moscow, april 21, 2010

All rights reserved. Copyright © 2008 Euler Hermes Kreditversicherungs-AG and PricewaterhouseCoopers AG WPG.

Opportunities and development in the current global crisis

Ute Kochlowski-Kadjaia, Euler Hermes Russia

Moscow, April 21, 2010

Contents

Role and Function of Export Credit Agencies (ECAs)

Crisis Response – Consequences for ECAs

Cover Policy for Russia

Conclusion

Mandatary business

Federal Export Credit Guarantees

By order and for account of the Federal Republic of Germany

as leading partner

cooperating as partners to a consortium

Interministerial Committee for Export Guarantees (IMA)

IMA

AAFederal Foreign OfficeBMWi

Federal Ministry of Economics and

Technology(in charge)

BMFFederal Ministry

of Finance

Experts- KfW IPEX-Bank- AKA Ausfuhrkredit-Gesellschaft- Representatives of export and banking

ConsortiumEuler Hermes

PricewaterhouseCoopers

BMZFederal Ministry for

Economic Cooperation and

Development

Definition Export Credit Guarantees

Insurance against the political / commercial risks arising abroad involved in export business (or export financing) transacted by an exporter domiciled in Germany provided by the Federal Republic of Germany

It requires the payment of a premium in accordance with the risk involved

and an uninsured portion to be borne by the policy holder

Requirements for Export Credit Guarantees

Business that qualifies for official support

– Export transactions (supply, works/services and financing contracts) of a German exporter with goods of mainly German origin involving non-marketable risks abroad

Criteria for the granting of cover are

– that the transaction is eligible for support

– that the risk is justifiable

– that the terms of the contract are in accordance with common practice

– that the provisions of the federal budget law are observed

NEWLY COVERED BUSINESS

15.213.2

10.313.012.2

7.2

7.5

6.7

7.67.6

2005 2006 2007 2008 2009

Wholeturnover/ Rev. policies

Specific policies

in Euro billions

20.6

17.019.8

22.420.7

TOP MARKETS FOR NEW GUARANTEES

165

12

210

845

649

447

678

703

716

971

1,552

1,357

1,479

2,878

2,042

1,353

1,363

1,991

2,066

2,087

10. Israel

9. Romania

8. Dubai

7. India

6. Brazil

5. China

4. Turkey

3. Russia

2. United States

1. South Korea

2009

2008

in Euro millions

Total: 15,156 EUR millions

in Euro millions and in %

BREAKDOWN OF SPECIFIC POLICIES BY TYPE OF SECTORS

51%

20%

12%

6%

4%3% 2% 1%

Infrastructure: 7,659 (51%)

Processing industry: 3,046 (20%)

Energy: 1,852 (12%)

Paper, timber, leather and textileindustry: 943 (6%)Services: 611 (4%)

Mining: 503 (3%)

Agriculture and food processingindustry: 338 (2%)

Environmental technology: 149 (1%)

Oil production and gas gathering: 32(0.2%)

Chemical industry: 22 (0.1%)

thereof:

aircraft: 21%

ships: 19%

thereof:

metal industry: 16%

Types of export guarantees – extract

Cover facilities

Single export cover/tied loan cover (pre and post shipment) Framework credit cover Revolving buyer credit cover Project financing Structured financing including countertrade business Cover in local currency Cover against payment defaults for confirmed L/C Whole turnover cover

Tied loan cover

Export contract/deliveryForeign buyerGerman exporter

German bankLoan contract

Repayment

Disbursement of buyer credit

Foreign bank

If necessary: buyer involvement in payment obligations

Local contract

Types of export guarantees I

Framework credit cover

Targets

– Financial credits for smaller transactions

– More flexible and quicker

Criteria for cover

– Credit volumeup to EUR 10m per single transaction

– Currencyframework and single contract must be the same

– International standards e.g. consensus must be considered

Types of export guarantees II

Revolving buyer credit cover

Contract between a German and a foreign bank to finance transactions between one German exporter and one foreign importer

Payment terms on short term basis (up to 12 months, in exceptional cases up to 24 months)

Policy period is one year and will be automatically extended if notice of termination is not given

Targets

– Cover of short term credits

– More flexible and quicker

Types of export guarantees III

In general: Export guarantees are granted to promote German export goods, but…

… a product receiving a German certificate of origin is considered as German.

… foreign content is acceptable in principle. Local costs and foreign content can amount to 30% (base rate) of the contact value without any statements. Exceeding the base rate is possible under certain circumstances.

