The Russian export credit agency is to expand its original mandate in an attempt to arrest Russia’s economic slowdown, GTR has learnt.
In an exclusive interview in Moscow, the ECA’s managing director of customer relations and international business Alexey Tyupanov told GTR that Exiar will expand the number of industries it supports, in order to sustain employment.
Exiar was established late in 2011 with an aim of diversifying Russia’s energy and mineral-centric exports portfolio. Since then, it has insured what it calls “high value-add exports”, mainly heavy machinery and rail transport equipment. In total, those sectors account for between 15% and 17% of total exports.
While this aim remains, the agency will now provide support for industries such as fertilisers and metals, the exports of which are less ‘high-value’, but which support huge numbers of jobs. Russia’s economic growth slowed to 1.3% in 2013, with the government keen to investigate ways of improving the return.
Tyupanov explains: “The reality is that foreign markets for Russian metal companies or fertilisers are becoming more and more challenging, more competitive. Maybe they’re not that high of value but they create a lot of jobs here in Russia. Look at Rusal [the aluminium producer] for example, they employ 80,000 or 90,000 people, it’s more than the entire aircraft industry in Russia. It’s a question of whether you should support only aircraft, or support metallurgy as well. You have to protect what you have and of course in the long-term nobody cancels the aim of diversifying exports. This is our main goal.”
He says that some Russian companies are so heavily-indebted, that they’re close to breaching financial covenants. In October 2012, for instance, Rusal needed to reach an agreement with its lenders for an extension on its financial covenants, related to a US$4.75bn jumbo syndicated PXF facility arranged a year previously. Thus, access to commercial debt has been less forthcoming.
The agency is now also willing to issue guarantees for projects – including oil and gas-related projects – which support Russian exports. For example, oil company Tatneft’s head of international legal Peter Gloushkov told the audience of GTR‘s trade and export finance conference in Moscow conference that the company is in the process of bidding for a tender to build a refinery in Uganda. Tyupanov feels this is an area in which Exiar could provide support.
“We’re actually looking at this project. There are two ways in which Exiar could help. The first is by issuing investment insurance, where we insure our exporters against political risk in the region, and secondly: attracting commercial financing, usually on the basis of project finance.”
Tyupanov tells GTR that direct lending remains outside of Exiar’s remit, saying that while the various government financial institutions communicate constantly, they retain very distinct objectives. VEB, for instance, is the only state-lender. He admits though that with this model, there is a lot that falls between the cracks.
“We do a lot of projects together with VEB but I think their focus is more on long-term, large-scale projects. For guys who have small projects, worth less than US$50mn… this is where VEB could improve. They’re very good for large-scale complicated projects which take a longer time to evaluate the structure. But for easy projects I think there should be a special entity that should provide financing on competitive terms.”
Tyupanov stops short of saying that this is an area Exiar should be active in, but claims that the agency would be in a position to do so, should the government decree it to be necessary.