Export Credit Guarantees of the
Federal Republic of Germany
Opportunities and development in the current
global crisis

All rights reserved. Copyright © 2008
Euler Hermes Kreditversicherungs-AG and
PricewaterhouseCoopers AG WPG.
Moscow, 21st April 2009
Contents
Role and Function of Export Credit Agencies
(ECAs)
Cover Policy for Russia
Impact of the Global Economic Crisis
page 2
Mandatory Business Germany
The Export Credit Guarantee Scheme in Germany
is handled by
in a consortium with
run on behalf and for the account
of the Federal Republic of
Germany
page 3
ECA - Objective
Cover enables exporters and/or banks to offer their products on
commercially attractive terms
Insurance against the risk of debt losses for commercial and political
reasons
Governmental support of exports into various countries enables
– access to global markets
– business development in riskier, emerging markets
Contributing to German competitiveness
page 4
Key figures I
20
,3
20
,8
19
,9
16
12
,8
10
,3
6,
1
8,
5
10
,0
10
10,0
10
,2
,2
15,0
9,
6
in billion EUR
20,0
,7
25,0
5,0
0,0
31/12/2005
Long Term Export Cover
page 5
31/12/2006
31/12/2007
Short Term Export Cover
31.12.2008
Total Cover
Key figures II
Volume of cover for the top ten countries (m EUR)
2.878
Russia
3.249
2.042
USA
740
1.552
India
643
1.479
1.232
1.357
1.438
1.120
1.019
Turkey
China
South Africa
994
Algeria
211
845
Brazil
664
649
South Korea
375
481
537
Ukraine
0
page 6
2008
2007
500
1.000
1.500
2.000
2.500
3.000
3.500
General criteria for cover in Germany
Eligibility for promotion
Is the transaction particularly deserving of promotion or is it in the
national interest
Justifiability of Risk
Reasonable prospect for the smooth execution of the project
without the occurrence of a claim
Terms of Contract
Terms of payment in accordance with international rules and basic
agreements for export business
Budget – Limitation
No guarantees are available, if the overall limit is utilised or an
indemnification is evident
page 7
Types of export guarantees – extract
Cover facilities
Single export cover/ buyer credit (“tied loan”) cover
Framework credit cover
Revolving buyer credit cover
Project financing
Structured financing including countertrade business
Cover in local currency
New: Cover of payment defaults out of confirmed LC
page 8
Types of export guarantees I
Tied loan cover
German exporter
Disbursement of
buyer credit
Export contract/delivery
Foreign buyer
If necessary: buyer involvement
in payment obligations
Local
contract
Loan contract
German bank
Foreign bank
Repayment
page 9
Types of export guarantees II
Framework credit cover
Targets
–
Financial credits for smaller transactions
–
More flexible and quicker
Criteria for cover
–
Credit volume
up to EUR 10m per single transaction
–
Currency
framework and single contract must be the same
–
International standards e.g. consensus must be considered
page 10
Types of export guarantees III
Revolving buyer credit cover
Contract between a German and a foreign bank to finance transactions
between one German exporter and one foreign importer
Payment terms on short term basis (up to 12 months, in exceptional cases up
to 24 months)
Policy period is one year and will be automatically extended if notice of
termination is not given
Targets
–
Cover of short term credits
–
More flexible and quicker
page 11
Foreign Content
Inclusion of non-German sub deliveries
In general:
Export guarantees are granted to
promote German export goods, but…
… a product receiving a German
certificate of origin is considered as
German.
… foreign content is acceptable in
principle. Local costs and foreign content
can amount to 30% (base rate) of the
contact value without any statements.
Exceeding the base rate is possible under
certain circumstances.
