How sovereign trends are transforming the ECA market

In light of growing geopolitical tensions, a changing trade landscape, and decreased globalisation, the role of Export Credit Agencies (ECAs) has been steadily evolving. Anne-Cécile Delas, Global Head of Global Trade, and Arnaud Sarret, Head of Structured Export Solutions, Natixis CIB, explore how sovereign trends are influencing this shift.

In recent years, the trade ecosystem has undergone significant upheaval. From the COVID-19 pandemic to worsening geopolitical conflict, energy and commodity supplies have come under significant strain, and deglobalisation has provoked a move away from interdependence in trade. As the energy transition gathers pace and security of supply becomes a growing concern, governments have increasingly turned to ECAs to provide additional support.  

While historically, ECAs have supported domestic companies with export operations, in recent times, their role has diversified to enable them to provide vital support to domestic economies as well. This has seen ECAs play a far greater role in the import space – supporting businesses through both financing and the procurement of long-term contracts.

This trend is perhaps most noticeable in the commodities sector. The international energy crisis that followed Russia’s 2022 invasion of Ukraine created a shock for European governments prompting them to shore up supply in light of strict sanctions. As international commerce faltered, ECAs diversified their services in order to help sovereigns secure long-term supply agreements with producers and traders and, in turn, support trade flows.

And it is clear this shift has now become widespread. In its most recent Export Finance Deals of the Year Awards, TXF handed Trafigura the accolade for “Market Innovation Deal of the Year”. The commodity trading company partnered with German ECA Euler Hermes to deliver critical minerals and gas into Germany, highlighting ECAs’ growing commitment to supporting national interests.

As well as impacting trade flows, increasing global tensions have also prompted governments to place a stronger focus on domestic manufacturing and production. As the energy transition gathers pace, governments are stepping up activity in order to meet targets – and ECAs are playing an important role in national industrial investment to support this growth.

As part of the wider BPCE network, at Natixis CIB we have seen first-hand how important the role of ECAs is when it comes to supporting the relocation or establishment of green supply chains.

Notably, we recently participated in a €873m financing to support the construction of global electric vehicle (EV) developer and manufacturer AESC’s new nine GWh battery manufacturing plant. The plant is among the first French EV battery gigafactories and supports the EU’s ambitions for clean mobility. Among other participants in the transaction, the project was supported by Bpifrance as part of its “Garantie des Projets Stratégiques” scheme – marking just one of a growing number of examples of collaborations between ECAs and commercial banks for energy transition projects.

Earlier this year, Bpifrance also guaranteed €51m in bank financing to support domestic start-up Verkor’s EV battery innovation centre in Grenoble.

And, as demand for metals such as lithium, cobalt, nickel – which are vital to progressing the energy transition – continues to build as highlighted by the EU Critical Raw Materials Act, ECAs will play an increasingly important role in helping sovereigns meet sustainability targets.

Elsewhere, new ECAs are being established to bolster trade efforts and support economic growth. Notably, in the Gulf Cooperation Council (GCC), ECAs have been set up by sovereigns to support the diversification of the economy away from oil and gas, and to support local investment in industrial sectors.

Etihad Credit Insurance (ECI), for instance, was established in 2018 to support the UAE’s transition to a non-oil-based economy by making exports of goods and services more globally competitive, and to encourage local businesses to access emerging markets.

Natixis CIB partnered with the export credit agency for the financing of Uzbekistan’s first wind power plant – Zarafshan – acting as ECI lender and ECI facility joint coordinator bank, among other roles. The 500-megawatt wind farm is set to be the largest wind plant in central Asia, providing almost 500,000 homes with sustainable and reliable energy. The transaction demonstrates ECI’s commitment to climate neutrality in line with the UAE’s goal to reach net-zero by 2050.  It also illustrates Natixis CIB’s support to energy transition and our capability to innovate and open new markets (non-recourse long term ECI financing), to the benefit of our clients.

Looking ahead, ECAs are set to continue to play a more diversified role in trade and, importantly, in supporting the transition to clean energy by supporting domestic businesses.

As a key player both in the commodity and energy market and in the ECA finance market enjoying a strong relationship with all major ECAs, Natixis CIB has been at the forefront of this shift. More than ever, we remain committed to supporting sovereigns and industrial groups to secure long term ECA covered long term financings while supporting wider sustainability goals.