Export credit agencies (ECAs) will figure prominently in several large project financings, with the likes of Japan Bank for International Cooperation (Jbic), Export-Import Bank of Korea (Kexim), Export-Import Bank of the US (US Exim) and Italy’s Sace providing support for their national champions active in Qatari projects.

For Qatar, the provision of ECA financing has often been pivotal in ensuring schemes get the go-ahead. And for good reason, says Giyas Gokkent, senior economist at the Washington-based Institute of International Finance. “When you look at the financing points, the funding costs from ECAs tend to be low, so firms can use that; it gives them an edge,” he says.

Some of the biggest ECA participation has been from Asia – the likes of Jbic and Kexim – but European credit insurers have also been prominent.

Italian credit

Sace, fully owned by Italian state-backed lender Cassa Depositi e Prestiti, has insured a portfolio of more than €1bn ($1.1bn) in transactions in Qatar, concentrated primarily in the oil and gas and petrochemicals sectors, along with consumer products, agro-foods and furnishings.

Sace guaranteed a $355m loan to the $10.4bn Barzan Gas Company project financing in 2011, for the implementation of a new integrated scheme in the Ras Laffan industrial area. The Sace guarantee will support the Italian contracts (including Nuovo Pignone and Cameron Italy) awarded by Barzan. The ECA’s contribution was complemented by more than $2bn of financing. Sace says it has €500m in new deals in Qatar, focused largely on infrastructure schemes.

ECAs have always played a major role in project financings on Qatar, says Dani Kabbani, managing partner at the Doha office of law firm Eversheds. “We have seen their involvement mainly in major oil and gas and petrochemicals, as well as power projects. We expect their involvement to continue within relevant projects, although these particularly large schemes will generally be reduced in number.”

Facility D financing

A more recent deal saw both Jbic and Kexim support the financing for the Facility D independent water and power project (IWPP) in Qatar. Jbic signed a loan agreement in mid-January for up to $1.27bn with Umm al-Houl Power (UHP), a special-purpose vehicle set up for the project. The loan is being co-financed with Japan’s Bank of Tokyo-Mitsubishi UFJ, Mizuho Bank, Sumitomo Mitsui Banking Corporation, Mitsubishi UFJ Trust and Banking Corporation, Sumitomo Mitsui Trust Bank, and Norinchukin Bank; Qatar National Bank; and Germany’s KfW IPEX-Bank, with a total co-financing amount of about $2.4bn.

UHP has significant Japanese involvement, having been set up by Japan’s Mitsubishi Corporation and Tokyo Electric Power Company (Tepco), together with Qatar Petroleum (QP), Qatar Electricity & Water Company and Qatar Foundation for Education, Science & Community Development. The loan is intended to support the IWPP project in Qatar, leveraging the know-how cultivated by Mitsubishi and Tepco in Japan and overseas, and will contribute to maintaining and strengthening the international competitiveness of Japanese industries.

SME support

But ECA support for Qatari projects goes beyond the confines of strict project financing transactions. For example, Kexim announced in March 2015 that it had signed a memorandum of understanding (MoU) for financial cooperation with Qatar Development Bank (QDB), a financial institution responsible for the country’s public-purpose lending. The MoU is intended to promote the global expansion of small and medium-sized enteprises (SMEs) and medium-large exporters in both Qatar and Korea by establishing a strategic channel of cooperation and exchange between leading government-mandated financial institutions. The two institutions would also be able to offer co-financing to SMEs and medium-large firms of both countries that jointly enter third countries.

That deal followed another MoU signed between Kexim and QP on financial cooperation. As a Kexim official explains, although the drop in oil prices is curtailing new hydrocarbons projects coming out of the Middle East for the moment, it was necessary to adopt a strategic approach to oil and gas development, which still represents the key foundation of industry in major Middle Eastern economies.

“In a similar vein, this MoU is meaningful in that it has established an early channel of financing for Korean companies going into the Middle East with a medium- to long-term perspective,” says the official.