Ex-Im Bank's programs – which include loan guarantees, export credit insurance, working capital guarantees and other services – can help fill in the gaps in private-sector export financing.
Ex-Im Bank was created during the Great Depression in order to finance the export sales of U.S.-made goods and services. The Office of Renewable Energy and Environmental Exports was later added in 2008.
2011 was a record year for financings, according to Fred Hochberg, chairman of the bank, who told NAW he expects increased business from manufacturers this year.
Financings grew 33% to $32.7 billion in 2011, compared with $24 billion in 2010. The renewables segment grew 117% to $721 million in financings.
‘With our slow-growth economy, we're not building a lot of power plants, so companies are looking at the export market," Hochberg explains. And, he reasons, ‘The U.S. is a key place from which to manufacture.’
Consider, for example, Langhorne, Pa.-based wind turbine manufacturer Gamesa, which tapped Ex-Im Bank to help attain financing for the export of 51 wind turbines for the 102 MW Cerro de Hula Wind Farm in Honduras in 2010.
Ex-Im Bank authorized a $159 million direct loan to Energ’a EÃ³lica de Honduras S.A. to finance Gamesa's export of the turbines for the Cerro de Hula project – the first utility-scale wind farm in Honduras. Cerro de Hula is one of the largest wind power projects in Central America, where wind power is needed due to limited domestic energy resources.
Ex-Im Bank also provided financing for Mexico's La Ventosa project. Project sponsor Energie Nouvelles was the loan beneficiary, which, in turn, sold the power generated by the wind turbines to Walmart de Mexico. Clipper Windpower supplied the turbines.
Transactions such as these will become more commonplace, Hochberg says, adding that exports are more integral now because the rest of the world is growing, even if that growth is not evident here in the U.S.
‘This is a critical time, particularly with the emergence of the so-called "BIC' countries: Brazil, India and China," Hochberg notes. The bank also lists Colombia, Mexico, Nigeria, South Africa, Vietnam, Indonesia and Turkey as key markets.
Furthermore, these emerging economies often have huge power deficits, so the need for energy projects is even more pressing.
Despite the record level of exports, however, Hochberg insists there is room for growth. After all, in 2010, exports constituted just 12.7% of the U.S. gross domestic product.
To drive home the point, Hochberg says Ex-Im Bank can get attractive interest rates, thanks to its relationships with other banks, which want to do business with Ex-Im because their risk exposure decreases.
Further, Ex-Im Bank can support up to 30% of the net contract price for locally originated or manufactured goods and services. The financing agreement can also help defray the costs of local expenses, such as construction and trucking costs. To be eligible for financing, goods and services must be shipped from the U.S. to a foreign buyer.
Hochberg says the bank remains a resource even if it is not as well known as other programs, such as the Department of Energy's (DOE) loan-guarantee program.
‘[Manufacturers] might not know us by name, but they know there is a program out there that can help them.’
And given the controversy surrounding the DOE's loan-guarantee program, a little anonymity may not be such a bad thing. Hochberg is quick to point out the difference between Ex-Im Bank and the DOE's loan-guarantee program.
‘We're financing the buyers of goods and services – we're not financing the company,’ he explains. ‘In the case of the DOE's loan-guarantee program, they were financing Solyndra itself.’