Ex-Im Bank Backs $2 Billion in Funds for U.S. Products, Services to South African Power Sector

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--The $2 billion funding package to support U.S. exports to South Africa's energy sector over the next eight years was launched by U.S. Secretary of State Hillary Clinton on a visit to the country. Ex-Im Bank Chairman and President Fred Hochberg emphasized in Johannesburg that there was no expiry date set on the arrangement. The funding had been approved in line with the identification of South Africa as one of the bank's top nine priority markets among the 180 countries in which the bank operates.

A declaration of intent was signed by Hochberg and South Africa's state-owned Industrial Development Corporation (IDC), which is already funding a range of renewable energy projects. The agreement would help to ensure that Ex-Im Bank continues to provide financing to South African buyers that want to buy high-quality U.S. goods and services, Hochberg said.

The major part of the loan finance will go to clean energy projects, but the capital was also available to conventional energy projects, as well as transmission and smart grid related developments. South Africa is currently targeting 3,725 megawatts (MW) of new renewable energy capacity through 2016, and the state power utility is progressing a $37.5 billion program to add 11,719 MW and 6,596 kilometers of transmission lines by 2018.

For related information, see June 11, 2012, article - South Africa's 3,725 Megawatt Renewables Roll-Out Could Bring More than $12 Billion in Investments.

Ex-Im Bank provides a variety of financing mechanisms, including working capital guarantees, export credit insurance and financing to foreign buyers. The bank is a self-funding government agency and is limited to supporting U.S. products and services deployed in such projects and funds would only be disbursed in instances where firm power offtake agreements were in place.

Ex-Im Bank already extended an $805.6 million direct loan to Eskom in 2011 for the purchase of engineering and construction management services from Black & Veatch for the Kusile thermal mega power plant. It has also approved a loan guarantee of more than $100 million toward the sale of GE Transportation's (NYSE:GE) (Fairfield, Connecticut) locomotive to state rail utility Transnet.

In the first three quarters of the 2012 financial year, the bank approved a record $1.5 billion in financing to support U.S. exports to Sub-Saharan Africa. This was above the $1.4 billion for the region in the full 2011 year. The 2012 funding included $37.2 million in loan guarantee to support the export of U.S. road construction equipment and related services by Hoffman International Incorporated to the Republic of Cameroon. The financing will support the purchase of 150 new and used machines produced by manufacturers, including Mack Trucks Incorporated (Greensboro, North Carolina), Terex Corporation (NYSE:TEX) (Westport, Connecticut), Caterpillar Incorporated (NYSE:CAT) (Peoria, Illinois) and Grove US LLC (Shady Grove, Pennsylvania).

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