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Live From SMM 2014
ECAs from equipment supplier nations playing an important role in newbuild finance

ECAs from equipment supplier nations playing an important role in newbuild finance

It is not just export credit agencies (ECAs) from shipbuilding nations that are playing an important role in newbuilding finance today, but also those from equipment supplying countries, especially in the offshore sphere delegates at the SMM Ship Finance Forum in Hamburg were told today.

As the final pieces of equipment are wheeled onto stands on the SMM show floor below the conference room, the building and supply of marine and offshore machinery were steering the presenters' comments. ECAs were central to the afternoon's discussion.

ECAs have become ever more important in the wake of the financial crisis, providing a reduction in risk and the equity banks need to set aside for agreements, and plugging that gap. as states agree to bear the burden should anything go wronWhile the idea of governments supporting their shipbuilding industries will be news to few, many might be surprised by the commercial influence that equipment supplier nations can exert if they too can offer an attractive financing package.

"The technology and expertise of the exporting country needs to be backed with financing expertise," said global head of marine industrie at KfW IPEX Bank, Carsten Wiebers. Using the example of a large drillship order in Brazil, Wiebers recalled how the Norwegians were successful in securing Norwegian produced contents on the ship by combining the technology with an attractive finance package. The less-aggressive approach of the Germans meant that the ships will be built with little German equipment.

Giving a further example of the approach, IHC Merwede Group cfo, Dave Vander Hyde said: "To minimise the risk concentration on our main ECA, you have to look around, If the cranes are from Austria, use Austria for (financing) the cranes. If the motor box is from Germany, use Germany for the ECA on the motor box, use Finland for Wärtsilä motors, a whole plethora of ECAs." IHC could not continue its current business without ECAs, according to Vander Hyde; although the company's 80%-exported dredging, offshore and mining relies heavily on state-backed credit, he believes there is room for ECA products to develop.

"There is no international level playing field for ECAs, the solutions that all the countries offer are completely different. Some have an EXIM bank, some are using commercials banks, some have national funds available. From an ECA perspective, getting a loan takes too long, sometimes three to four months for a response. Risk appetite is also low."

While certain among the panel might believe that ECAs could do with a shake up, delegates firmly believed that they will play a strong part in the future of financing shipping, with 43.2% of delegates agreeing strongly. When asked whether they agree there was going to be a renaissance of traditional bank finance, most of the audience were not hopeful, with 42.5% either disagreeing or strongly disagreeing with the statement, and only 7.5% in agreement or strong agreement.

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