The EX-IM Bank’s role to financially level the playing field for US manufacturers selling abroad is in some corners a controversial activity. But without the EX-IM Bank’s financial muscle, how would capital intensive US manufacturing fair against competition from the other sixty-countries that have EX-IM style financing for their manufacturers? This year, Congress debates the fate of the Export-Import Bank of the United States, one of those government agencies that likes to keep its head down and job-creating statistics up. The Ex-Im Bank lends money, guarantees loans and offers credit insurance for American-made goods sold abroad. It likes to boast that it’s been responsible for supporting more than one million workers in the past five years. The institution, however, runs afoul of those who believe the government shouldn’t manage banks, underwrite loans or lessen costs for big American manufacturers in what critics charge is a kind of corporate welfare program. Some American companies such as Delta Airlines also argue that these low-interest loans can actually give foreign competitors an advantage. (Delta sued the bank in 2011 over $3.4 billion in loan guarantees for Air India, which is buying 30 Boeing aircraft. So far, Delta has failed to convince the courts that it is suffering as a result of the loan.) As lines are drawn, public relations campaigns mounted and various politicians, lobbyists and pressure groups duke it out, energy and power will be an important focus. Bank supporters believe this is one large sector in which bank financing translates into added business. “This kind of heavy capital equipment often costs many millions of dollars and customers want to spread out repayment, says Lorne Thompson, COO of the think tank Lexington Institute, who has researched the bank and supports its mandate. In many emerging markets, customers “may not be able to tap commercial banks, where they face a combination of a lack of resources and a lack of will.” The US Ex-Im Bank isn’t alone in what it offers its manufacturers. Some 60-countries have similar export-credit institutions, Thompson says. A few of those, notably China and Brazil, layer on concessionary financing that make competition that much more difficult. “They’re not playing on a level field,” says Thompson. When combined, power and energy-related exports form the bank’s second largest sector, behind aviation and its flight leader Boeing, which hog about 45% of the bank’s total loan exposure. For the fiscal year ended last September, the bank authorized a total of $27.3 billion in loans. EX-IM Power Play In fiscal year 2013, the bank recorded a total exposure of $113.8 billion, of which $81.6 billion are disbursed and outstanding. About 72% of the total portfolio represents guarantees, not actual loans. Some $24 billion represented power and energy-related lending. The majority of these loans related to refineries, petrochemical plants and LNG production. The biggest last year was a $1.8 billion loan to Bechtel Power Corp., which is constructing mammoth LNG plants in Queensland, Australia. Power project equipment per se totaled only about $7.4 billion. Last year’s totals represented a $900 million decline over the previous year. In fiscal 2012, the bank approved a $2 billion loan for construction of a nuclear power plant in United Arab Emirates, which may have distorted statistics. The bank has professed a shift toward renewables—solar and wind—in terms of both policy preference and demand. In mid-December, the Ex-Im Bank bolstered that effort, when it announced that for environmental considerations, it would no longer underwrite most coal-fired plants. “Power has always been pretty strong for the Bank,” says Bulent Osma, managing director of New York-based project advisory services P50 Capital LLC, which specializes in power-related infrastructure projects and has done project due diligence for Ex-Im Bank. “But renewables have picked up a lot over the last 3 ½ years.” That category is also of special interest for American shipping interests (see related story on the right). Whether wind farms or gas turbines, local banks usually aren’t interested in providing loans. Nor are most private sector multinational financial institutions operating in many emerging markets. Political instability, business risks, even military concerns all conspire to make private-sector loans for infrastructure hugely difficult. “In many of these countries, commercial bank appetite for these types of projects is either non-existent or very limited,” says Osma. The Philippines, for example, suffers chronic power shortages. Reliable electricity in many parts of the country remains a dream and the deadly typhoon that last year struck Leyte, in the central part of the Philippines, only made matters that much more dire. Lack of adequate financing has held growth in check for decades. Late last month (note: March) the country’s Department of Energy signed a memorandum of understanding with the Ex-Im Bank for $1 billion in loans targeting both renewable energy and LNG. Patience Key to Success It may, however, take years before this kind of agreement gets translated into actual projects. “Patience is key to success,” says Rick Angiuoni, the bank’s regional director for Africa, in an email. Washington has trumpeted efforts in Sub-Saharan Africa as well. Two years back, South Africa signed an MOU with the bank, which pledged up to $2-billion in financing for energy-related exports and technology, with an emphasis on clean tech. Last year, President Obama announced an ambitious $7 billion power-related assistance to Africa. The Ex-Im Bank is tasked with making available up to $5-billion in loans and guarantees. “The amounts of financing needed are massive and require the support of export-credit agencies such as Ex-Im Bank,” says Angiuoni. “Reforms across the continent are giving impetus to more investments in the sector, and US companies are increasingly engaged.” Angiuoni points to significant deposits of onshore and offshore gas in Africa. Africa’s energy future is largely tied to gas-fueled power plants.” Available loans may not be enough, say critics. Benjamin Leo, an Africa analyst at Center for Global Development, writes that the bank’s track record in African power is spotty at best. He logged just three power transactions in 12-years, one in South Africa and two small projects in Ghana. Because of credit risks, there’s a seven-year maximum repayment for Ex-Im loans in about half the countries on the continent, Leo says. By contrast the multilateral agency OPIC offers financing up to 15-years. Angiuoni responds that long-term financing is available in the countries with the most potential for power projects. That includes Angola, Mozambique, Nigeria and Tanzania, in addition to South Africa and Ghana. When it comes to renewable energy, the Ex-Im Bank claims success in Latin America. “For Ex-Im Bank participation, it’s been an important region,” says Osma, who believes demand in many Latin American countries for renewables will continue to increase. “Financing can make a critical difference,” says Craig O’Connor, the bank’s office of renewable energy and environmental exports director. He cites 18-year terms for renewable projects as “competitive” with other lenders. Late last year, the bank lent a total of $162 million to three wind farm projects in Latin America, one each in Costa Rica, Honduras and Uruguay. The wind turbines were manufactured by a Pennsylvania-based subsidiary of the Spanish company Gamesa. (Under lending guidelines, manufacturing must be done in the US; ownership is neutral.) O’Connor terms the bank’s financing role “advantageous” in Gamesa’s success in winning the contracts. Can the Ex-Im Bank actually tip the scales? Cutting the bank’s mandate “would have a chilling effect on activities,” says Thompson. However, he adds that even with Ex-Im Bank assistance, American solar or wind power manufacturers may be fighting a losing battle to low-cost countries. “Without government protection such as outright subsidies, American or European producers will find it difficult to compete with China.”