Bankrolling Key Overseas Projects

Exim Bank to finance various overseas projects involving domestic firms such as mining and construction work

The Export-Import Bank of Korea announced that it will provide project financing worth $800 million for the ERC Oil Refinery Project. Egypt’s Egyptian Refinancing Co. (ERC) Oil Refinery Project is a $3.7 billion project under the control of Egyptian General Petroleum Company (EGPC) and Arab Resources Company (ARC) to construct and operate an oil refinery capable of processing over 500 tons a year of highly refined products such as diesel and petroleum. Egypt’s old and worn out oil refining facilities have caused Egypt to suffer supply shortages of highly-refined petroleum products as well as severe air pollution.
The government of Egypt views this project as a solution to such problems and has actively pursued private funding for this national project.
The Eximbank of Korea has expressed active support for the project from the beginning and, despite the sub-prime mortgage crisis, has maintained a leading role in financial negotiations to ensure that GS Construction won the $2.2 billion contract for the project. Officials from the Eximbank stated, “Large-scale projects are anticipated in Africa and this is expected to begin a ‘second Middle East boom.’ To ensure that plant construction serves as the next driver of growth for the Korean economy, we will provide optimal financial services and support Korean companies in their efforts to secure contracts for these projects.” On July 26, Korea Eximbank announced support of $250 million for the acquisition and development of an Australian iron mine by POSCO.
POSCO hopes to purchase a 24.5 percent stake in a mine located in the Pilbara in Western Australia to secure development and long-term purchase rights for the mine.
The bank will provide $250 million in loans, which is 42 percent of the $600 million needed by POSCO for the project.
AMCI of the United States and Aquila of Australia each hold a 50 percent share of the iron mine with estimated deposits of approximately 742 million tons. POSCO acquired shares in the mine from AMCI in July. This project will secure the stable supply of 9.8 million tons of iron per year for 25 years beginning in 2014. It is expected that Korea’s self-development rate for iron will increase from 14.2 percent to 37.5 percent.
In 2009, Korea was the third largest iron importing country after China and Japan.
An official from Eximbank stated, “To ensure the stable procurement of key resources, we will actively support the investment and M&A efforts of Korean companies in foreign mines.”
The financial resources of the Economic Development Cooperation Fund (EDCF) consist of contributions and borrowings from the government as well as its own operational profits. As of Dec. 31, 2008, the EDCF had raised a total of 2.306 trillion won through these resources for a cumulative loan commitment of 4.761 trillion won, while its disbursements from those funds stood at 2.010 trillion won.
The EDCF offers two types of loans: loans to foreign governments, government agencies and other eligible organizations to support the economic development of developing countries; and loans to Korean firms for overseas investment projects. Thus far, most of the loans have been extended to foreign governments for their development projects.
The highest policy-making authority of the EDCF is the Fund Management Council, which is composed of 12 members, most of whom are ministerial-level government officials. The direction of EDCF operations and the assumption of principal policy-making responsibilities rest with the Ministry of Strategy and Finance (MOSF), which also coordinates policy matters with other relevant ministries.
Entrusted by the MOSF, the Eximbank is responsible for the administrative operation of the EDCF, including appraisal of projects, execution of the loan agreements and loan disbursements. Other duties include principal/interest payments and collection, project supervision and evaluation of post-project operations.
The Eximbank is an official export credit agency providing comprehensive export credit and guarantee programs to support Korean enterprises in conducting overseas business. Since its establishment in 1976, the bank has actively supported Korea’s export-led economy and facilitated economic cooperation with foreign countries.
Eximbank’s primary services include export loans, trade finance and guarantee programs structured to meet the needs of clients in a direct effort to both complement and strengthen the clients’ competitiveness in global markets. The bank also provides overseas investment credit, natural resources development credit, import credit and information services related to business opportunities abroad.
Furthermore, the bank is responsible for the operation of two government funds: the EDCF, a Korean Official Development Assistance program, and the Inter-Korean Cooperation Fund (IKCF), an economic cooperation program with North Korea. The bank strives to become “Your Partner for Global Business,” as reflected in its vision, by continuously fostering innovation and development throughout its operations.” nw

Chairman Kim Dong-soo of Korea Export-Import Bank, left, shakes hands with President Chi Seong-ha in charge of the Commercial Part of Samsung Corp. after signing an agreement for cooperation in supporting Korean-type hidden champions in Korea between the two companies.