The Export-Import Bank of the United States (US Exim) is anticipating a “significant” rise in domestic financing activity in the coming year as it works to rejig its offering and grow investment in key sectors such as semiconductors, critical minerals and renewable energy.  

US Exim first launched the Make More in America (MMIA) programme nearly two years ago, following a 100-day review of critical supply chains. 

To date, the government agency has signed two deals for a combined total of US$174mn: a loan of US$4.7mn for Pennsylvania-based lithium technology firm, Aquatech, and US$169mn in financing for Beta Technologies, a maker of electric aircraft and infrastructure.  

Such figures are dwarfed by the financing extended by rival export credit agencies under their equivalent programmes, such as the UK’s, which since releasing its export development guarantee in 2020 has rolled out billions of dollars in support to large corporates such as Ford and Jaguar Land Rover.   

But in an interview with GTR, US Exim’s first vice-president and vice-chair of its board, Judith Pryor, says MMIA will become a “significant part” of its portfolio in 2024 and will align the ECA with White House efforts to secure supply chains for strategically important goods.  

“The MMIA initiative is going to be a boon for American manufacturers and American manufacturing. We have US$2bn in the pipeline,” she says, while noting deals are split across a range of industries, such as energy efficiency, battery storage, satellites and critical minerals. 

“We’re not the first ECA to provide this type of product, many of our counterparts and contemporaries do this. But for the first time, we’re able to support the full lifecycle of an export,” she says.  

“This is a new direction for the agency,” Pryor adds.  

Under MMIA, US Exim has made available the agency’s range of medium and long-term loans and guarantees for the establishment or expansion of US-based manufacturing facilities with an export nexus. 

The required US Exim content for small businesses, climate-related projects and those tied to transformational exports such as semiconductors, energy storage or quantum computing, is 15%. For all other projects, it is 25%.  

 

Fossil fuels still on the table? 

Despite the preferential treatment afforded to energy-transition sectors under MMIA, US Exim says it is still open to financing oil and gas development.  

Pryor tells GTR that US Exim is bound by its charter and must remain sector-agonistic across all its products.  

“US Exim is focused on certain sectors, but it doesn’t mean we’re ignoring others. ECAs globally have to take on renewable energy, energy efficiency, as well as energy storage projects – right now, not yesterday,” Pryor says.  

“But that doesn’t mean that we are not looking at other transactions, whether it be for healthcare, equipment sales, or new manufacturing facilities.”  

“We can’t discriminate against deals coming across our door on the basis of sector. Historically, we’ve supported large infrastructure projects, including in the oil and gas sector. They’re huge projects, which require large commitments. But we will see what creditworthy applications come,” she says.  

Environmental activists have long urged US Exim to nix support for fossil fuels, and say the agency is failing to direct at least 5% of its annual financing towards renewable energy, energy efficiency and storage.  

An October report from German think tank Perspectives Climate Group and Oxfam found just 1.25% of US Exim’s new authorisations were deemed environmentally beneficial in 2021, while 0.2% were in support of renewable energies. Oil and gas made up over 25% of its portfolio that year. 

In January 2022, Friends of the Earth wrote to US Exim and said the Washington DC-based agency should “reconsider financing domestic projects as it will likely lead to an increase in support for the fossil fuel industry”.  

It noted that US industry lobbyists such as LNG Allies had pushed for greater US Exim backing even before the launch of the domestic financing initiative, and argued this pressure would only increase. 

“LNG Allies argues that US LNG exporters are at a financial disadvantage and, therefore, need domestic subsidies from Exim to compete,” Friends of the Earth wrote.  

“LNG Allies suggests that Exim could finance more than 14 LNG export projects with a potential capacity of 253 million tonnes per annum of LNG export capacity. That could translate into billions of dollars in support from Exim for LNG and a catastrophic amount of US-financed greenhouse gas emissions.”  

 

Pencils down 

While US Exim is forecasting a potential boom in domestic financing, the agency says its ability to support key energy transition sectors is being hindered by factors outside of its control – not least its default rate cap.  

Currently, the agency is required to freeze lending activity if default rates among borrowers rise above 2%. 

A US Exim report published in September last year said the agency is the only member of the OECD Arrangement on Officially Supported Export Credits with such a low cap, and the only ECA required to halt lending completely if that figure is exceeded. 

The rate is based on entities that have defaulted on their payment obligations to US Exim. To calculate the rate, the ECA tallies up the value of payments overdue by the total amount of financing involved.  

US Exim’s default rate has generally stayed below 1%, yet spiked to 1.56% in June 2021 as the agency’s borrowers grappled with the impact of the Covid-19 pandemic.  

“We’re good stewards of US taxpayer dollars. No one wants to be the person that brings in the deal that goes south and pushes us over the 2%, because the consequences are devastating,” Pryor tells GTR 

“It would be pencils down. We would be shut down and unable to operate. How does that help anyone? A bank would kill for such a low default rate.” 

The Joe Biden Administration has said it would favour US Congress increasing the cap, and in June, senators Joe Manchin and Jim Risch tabled a bill that would raise it to 4%. 

That bill, the Civil Nuclear Export Act of 2023, aims to help the US compete in “existing and emerging nuclear markets” and reduce dependence on technology from Russia and China. 

Pryor agrees that 4% could be the “magic number” as the current limit impedes US Exim’s ability to support key sectors.  

“Think about the abilities of our underwriters working on a project finance structure. If US Exim’s default rate is at 1.8%, maybe they will avoid these deals – and if we’re hesitating in the clean energy sector, we’re in trouble,” she says. 

“I promise you the rate weighs on everyone’s psyche as they approach the underwriting process.”