Foreign ContentInclusion of non-German sub deliveries

Background Main supply and subcontracting deliveries will be covered by one credit insurer The value of the subcontracting deliveries will be reinsured by the credit insurer

for goods sourced from his country Resulting in

– One policyholder

– One credit insurer

– One cover

– One cover scheme

= One stop shop

Foreign Content – Reinsurance I

ASHR´A (Israel) Atradius (Netherlands) CESCE (Spain) COFACE (France) COSEC (Portugal) ECGD (Great Britain) EDC (Canada) EFIC (Australia) EGAP (Czech Republic) EKF (Denmark) EKN (Sweden) FINNVERA (Finland)

GIEK (Norway) KUKE (Poland) NEXI (Japan) ODL (Luxemburg) OeKB (Austria) ONDD (Belgium) SACE (Italy) SERV (Switzerland) SID (Slovenia) US Ex-Im Bank (U.S.A)

German ECA: 21 reinsurance agreements with other ECAs

Foreign Content – Reinsurance II

Contents




Conclusion

Challenge for ECAs

The major challenge for ECAs in a world characterised by a financial and increasingly economic crisis is to find a balance

between…

... a prudent and responsibleadministration of the Germangovernment‘s and taxpayer‘smoney

►grant cover after a thoroughevaluation of the risks involved

…and the objective of promotingthe economy, in our caseespecially German exports

►accept risks despite the global economic turbulences

Crisis response – Consequences on ECAs I

During the crisis ECAs were forced to act counter-cyclically and

flexibly.

Substantial increase in demand for ECA cover in combination with ECA related government action against the crisis

ECAs are approached by new customers and are getting involved in new industry sectors and/or buyer countries such as EU and other OECD countries

Cover is sought for risks that used to be perceived as save

Crisis response – Consequences on ECAs II

Governments response with new/amended insurance products and cover policies in order to facilitate export finance

(Re-)Entry of ECAs in the field of marketable risks (short term cover for EU and OECD countries) due to restrictions of the private credit insurance market

ECAs are extending their umbrella – rather than closing it

Crisis response –New and amended products I

German Government launched a package of new cover

regulations embedded in the Economic Stimulus Plan II.

Supplier Credit Guarantee

– Increased percentage of cover up to 95 % to reduce refinancing costs

Credit Confirmation Risk Cover– Newly established instrument to stabilize L/C business

– Banks can insure themselves against the risks involved in the confirmation of a letter of credit that has been issued to finance an export transaction by a German company

Crisis response –New and amended products II

German Government launched a package of new cover

regulations embedded in the Economic Stimulus Plan II.

Contract Bonding– Increased single limit of cover from EUR 80 to EUR 300 million to

ease exporter’s liquidity position, as it helps to ease the pressure on the exporter’s credit line

Securitisation Guarantee in relation to the KfW Refinancing Program– Facilitating access to long-term funding for banks arranging

Hermescovered transactions.

– Banks sell their covered receivables (from existing and new loans) to KfW and make fresh funds available for the financing of new business covered under Federal Export Credit Guarantees

The crisis so far

Despite a double-digit decrease in German exports in 2009 as well as cancellations and postponement of many projects cover volume is expected to rise

Both standard and new products contributed to this result

During the crisis, ECA-covered financing has gained tremendous importance

ECAs have proved to be a reliable partner and will continue giving support to maintain and where necessary restore trust in global financial systems and trade relationships.

Policies regarding the analyses of banks I

► Apart from generally accepted banks, still case by case analysis

► No general rejection of any CIS country

► Detailed information regarding ownership structure

► In-depth insight into the respective bank‘s risk management

Policy regarding analysis of banks II

► Financial Statements (preferentially according to IFRS) for 3rd Quarter 2008

► Securities portfolio

► Detailed overview of liquidity situation

► Exposure to currency risks- Matching Maturities

- Proportion of ‘Loans to customers’ in foreign currencies and assessment of customers’ ability to pay back such loans

► Detailed overview of ‘Loans to Individuals‘

► Exposure to real estate sector

► Impairment provisions

Contents




Conclusion

Russia – cover policy

Generally open for short-term transactions (examination of creditworthiness)

Criteria / securities for credit business transactions:

- State guarantee

- Corporate risk

• Additional securities not required in cases of excellent standing of the buyer

- Bank guarantee

• Generally accepted banks: 15 banks such as VTB, Sberbank, Vnesheconombank, Gazprombank or Alfa Bank

• Other banks on a case-by-case basis (about 50 banks so far)

• In general involvement of the Russian buyer in the payment obligations

Premium category 4

Russia – cover volume for recent years

1.420

1.7922.015

3.249

2.878

1.991

2004 2005 2006 2007 2008 2009

short term long term total

(in million EUR)

German ECA underwriting volume (long term) for Russia by type of security

716

61

2925

50

32

35

37

37

32

17

75

36

50

6361

47

68

23

2002 2003 2004 2005 2006 2007 2008 2009(30.09.)

State Guarantees Bank Securities Corporate Risk

%

Russia – recent experience

►Only very few covered banks have not been able to meet their obligations so far

►Strong effort by the Russian government to support system relevant banks

►Further consolidation of the banking sector is nevertheless to be expected in 2009

Russia will remain a major partner in the years to come

Contents




Conclusion

Conclusion

Due to the current challenges and difficulties ECA-covered

financing has gained tremendous importance.

ECAs will be a reliable partner and will give support to maintain

and where necessary restore trust in global financial systems and

trade relationships.

Russia and CIS will remain major partners also in the years to

come.

Thank you for your attention!

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moscow, april 21, 2010

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