Down but not under
Few export credit agencies can claim to be suffering as severe an
Asian hangover as Australia's Export Finance and Insurance
Corporation (EFIC). When Australia's attempt to establish
Asian-pacific dominance foundered in the face of devaluations, EFIC
was left without much of an order book to support. And activity in
the mining sector, Australia's export powerhouse, has been subdued.
EFIC's solution has been to concentrate on the new niche markets and capitalise on the areas that have recovered most quickly from the crisis. In common with that other mining-friendly ECA, the Export Development Corporation, the answer is telecoms telecoms, telecoms. This is an industry where Asia, regardless of conditions, will be anxious to keep up with the game.
EFIC's last two major telecoms transactions have involved regional telcos with ambitious rollout plans. In March it entered into a re-insurance agreement with Finnvera to back a vendor finance package for Philippines network operator Globe Telecom. Globe, indirectly controlled by Deutsche Telekom and SingTel, required additional network equipment to support GSM expansion. EFIC backed the subcontracted parts of Nokia's product suite, sourced from Australia, in a deal worth in total around $165 million.
The second, more recent, deal involved backing for another equipment firm's Australian subsidiary, in this case Ericsson. TM International in Bangladesh (TMIB), a division of Telekom Malaysia, signed an agreement in March to purchase additional switching and capacity for its GSM network. It also sourced a number of handsets from the Swedish cellular supplier. Since its repayment streams will be reliant on local currency denominated revenues, TMIB wanted limited insulation from convertibility risk.
The $26 million deal, financed by ANZ, involved a portion of the funding denominated in the Bangladeshi currency the Taka. EFIC provided the package with a guarantee. Given the continuing slew of telecoms projects due to come to the market in the rest of 2000, and the marked preference for hi-tech firms setting up shop in Australia, more of these lucrative partial deals cannot be ruled out.
Another activity currently tiding the ECA over is asset finance, especially for the shipping industry. Australia is one of the major players in the construction of $40 million-plus catamaran fast ferries. A second-hand market in these ships is still in its infancy and lease financiers tend to be wary of deals that do not have clearly defined residual value indicators. EFIC's contribution to providing comfort both to lessors and lessees is residual risk insurance, which ensures a wider take-up of ferries amongst the shipping community. Its most recent such deal was a $43 million policy for Incat's sale of a catamaran to a lessor.
Angus Armour, EFIC's general manager of export and project finance, says that these asset-based deals take up a significant proportion of its current business. He adds, ?this solution is typical of EFIC's ?market gap? role. We were willing to take on that risk as a result of our experience gained in assisting the industry from the start. By doing so, we have made it possible for other financiers to participate in the difficult and sometimes risky fast ferry transactions?.
The indications are that big-ticket infrastructure projects will make a long-delayed reappearance in Asia. The closest to the market is the North Luzon Toll expressway deal, a $406 million road deal that covers the construction of a 181.2 km section from Manila to Bataan. The sponsors, Benpres and Egis, have lined up Leighton as contractors. The IFC is likely to lead the financing, with involvement from the Asian Development Bank, MIGA, Coface and EFIC.
This is likely to pale next to the ambitious plans for developing Papua New Guinea's oil and gas reserves. Since Interoil gained Opic financing for the Port Moresby Refinery, attention has now turned towards how the country can increase its self-sufficiency. Indeed plans are already advanced for the PNG to Queensland gas pipeline. This $3 billion project is sponsored by Chevron, BP, Mobil, Orogen, Mitsubishi and BHP, but Australian Gas Light and Petronas have won the BOO concession for the 2,500km Australian section.
The Australian government has already indicated a leaning towards support for gas-fired power stations in the state of Queensland, a factor in the difficulties confronting several coal-fired deals, so backing in some form is highly probable. However, mining projects in the region have come in for sustained criticism from developmental and human rights organisations, so the high-level decision-making process will be protracted. Moreover, the future of the project, as well as the associated Timor Gap proposal, is closely linked to the developing political situation in the region.
With this in mind, EFIC may be involved as a political risk insurance provider, although direct lending cannot be ruled out. Its experience with the Alumbrera mining project, since developed on Antamina (albeit without EFIC's involvement) indicates that the ECA will not have too many problems in coming together with a common insurance policy.
The Australian Minister for Trade has announced a review of the country's export credit operations, spurred largely by the private market's increase in capacity and activity. The key question is how far EFIC will move into private sector partnerships, especially when the ECA is run at a relative distance from the authorities. It is made all the more pertinent as EFIC moves from the short term, crisis-driven support for exporters that took up much of the agencies time over the past two years.
Armour says that the current crop of deals is a good indication of where EFIC is at now. ?We're a niche player and we target the best qualities of a niche player: flexibility, responsiveness, and innovative solutions. In terms of our clients, we continue to achieve 90% plus satisfaction results and the feedback from the survey process suggests that we're achieving our aims. Practically speaking, that's best demonstrated by the activities of our client base, particularly the multinationals, as they work with us to increase their sourcing from Australia?.
