Raw like sushi
Japan Bank for International Cooperation (JBIC), the institution
which replaced Export-Import Bank of Japan (JEXIM) and the Overseas
Economic Co-operation Fund of Japan (OECF) is now 10 months old.
Players in the international project finance market who have not
yet worked with JEXIM's reincarnation have still to determine
whether the new name has brought with it new policies and working
practices.
Looking at the level of commitment that JBIC extended to three of its latest deals (all in Brazil) it would seem that if nothing else, JBIC has been energized by the transformation. For the three deals ? see table for details ? JBIC support ratios ranged between 35% and 54% of total project cost, well above average commitment levels in1999. Deals booked by JBIC's project finance department last year tended to see support levels around 30% or below.
High commitment ratios are not, in fact, new ? Tsuguya Ieda, director in JBIC's Tokyo energy and natural gas department, says that, according to its own guidelines, JBIC support can extend to 60% or 70% of a project's total cost. ?Basically that's the same as traditional JEXIM policy,? Ieda says.
If JBIC's involvement in the project finance market looks a little inconsistent this is both because the organization is a body of two halves (former JEXIM and OECF business is managed separately within the bank) and because JBIC extends a flexible, case by case evaluation process to each project. Export-related project deals, the Ilijian project (see table) is the latest example, tend to see support levels that are lower than strategic, strategic investment deals, where private sector risk/reward conclusions are harder to calculate. Because the Brazilian projects will eventually provide for a substantial volume of Japan's fuel needs they are all considered of national, strategic importance.
The three Petrobras deals are also unusual in that they revolve around leases. ?The lessor is a 100% Japanese owned entity and that also makes it easier for us to give such substantial cover,? says Ieda. The third significant factor which has determined the large size of the JBIC portion is the commercial banking market's current perception of Brazilian risk. ?Brazil's economy is in recovery but commercial banks are still hesitating to commit very large sums to the country's long list of potential projects,? Ieda observes.
Interestingly, MITI (Japan's Ministry of International Trade and Industry) is close to its exposure limits for Brazilian projects despite the fact that there are still many pipeline projects lined up for MITI assistance. It is understood that JBIC took such a substantial slice of the Petrobras deals in order to give MITI more room to maneuver on future deals.
In order for JBIC itself to get comfortable with such a large exposure to Petrobras, a banking source in the commercial sector says that JBIC held a bilateral meeting with the Brazilian company in Autumn last year. ?But as far as I am aware, there were no bilateral agreements signed that were additional to what was in the projects' deal documentation,? the source says.
Including the three Petrobras deals (which are not actually classified as project finance transactions by JBIC's own project finance department) JBIC's contribution to the global project finance market this year will be substantially larger than in 1999, says Yasushi Uno, deputy director general of the project finance team.
This fact seems to discount any view that the role of export credit agencies would lessen as investors become more confident about emerging market developments. The number of approaches made to JBIC (or JEXIM and OECF as it was then) for assistance soared between 1998 and 1999, says Uno, in line with the finance industry's reluctance to lend on a commercial basis.
Of course, the high volume of JBIC loans is also a reflection of the fact that many more developments are now viable and in the works as recovery takes place in economies previously hard hit by the financial crisis of 1997 and 1998.
Where and when JBIC will lend in the future will depend on political as well as project specific and financial markets issues. JBIC's remit is broader than JEXIM's was ? it shouldn't be forgotten that the institution exists not just to aid Japan's foreign trade and economic co-operation. JBIC can and does finance on an untied basis, providing financial assistance for projects that are not connected with any specific Japanese procurement, export or investment scheme.
In contrast to US Eximbank, a clear relationship exists between JBIC's lending decisions and a developing economy's attitude to economic and financial restructuring. Currently in the Philippines, for example, the disbursement of the second tranche of a banking sector reform loan and a power sector reform loan, and their co-financing by the JBIC, is tied to the privatization of Philippine National Bank and the passage of the power sector reform bill.
Looking at the level of commitment that JBIC extended to three of its latest deals (all in Brazil) it would seem that if nothing else, JBIC has been energized by the transformation. For the three deals ? see table for details ? JBIC support ratios ranged between 35% and 54% of total project cost, well above average commitment levels in1999. Deals booked by JBIC's project finance department last year tended to see support levels around 30% or below.
High commitment ratios are not, in fact, new ? Tsuguya Ieda, director in JBIC's Tokyo energy and natural gas department, says that, according to its own guidelines, JBIC support can extend to 60% or 70% of a project's total cost. ?Basically that's the same as traditional JEXIM policy,? Ieda says.
If JBIC's involvement in the project finance market looks a little inconsistent this is both because the organization is a body of two halves (former JEXIM and OECF business is managed separately within the bank) and because JBIC extends a flexible, case by case evaluation process to each project. Export-related project deals, the Ilijian project (see table) is the latest example, tend to see support levels that are lower than strategic, strategic investment deals, where private sector risk/reward conclusions are harder to calculate. Because the Brazilian projects will eventually provide for a substantial volume of Japan's fuel needs they are all considered of national, strategic importance.
The three Petrobras deals are also unusual in that they revolve around leases. ?The lessor is a 100% Japanese owned entity and that also makes it easier for us to give such substantial cover,? says Ieda. The third significant factor which has determined the large size of the JBIC portion is the commercial banking market's current perception of Brazilian risk. ?Brazil's economy is in recovery but commercial banks are still hesitating to commit very large sums to the country's long list of potential projects,? Ieda observes.
Interestingly, MITI (Japan's Ministry of International Trade and Industry) is close to its exposure limits for Brazilian projects despite the fact that there are still many pipeline projects lined up for MITI assistance. It is understood that JBIC took such a substantial slice of the Petrobras deals in order to give MITI more room to maneuver on future deals.
In order for JBIC itself to get comfortable with such a large exposure to Petrobras, a banking source in the commercial sector says that JBIC held a bilateral meeting with the Brazilian company in Autumn last year. ?But as far as I am aware, there were no bilateral agreements signed that were additional to what was in the projects' deal documentation,? the source says.
Including the three Petrobras deals (which are not actually classified as project finance transactions by JBIC's own project finance department) JBIC's contribution to the global project finance market this year will be substantially larger than in 1999, says Yasushi Uno, deputy director general of the project finance team.
This fact seems to discount any view that the role of export credit agencies would lessen as investors become more confident about emerging market developments. The number of approaches made to JBIC (or JEXIM and OECF as it was then) for assistance soared between 1998 and 1999, says Uno, in line with the finance industry's reluctance to lend on a commercial basis.
Of course, the high volume of JBIC loans is also a reflection of the fact that many more developments are now viable and in the works as recovery takes place in economies previously hard hit by the financial crisis of 1997 and 1998.
Where and when JBIC will lend in the future will depend on political as well as project specific and financial markets issues. JBIC's remit is broader than JEXIM's was ? it shouldn't be forgotten that the institution exists not just to aid Japan's foreign trade and economic co-operation. JBIC can and does finance on an untied basis, providing financial assistance for projects that are not connected with any specific Japanese procurement, export or investment scheme.
In contrast to US Eximbank, a clear relationship exists between JBIC's lending decisions and a developing economy's attitude to economic and financial restructuring. Currently in the Philippines, for example, the disbursement of the second tranche of a banking sector reform loan and a power sector reform loan, and their co-financing by the JBIC, is tied to the privatization of Philippine National Bank and the passage of the power sector reform bill.
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