BGN Sees ECAs as Matchmakers in Developing Export Finance Ecosystems 

May 30, 2024
BGN Sees ECAs as Matchmakers in Developing Export Finance Ecosystems 

During the past two years, government-backed finance bodies have increasingly turned to international commodity traders to help support their export strategies and efforts to secure supply of vital imports.  

BGN believes that export credit agencies, or ECAs, will continue to play an important role in bringing together traders and banks to facilitate trade in energy and other commodities.  

“Having established ourselves in the ECA market, we maintain a steady interest in looking at new opportunities where government-backed agencies provide complementary sources of finance to traders,” BGN CFO Yannick Luce said on a panel at the TXF Amsterdam 2024 global natural resources & commodities finance conference. “It’s not just the deal terms that we look at. We are interested in whether ECAs can facilitate a useful ‘ecosystem’ around a transaction by introducing traders to local exporters and financial institutions.” 

As a growing, partnership-based commodities trader, BGN assists a number of countries with energy security of supply and the energy transition, as well as enabling the export needs of commodity-producing countries. BGN has an active financing facility with the Abu Dhabi Exports Office (ADEX) and banks in the UAE. The company is also considering other ECA-backed opportunities in the Middle East Gulf, and other regions. 

In addition to providing diversification to a trader’s financing strategy, the ECA’s role as an introducer to local commercial counterparties and banks enhances its value in the market, Yannick told the conference. The ecosystem can work well for both public and private sector actors, he added. 

TXF this year celebrated the 10th anniversary of its flagship Amsterdam event. Delegates from government agencies, central banks and other public institutions mingled with traders and financiers in the Dutch city that has played a key role in the history of commodity trading and is famous for the ‘tulip mania’ of centuries ago. 

With the majority of financing for commodity trading provided directly by banks, ECA finance is expected to account for a small portion of a trader’s overall liquidity portfolio, according to Yannick. 

“It’s part of a general liquidity diversification strategy and, in our case, it is very much an export-focused initiative,” he said, without elaborating on where and when the next deal might take place. 

The conference panel, which also included Oliver Schenkenberg, Group Treasurer of trader Gunvor, James Lowrey of the bank SMBC, and a representative of a European ECA, concluded that government-backed finance for commodity traders is here to stay for at least some years and that new commodity classes are likely to be added to energy, metals and food. 

Panelists agreed that smaller traders might also benefit from ECA finance, provided they can meet the necessary requirements around commodities flows, due diligence and ESG considerations. 

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