EFIC's solution has been to concentrate on the new niche markets and capitalise on the areas that have recovered most quickly from the crisis. In common with that other mining-friendly ECA, the Export Development Corporation, the answer is telecoms telecoms, telecoms. This is an industry where Asia, regardless of conditions, will be anxious to keep up with the game.
EFIC's last two major telecoms transactions have involved regional telcos with ambitious rollout plans. In March it entered into a re-insurance agreement with Finnvera to back a vendor finance package for Philippines network operator Globe Telecom. Globe, indirectly controlled by Deutsche Telekom and SingTel, required additional network equipment to support GSM expansion. EFIC backed the subcontracted parts of Nokia's product suite, sourced from Australia, in a deal worth in total around $165 million.
The second, more recent, deal involved backing for another equipment firm's Australian subsidiary, in this case Ericsson. TM International in Bangladesh (TMIB), a division of Telekom Malaysia, signed an agreement in March to purchase additional switching and capacity for its GSM network. It also sourced a number of handsets from the Swedish cellular supplier. Since its repayment streams will be reliant on local currency denominated revenues, TMIB wanted limited insulation from convertibility risk.
The $26 million deal, financed by ANZ, involved a portion of the funding denominated in the Bangladeshi currency the Taka. EFIC provided the package with a guarantee. Given the continuing slew of telecoms projects due to come to the market in the rest of 2000, and the marked preference for hi-tech firms setting up shop in Australia, more of these lucrative partial deals cannot be ruled out.
Another activity currently tiding the ECA over is asset finance, especially for the shipping industry. Australia is one of the major players in the construction of $40 million-plus catamaran fast ferries. A second-hand market in these ships is still in its infancy and lease financiers tend to be wary of deals that do not have clearly defined residual value indicators. EFIC's contribution to providing comfort both to lessors and lessees is residual risk insurance, which ensures a wider take-up of ferries amongst the shipping community. Its most recent such deal was a $43 million policy for Incat's sale of a catamaran to a lessor.
Angus Armour, EFIC's general manager of export and project finance, says that these asset-based deals take up a significant proportion of its current business. He adds, ?this solution is typical of EFIC's ?market gap? role. We were willing to take on that risk as a result of our experience gained in assisting the industry from the start. By doing so, we have made it possible for other financiers to participate in the difficult and sometimes risky fast ferry transactions?.
The indications are that big-ticket infrastructure projects will make a long-delayed reappearance in Asia. The closest to the market is the North Luzon Toll expressway deal, a $406 million road deal that covers the construction of a 181.2 km section from Manila to Bataan. The sponsors, Benpres and Egis, have lined up Leighton as contractors. The IFC is likely to lead the financing, with involvement from the Asian Development Bank, MIGA, Coface and EFIC.
This is likely to pale next to the ambitious plans for developing Papua New Guinea's oil and gas reserves. Since Interoil gained Opic financing for the Port Moresby Refinery, attention has now turned towards how the country can increase its self-sufficiency. Indeed plans are already advanced for the PNG to Queensland gas pipeline. This $3 billion project is sponsored by Chevron, BP, Mobil, Orogen, Mitsubishi and BHP, but Australian Gas Light and Petronas have won the BOO concession for the 2,500km Australian section.
The Australian government has already indicated a leaning towards support for gas-fired power stations in the state of Queensland, a factor in the difficulties confronting several coal-fired deals, so backing in some form is highly probable. However, mining projects in the region have come in for sustained criticism from developmental and human rights organisations, so the high-level decision-making process will be protracted. Moreover, the future of the project, as well as the associated Timor Gap proposal, is closely linked to the developing political situation in the region.
With this in mind, EFIC may be involved as a political risk insurance provider, although direct lending cannot be ruled out. Its experience with the Alumbrera mining project, since developed on Antamina (albeit without EFIC's involvement) indicates that the ECA will not have too many problems in coming together with a common insurance policy.
The Australian Minister for Trade has announced a review of the country's export credit operations, spurred largely by the private market's increase in capacity and activity. The key question is how far EFIC will move into private sector partnerships, especially when the ECA is run at a relative distance from the authorities. It is made all the more pertinent as EFIC moves from the short term, crisis-driven support for exporters that took up much of the agencies time over the past two years.
Armour says that the current crop of deals is a good indication of where EFIC is at now. ?We're a niche player and we target the best qualities of a niche player: flexibility, responsiveness, and innovative solutions. In terms of our clients, we continue to achieve 90% plus satisfaction results and the feedback from the survey process suggests that we're achieving our aims. Practically speaking, that's best demonstrated by the activities of our client base, particularly the multinationals, as they work with us to increase their sourcing from Australia?.
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