia**
**	**_**Challenge**_**: Ex-Im Bank closed in Georgia at the time**
**2.    SAK and Intl. Air Transport Assn. (IATA) contract for billing and collection of over-flight revenue...Airlines, both western and NIS, pay over-flight fees into an escrow account in Switzerland.**
**4.   Transaction creditworthy based on ability of SAK to perform billing, ability of airlines to pay over-flight into escrow account **
**5.   Bank of New York made the loan to SAK to purchase the equip/services with **_***Ex-Im Bank Guarantee.***_
**6.   Semi-annual P&I payment made from escrow account; Excess funds, above reserve and debt service, paid to SAK**
**7.   *****Renewable energy companies could use this structure to sell “energy” to creditworthy international customers.***

## Working Capital Guarantee

**Ex-Im Bank provides 90-100% 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, or payment guarantees.**
**Enables the exporters to finance foreign sales receivables.**
**Most Working Capital Guarantees provided by Delegated Authority Lenders (see **_[www.](http://www.exim.gov/)__[exim](http://www.exim.gov/)__[.](http://www.exim.gov/)__[gov](http://www.exim.gov/)_** for a list) without prior Ex-Im Bank approval.**

## Case Study: PowerLight Corp.

**PowerLight of Berkeley, CA received a $5 million working capital loan made possible through Ex-Im Bank’s Working Capital Guarantee Program (“WCGP”).**
**PowerLight is using the working capital line of to finance the $50+ million export sale of  solar tracking technology to Bavaria Solarpark, the world's largest solar electric project!**** **
**The project will generate 10 megawatts of electricity, enough to power 9,000 homes in the region, supported by a 20-year power purchase from the German government. **
- _[Union Bank of California](http://www.exim.gov/cftools/intercept.cfm?http://www.uboc.com)_**, an Ex-Im Bank delegated authority lender, provided the loan and will receive Ex-Im Bank's Guarantee when the loan is processed.**
**PowerLight is using the working capital line in part to post a 10% performance bond as required by Bavaria Solar.**

## New Initiative: Sub-sovereign Lending

**Recognizes emerging market for U.S. environmental firms: foreign cities, states, and other sub-sovereign government entities.**
**Ex-Im Bank supports Loans/Guarantees to sub-sovereign entities:**
**foreign currency debts are not in default **
**rated B/B2 or stronger by accepted global credit rating agency.**
**The global credit rating agencies whose ratings may be used:**
**Standard & Poor’s, Moody’s, Duff & Phelps, Fitch/IBCA, and Japan Credit Rating. **
**New initiative immediately qualifies subsovereign entities in: **
**Argentina, Brazil, Bulgaria, China, Colombia, Croatia, the Czech Republic, Estonia, Latvia, Malaysia, Poland, Slovakia, and South Korea. **

## Conclusion

**Ex-Im Bank: top priority to support renewable energy and energy efficiency exports.**
**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. **
***http://www.exim.gov***
***craig.oconnor@exim.gov***