UK Export Finance (UKEF) has launched a guarantee product aimed at boosting financing for projects in their earlier stages, with the agency having already seen interest from borrowers in Africa and the Americas.
The early project services guarantee (EPSG) will provide cover on bank loans to foreign borrowers that choose to use UK services firms at the scope and design phases of their projects.
Services work could include value for money studies, project design, geophysical surveys, as well as assessments of the environmental, social and governance (ESG) impact of a potential export credit deal.
The initiative aims to boost UK services exports and will also help address a financing gap for the preparatory stages of major projects, especially in emerging markets, UKEF says in a statement.
The agency has fielded enquiries from entities in the Americas and Sub-Saharan Africa, and there has been “interest” from buyers for potential infrastructure deals, a UKEF spokesperson tells GTR.
“We expect good use in developing countries as often they need to fund the design stage via [an] aid budget or through using day-to-day financing,” they say. “EPSG would allow these overseas buyers – subject to sustainable lending requirements – to purchase UK design services and benefit from a longer repayment period”.
Deals could be “as small as US$100,000” or as large as “tens of millions” under the product, the spokesperson says.
Export credit agencies require detailed impact assessments and monitoring prior to issuing support, yet some observers warn these processes are a financial burden for borrowers. According to advisory firm Bluebird Finance and Projects, environmental surveys can cost close to €800,000 and some agencies mandate these types of checks for projects outside of the oil and gas sector.
A handful of export credit agencies and development institutions have already created similar products.
Well over a decade ago, the Export-Import Bank of the United States launched its engineering multiplier programme which extends loans and guarantees to foreign buyers that tap US companies for feasibility studies and pre-construction design, engineering and architecture services.
In 2016, Sweden’s development finance institution Swedfund established its “project accelerator” to grow bankable and sustainable projects in developing countries by financing feasibility studies.
In recent years, the African Export-Import Bank and Nigeria Export-Import Bank agreed to establish a fund for early project financing and technical services in Nigeria. At the time, they told GTR that they aimed to mobilise up to US$50mn for the initiative.