page 12
Foreign Content – Reinsurance I
Background
Main supply and subcontracting deliveries will be covered by one credit insurer
The value of the subcontracting deliveries will be reinsured by the credit
insurer for goods sourced from his country
Resulting in
–
One policyholder
–
One credit insurer
–
One cover
–
One cover scheme
= One stop shop
page 13
Foreign Content – Reinsurance II
German ECA: 21 reinsurance agreements with other ECAs
ASHR´A (Israel)
GIEK (Norway)
Atradius (Netherlands)
KUKE (Poland)
CESCE (Spain)
NEXI (Japan)
COFACE (France)
ODL (Luxemburg)
COSEC (Portugal)
OeKB (Austria)
ECGD (Great Britain)
ONDD (Belgium)
EDC (Canada)
SACE (Italy)
EFIC (Australia)
SERV (Switzerland)
EGAP (Czech Republic)
SID (Slovenia)
EKF (Denmark)
US Ex-Im Bank (U.S.A)
EKN (Sweden)
FINNVERA (Finland)
page 14
Contents
Role and Function of Export Credit Agencies
(ECAs)
Cover Policy for Russia
Impact of the Global Economic Crisis
page 15
Russia – cover policy
Generally open for short-term transactions (examination of
creditworthiness)
Criteria / securities for credit business transactions:
 State guarantee
 Corporate risk
 Additional securities not required in cases of excellent standing of the
buyer
 Bank guarantee
 Generally accepted banks: 15 banks such as VTB, Sberbank,
Vnesheconombank, Gazprombank or Alfa Bank
 Other banks on a case-by-case basis (about 50 banks so far)
 In general involvement of the Russian buyer in the payment obligations
Premium category 3
page 16
Russia – cover volume for recent years
(in million EUR)
3.249
2.878
2.015
1.792
1.420
983
2002
800
2003
2004
short term
page 17
2005
long term
2006
total
2007
2008
German ECA underwriting volume
(long term) for Russia by type of security
23
36
17
46
47
61
68
35
61
37
32
32
63
37
54
29
16
2002
2003
2004
state guarantees
page 18
7
2005
bank securities
0
2006
0
2007
corporate risks
0
2008
Russia – recent experience
 Only very few covered banks have not been able to meet their
obligations so far
 Strong effort by the Russian government to support systemrelevant banks
 Further consolidation of the banking sector is nevertheless to be
expected in 2009
 Russia will remain a major partner in the years to come
page 19
Contents
Role and Function of Export Credit Agencies
(ECAs)
Cover Policy for Russia
Impact of the Global Economic Crisis
page 20
Current situation
 Liquidity situation for many banks worldwide still an issue
Interbank market has still not recovered yet (e.g. syndicated loans)
Refinancing is harder to assure
 Danger of cancellation of contracts or deferment of projects and
deliveries
 Increase in NPLs to be expected – pressure on profitability and equity
of banks
 Export and banking community is discussing about additional
support, especially in terms of funding with governments.
page 21
Challenge for ECAs
The major challenge for ECAs in a world characterised by a financial and
increasingly economic crisis is to find a balance between…
... a prudent and responsible
…and the objective to promote the
administration of the German
economy, in our case especially
government‘s and taxpayers‘
German exports
money
grant cover after a thorough
accept risks despite the global
evaluation of the risks involved
economic turbulences
page 22
Impact of Credit Crunch on Hermes Cover
Two opposing developments:
Increasing demand for cover
» risk reduction
» crisis of confidence leading to request for cover for banks and
corporates that used to be ‘above suspicion’
» long-term, reliable financing
» new / extended possibilities for cover underway
Worldwide economic slowdown
» Negative impact on trade with CIS-countries
» Cancellation or postponement of projects
page 23
ECA – extended and new types of cover
 ECA extending the umbrella – rather than closing it
 Extended and new types of cover underway
(limited until December 2010)
- Cover for confirmation of letters of credit
- Extension of counter guarantees: up to EUR 300 Mio.
- Changes in percentage of uninsured portion
- Assignment of receivables facilitated
page 24
Policies regarding the analyses of banks I
 Apart from generally accepted banks, still case by case analysis
 No general rejection of any CIS country
 Detailed information regarding ownership structure
 In-depth insight into the respective bank‘s risk management
page 25
Policy regarding analysis of banks II
 Financial Statements (preferentially according to IFRS) for
3rd Quarter 2008
 Securities portfolio
 Detailed overview of liquidity situation
 Exposure to currency risks
Matching Maturities
Proportion of ‘Loans to customers’ in foreign currencies and assessment of
customers’ ability to pay back such loans
 Detailed overview of ‘Loans to Individuals‘
 Exposure to real estate sector
 Impairment provisions
page 26
Conclusion
Due to the current challenges and difficulties ECA-covered
financing has gained tremendous importance.
ECAs will be a reliable partner and will give support to maintain
and where necessary restore trust in global financial systems and
trade relationships.
Russia and CIS will remain major partners also in the years to
come.
page 27
Thank you for your attention!
Further information is provided under:
www.agaportal.de
www.exportkreditgarantien.de
E-mail: info@exportkreditgarantien.de
Thomas Wohlwill
Underwriting and Risk Management
Head of Division
PricewaterhouseCoopers AG WPG
Telefon:+49 (0)40 / 8834 – 9512
E-Mail: thomas.wohlwill@exportkreditgarantien.de
Karlheinz Bieniek
Underwriting and Risk Management
Head of Division
Euler Hermes Kreditversicherungs AG
Telefon:+49 (0)40 / 8834 – 9002
E-Mail: karlheinz.bieniek@exportkreditgarantien.de
page 28
Susanne Heinssen
Underwriting
Head of Department
PricewaterhouseCoopers AG WPG
Telefon:+49 (0)40 / 8834 – 9531
E-Mail: susanne.heinssen@exportkreditgarantien.de
Jens Heitmann
Financial Sector & Key Account Risks,
Head of Department
PricewaterhouseCoopers AG WPG
Telefon:+49 (0)40 / 8834 – 9588
E-Mail: jens.heitmann@exportkreditgarantien.de
Thomas Baum,
Senior Manager
Corporate Finance
PricewaterhouseCoopers
Telefon:+7 (495) 223 5112
E-Mail: t.baum@ru.pwc.com
page 29