UK export credit agency (ECA) UK Export Finance has increased capacity to support infrastructure projects in the Middle East.

The government department provides guarantees with the aim of supporting UK-linked companies looking to win contracts for goods or services overseas.

The agency provided its largest guarantee to a Middle East project to date with a $1bn exposure to the $12.5bn Sadara petrochemicals project in Saudi Arabia, signed in June last year.

“We have a large capacity to support the Middle East region. We were the second-largest export credit agency after US Exim to support the Sadara project,” said Ali Sherwani, head of business development at UK Export Finance.

As well as supporting large-scale Saudi Arabian projects, UK Export Finance is also eyeing opportunities to support UK companies’ interests in Dubai, following the emirate’s successful bid to host Expo 2020 and the anticipated hike in infrastructure spending.

“We have already indicated some capacity for that development. If UK companies were to win contracts for goods and services, we can provide financing,” Sherwani told delegates at MEED’s Project and Infrastructure Finance conference in Bahrain.

Sherwani added that the government body was widening the methods it can use to support UK interests.

He said providing guarantees for capital market issuances is a growing trend. Traditionally, ECAs usually provide cover for bank loans, but increasingly have been guaranteeing bonds as well.

Currently, UK Export Finance has only provided cover for bonds issued for aircraft deals, but speaking on the sidelines of the conference, Sherwani said the agency is keen to use the bond guarantees to support a wider range of deals, including large infrastructure projects.

He also said the agency is seeking EU approval to be allowed to provide cover for bonds issued during the construction phase of projects. EU approval is expected in the coming months.

In this way, the agency can help banks exit their loan obligations earlier. Rather than committing to tenors of 15-18 years, the banks could refinance their commitments in the capital markets after just two to three years, even before the project is completed.

This option could reduce financing costs, as the banks would not be required to provide as much expensive long-term financing.