Financing opportunities for Africa’s oil and gas sector
Africa Oil Week spoke to Jens Rohleder, Vice-President of the Maritime Industries Department for KfW IPEX-Bank, about financing opportunities in Africa.
Jens Rohleder, Vice-President of the Maritime Industries Department
Export finance is becoming a more relevant instrument for funding oil and gas activities in Africa. The German KfW IPEX-Bank is one of the leading export finance specialists. Jens Rohleder, working for the Maritime Industries sector department at KfW IPEX-Bank, explains which circumstances could enhance financing opportunities in Africa: “A major aspect with financing African oil and gas activities is that commercial solutions are available but might not provide the same amounts or tenors you could achieve with ECA-cover attached.
KfW IPEX-Bank has extensive expertise in financing exports, also for markets with hurdles. For 60 years the bank has tailored financing solutions both for its clients and the purchasers of their export goods, which are then implemented even under strenuous overall conditions. As a specialist in export finance the bank promotes instruments of the German Federal Government to boost exports. These include export credit guarantees (ECA), which are processed by Euler Hermes Deutschland AG on behalf of the Federal Government ("Hermes cover"). These protect export transactions against payment defaults for economic or political reasons, enabling German exporters to maintain their business relationships or move into difficult markets even during crises.
So how does export financing work?
Rohleder explains that the bank by its mandate is focussed on the European part of the investment and provides a well-suited solution for that part with relevant ECA cover. “Sometimes exports could be coming out of one or two European countries, and in this case, we are able to structure multi-ECA financings. For example, we have provided ECA covered financing for German equipment in a bigger offshore project. Given the implicit higher risk profiles of offshore investments in today’s environment ECA-cover would not only lower the ultimate risk of the financing banks but also minimise the requirements to allocate equity (“RWA”) for a specific transaction. This of course would also be reflected in the pricing of such transaction.” The oil and gas sector is a good example of export financing benefitting both the exporter from Europe and the buyer from Africa.
"Export finance can actually provide for another opportunity to European companies to sell their goods to Africa, and thereby African countries can optimize their portfolio of suppliers with most environmental preservation and a maximum of efficiency,” says Rohleder. Aside from major companies there are many small and medium-sized enterprises in Europe that are producing sought-after products for the supply industry in the oil and gas market. In order to pave the way for the supply industry with their relatively small tickets, purchases can be bundled in so-called “shopping lines” and thus also be eligible for ECA cover.
“There are many other options in the market like commercial lending and leasing, but export financing provides for security in a sometimes difficult environment,” Rohleder sums up.
This article was first published on Africa Oil Week’s media room. Held from 5-9 November, 2018 at Cape Town International Convention Centre, South Africa, AOW is regarded as the leading business intelligence and transaction platform for Africa's oil and gas sector