Credit Guarantee to secure access to raw materials

The credit guarantee to secure access to raw materials is a credit guarantee in favour of banks and covers non-payment by the supplier under the credit agreement.

Unprocessed or partly processed raw materials, typically metals and minerals, used as input by Swedish manufacturers and as such of significant interest to the Swedish economy and society at large can be considered. There is no list of specific raw materials, but the Swedish buyer must describe why the raw material is of importance to Sweden and why it is essential to have an off-take agreement.

Raw material in this context is defined as unprocessed or partially processed goods for further industrial processing that are used as input in the manufacturing of other goods.

If an industrial operation requires the raw material for its manufacturing process in Sweden it will likely be considered as Swedish interest. EKN will require the importer to describe the need for importing the raw material, especially concerning employment and the maintenance of processing capacity. EKN will assess the eligibility of the Swedish interest case by case.

The borrower should be a raw materials producer outside of Sweden who enters into an off-take contract for the delivery of raw materials with a buyer in Sweden.

The importer of raw material shall be able to meet the obligations arising from the agreement on the supply of raw material. The imported raw material should be processed in Sweden.

The raw material importer is responsible for ensuring that the agreement on the supply of raw material is valid and binding on the parties, and that the necessary permits for carrying out the agreement are in force. The importer will have certain information requirements towards EKN in respect of the Offtake agreement.

The maximum cover for non-European debtors will be 90% and for European debtors 80%. The coverage will be based on the assessment of commercial and political risks related to the loan.

The credit period should correspond to the commercial nature of the project and be largely in line with the tenor of the offtake agreement. The tenor should normally also be aligned with the OECD rules for maximum tenors. The final repayment of the loan should not be longer than then when the offtake agreement ends.

In principle the maximum allowed amount will be calculated as 25% of the value of the off-take agreement. However, the maximum allowed amount might also be limited by EKN’s internal credit assessment.

The premium charged will reflect the risk and structure of the specific transaction. The methodology may differ according to market, but the floor will be the pricing for normal export credits.

The off-take contract must provide a reliable source of raw material needed for a longer time-period and the Swedish buyer must describe why it is of importance to Sweden.

The off-take contract should be unconditional, and the seller should not have the right to terminate it during the agreed term.

The principle is that the loan should then be accelerated/prepaid. The mechanisms will be decided case by case in each transaction.

Swedish and international banks are eligible to apply for cover.

Initial enquiries can be looked at prior to a formal application providing that a Swedish importer has confirmed interest and that there potentially will be an offtake contract.

The importer of raw material shall provide EKN with an Importer declaration including an account of the need for importing the raw material, especially concerning employment and the maintenance of processing capacity, and with the principal terms of the agreement of raw material supply. The lender, or some other party to the guarantee arrangement, shall provide EKN with an account of the principal terms of the credit to be guaranteed.

The same country restrictions as our export credit guarantees will be applied.

Internationally accepted standards for the project’s environmental and social impact must be met. The same sustainability requirements as our export credit guarantees will be applied.

No fossil fuels including coal will be considered under the raw materials guarantee scheme.

Trading houses will not be considered at this stage.

Normally investments in the construction or extension of specific raw material projects will be considered. However, cases in which the funding is not linked to a specific investment might be eligible if they are connected to an off-take contract for the delivery of raw materials to a Swedish buyer.

Prior to first disbursement the offtake agreement must be final.

There will be some validations that the project is moving along that will be decided case by case, such as Cost to complete certificate, Lenders technical advisors approval. Normal project finance procedures will be followed.