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.
A bank can apply for the credit guarantee to secure access to raw materials if the loan is granted in connection with a long-term offtake contract (for example for the purchase of concentrates for the basic metals industry). The offtake contract must provide a reliable source of raw material needed for a longer time-period.
The raw material supplier needs to be situated abroad and a condition for the issuance of a credit guarantee is that there is a significant Swedish public interest or that the activity is otherwise deemed to be of significant benefit to economic development in Sweden. The loan period should be related to the project’s commercial nature and to the offtake contract.
The risk must be justifiable and internationally accepted standards for the project’s environmental and social impact must be met.
Which raw materials can be considered?
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.
How do you define raw material?
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.
What would constitute Swedish interest for eligibility?
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.
Who could be an eligible borrower?
The borrower should be a raw materials producer outside of Sweden who enters into an off-take agreement for the delivery of raw materials with a buyer in Sweden.
Who could be an eligible importer?
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.
What are the raw material importer's obligations?
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 off-take agreement.
What will be the maximum allowed cover?
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.
What would be the maximum tenor?
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 off-take agreement ends.
What is the maximum allowed amount that could be covered?
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.
Are there any requirements regarding the off-take agreement?
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 agreement should be unconditional, and the seller should not have the right to terminate it during the agreed term.
What happens if the off-take agreement gets terminated for some reason?
The principle is that the loan should then be accelerated/prepaid. The mechanisms will be decided case by case in each transaction.
Who can apply?
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.
Do you have any country restrictions?
The same country restrictions as our export credit guarantees will be applied.Read more about countries
What sustainability criteria 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.Read more about sustainability
Can oil and gas be considered?
No fossil fuels including coal will be considered under the raw materials guarantee scheme.
Can trading houses be considered?
Trading houses will not be considered at this stage.
Is working capital acceptable?
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.
Web page last updated 4 Jul 2023