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Eximbank teams with 7 banks to offer joint project financing

State-funded bank leads $1.5b LNG project in U.S.

The Export-Import Bank of Korea is vitalizing its support in financing overseas projects such as energy plants, highways, railroads, resources and other segments of construction to help Korean companies win deals.

In particular, the state-controlled bank recently signed a pact with another state-funded bank and six commercial banks on providing Korean companies with loans in the form of project financing in the overseas markets.

The seven banks are the state-run Industrial Bank of Korea, KB Kookmin Bank, Woori Bank, Shinhan Bank, Hana Bank, Korea Exchange Bank and NongHyup Bank. In addition, the Korea Trade Insurance Corp. will also join the move as a close partner of Eximbank.
Executives of the Export-Import Bank of Korea pose with employees from commercial banks to celebrate their joint offering of project financing in overseas markets at the state-run Eximbank’s headquarters in Yeouido, Seoul, last week. (Eximbank)
Executives of the Export-Import Bank of Korea pose with employees from commercial banks to celebrate their joint offering of project financing in overseas markets at the state-run Eximbank’s headquarters in Yeouido, Seoul, last week. (Eximbank)

The enhanced project financing led by Eximbank comes as Korea faces tough competition from Japan and China in the infrastructure sector.

“Our project financing is to back Korean companies, not to lose bids against their counterparts abroad,” said an Eximbank executive.

Japan has emerged as a prominent competitor as its companies seek growth overseas on a weak yen amid the economic slowdown at home.

Eximbank is considering providing project financing worth 21 trillion won ($19 billion) this year, up from 19 trillion won last year.

In collaboration with the seven banks and the state-run Korea Trade Insurance Corp., Eximbank said it would offer $1.5 billion (1.65 trillion won) in loans to the “Sabine Pass” liquefied natural gas project in the U.S.

The LNG project refers to the LNG-related facility expansion at Sabine Pass in the state of Louisiana, which will allow the U.S. to export LNG for the first time in its history.

The U.S. government has stepped up the lifting of a ban on LNG exports in line with the rising supply of natural gas, caused by the recent shale gas boom.

The project, initiated by U.S.-based Cheniere Energy, had sought international loans to finance $8.8 billion of the total $12.5 billion required to build four liquefaction trains at the project site.

An Eximbank spokesman said the partial financing of the Sabine Pass LNG project was a precondition of a contract signed between the Korea Gas Corp. and Cheniere Energy last year.

“With the loan offering by the two state-run banks, the Korea Gas Corp. will be able to import approximately 3.5 million tons of LNG per year from the Sabine Pass Liquefaction Train 3 for 20 years starting from 2017 as signed.”

He also said the joint project financing is also meaningful in that it will facilitate cooperation and exchanges among the nation’s state-run banks.

Aside from Eximbank and the Korea Trade Insurance Corp., Korea Development Bank and the Korea Finance Corp. had been involved in financing large-scale engineering, procurement and construction projects independently until they launched a committee meeting to discuss joint project financing.

Over the past year, representatives from the four state-run banks have held a committee meeting on a quarterly basis to discuss how to finance the ‘Sabine Pass’ liquefied natural gas project.

“The committee is open to local private banks in a bid to offer local banks a chance to raise project financing capacity. Local banks have been less experienced in financing overseas EPC projects compared with foreign financial firms,” an Eximbank director general said.

He said that Eximbank will not only participate as a financial provider, but will invest in equities of infrastructure projects with private companies to further guarantee and secure deals.

Its financial advisory services will expand this year for Korean companies seeking to secure several infrastructure deals.

By Kim Yon-se (kys@heraldcorp.com)
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