Southwest Windpower

Banking on ‘green’ exports

Break Bulk.com
November 17, 2008
www.breakbulk.com

“Green” technologies represent a growing segment of the global economy. According to Environmental Business International Inc., the global environmental market was valued at $728.7 billion in 2007. The Department of Commerce reported that U.S. clean and renewable-energy exports nearly doubled between 2002 and 2006, and that exports of environmental technologies grew 55 percent in the same period. The companies in this industry generate billions of dollars in exports and support millions of jobs.

The Export-Import Bank of the United States, an independent federal agency that assists in financing U.S. exports, is dedicated to increasing support for U.S. companies that export environmentally beneficial goods and services, including exports related to renewable-energy production.

Ex-Im Bank has supported more than $3 billion of environmentally beneficial U.S. exports since the Environmental Exports Program was established in 1994, including more than 65 renewable-energy projects totaling $1.27 billion. In fiscal 2008, Ex-Im Bank working capital guarantees supported $315 million in renewable-energy exports.

I serve as the board member who oversees Ex-Im Bank’s environmental initiative. The bank’s newly expanded Office of Renewable Energy and Environmental Exports, headed by Craig O’Connor, focuses exclusively on building support for U.S. environmental exports.

Companies in environmental industries face significant capital needs at start-up and require reliable financing for sales to international buyers, particularly for projects that may take years to become commercially viable. Ex-Im Bank provides financing products to help exporters gain access to working capital, to protect them against non-payment by foreign buyers, and to offer financing to foreign buyers.

The ability to offer financing or credit terms is often the most critical element in successfully competing for international environmental sales. Ex-Im Bank supports short-term sales with export-credit insurance (including an enhanced small-business policy) that insures against commercial and political risks of buyer nonpayment and enables exporters to offer open-account financing. Southwest Windpower of Flagstaff, Ariz., has used our insurance to sell its products to developing markets across the globe.

Lack of working capital is one of the biggest barriers facing U.S. small business exporters. Despite their creditworthiness, these exporters sometimes find their local banks reluctant to provide loans. Ex-Im Bank’s working capital guarantee helps commercial lenders make loans to U.S. exporters for export-related activities by substantially reducing the risks associated with these loans.

Enhanced buyer financing is also available through Ex-Im Bank to support environmental exports, including longer repayment terms, capitalization of interest during construction and automatic availability of local cost financing up to 30 percent of the U.S. contract price. Repayment terms of up to 15 years are available to support U.S. exports to water and wastewater projects, as well as renewable-energy projects involving solar, wind, geothermal, bio-energy and hydroelectric power sources.

Ex-Im Bank often plays an important early-stage role in helping small clean-energy companies to finance operations, increase international sales and attract significant equity investment. A number of U.S. solar-energy and wind-energy companies have benefited from this support and have been able to obtain equity investment as a result.

One such company is the former Powerlight Corp. of Berkeley, Calif.. It is now owned by SunPower Corp. of San Jose. In 2005, Powerlight used a $5 million working capital line of credit guaranteed by Ex-Im Bank to export its solar-tracking technology to Germany’s Bavaria Solarpark, the world’s largest solar-power project at that time. An Ex-Im Bank delegated-authority lender provided the loan.

In 2006, Powerlight became the first U.S. exporter to benefit from the bank’s 15-year repayment terms for buyer financing. The company exported its solar-energy equipment and services for the development of a privately owned solar-powered project in Gwangju, Korea, with the backing of a 15-year,

$7.8 million medium-term loan guarantee from Ex-Im Bank. The energy is sold to Korea Electric Power Corp. at a price set by Korea’s Ministry of Commerce, Industry and Energy for 15 years following the project commissioning.

Structured-finance credit is customized to address the specific issues of a smaller environmental project but entails lower transaction costs than traditional project finance. Ex-Im Bank has no minimum or maximum project size, and we are very interested in assisting these kinds of small projects.

Linda Mysliwy Colin is vice chairman and first vice president of the Export-Import Bank of the United States.