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Shipping Finance from the Perspective of ECA

Ying Zeng

Project Insurance Underwriting Department

ECA Ship Finance:A 10 Year Review and Outlook

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Contents

� Overview of Sinosure

� 10 years Shipping Business Review

� Challenge and Outlook

Section 1Overview of Sinosure

Sinosure: a state-funded, policy-oriented ECAWith the goal to promote exports and overseas investment through credit insurance against commercial and political risks

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1 State-funded ECA: The only officially export credit insurance agency in the mainland of China

Policy-oriented: Mandate according to China’s diplomatic,international trade, industrial, fiscal and financial policies

Leading agency of OBOR: engaged in 14 out 47 specific tasks regarding the mandate from China’s State Council4

Non-profit: achieve long-term financial break-even status based on risk pricing and management

Sinosure’s main roleAmid global economic slowdown and uncertainty, Sinosure is fulfilling its obligation of promoting “going-out” strategy

Cover commercial and political risks for a wide range of “going-out” projects (hundreds of projects every year)

Provide insurance and guarantee for numerous exporters,contractors, lenders and investors

Facilitate fundraising from a variety of banks, including domestic banks and international banks

Provide global credit information and rating services through a network covering more than 200 countries and regions

Characteristics of ECA Finance------Soverign credit

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1 Underwriting policy: remain stable compared with commercial bank as SInousre is policy-oriented company to promote Chinese exportation.

Financial condition: optimize the conditions ,like increase the leverage,prolong repayment period,reduce financial cost.

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Financial chanel: increase owner's credit limit in bank and expand the financial chanel for owner.

Commercia risk:prevent financial institution from the risk and improve capital adequacy ratio of bank according to Basel Agreement III.

Underwriting RequirementsChinese Content, Coverage.....

Ship-owner: proven track record, non-speculative

Coverage: up to 95% of political risk and commercial risk

Beneficiary: lending banks, leasing companies, Chinese shipyards

Pre-delivery finance: high-tech vessel and key shipyard

Shipyard: registered and operating in China

Section 2A 10 year Shipping Business Review: (2009-2018)

Sinosure shipping portfoliothe aggregated insured amount in 2018 is the highest in past decade, contributing 18.5% of the total M/L buyer credit insurance amount.

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2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Sinosure shipping portfolio by year($b)

Shipowner Allocationmainly concentrated in Europe and Asia

Shipyard Allocationmainly concentrated in CSSC and CSIC

Business ProfileShipowners

Business ProfileCooperation Banks & Leasing Companies

Section 3

ECA Shipping Business Challenge andOutlook

Increasing Risk ClaimRecent years shipping & offshore risk claim to Sinosure is increasing due to the difficult market

Claim: 11 buyer credit insurance projects (including offshore and ships)

Indemnity: 8 buyer credit projects indemnity was paid to insured banks, 162% yearly increase

Indemnity: more buyer default insurance projects indemnity is to be paid to insured shipyards

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2019

Improving Support PolicyIn spite of the risk & claim, Sinosure supporting policy remains stable and robust. In 2019 Sinosure shall improve finance terms, more favourable to clients.

up to 85%, 5% increase from previous 80%

up to 15 years, 3 years increase from previous 12 years

leverage

profile/tenor

Change and Challenge in Current Market------market concentration is enhanced

1market cocentration ratio is increasing on both shipping and shipbuilding sides------still on the road

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niche market/regional market-----small and beautiful companies

for shipyards eihter state-owned or private------equally treated, no bias

3 for shipowners especially container operators------focus on top big liners

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Change and Challenge in Current Market------IMO lower sulfur emission(≤0.5%) 2020 regulation

1 lower sulfur bunker cost ------$200/ton higher on average than IFO380

2 lower sulfur bunker supply---trader------Maersk signed framework agreements with bunker suppliers

3 lower sulfur bunker supply---oil major------Sinopec started Green Bunker Initiative & set up Bunker Supply Global Center in Zhoushan

Change and Challenge in Current Market------scrubber installation

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scrubber installation finance---risk challenge------based on company credit without ship mortgage

scrubber installation price------$4m~6m/unit

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scrubber installation volume------2000 ships before 2020

4 scrubber installation finance---ECA Undertaking------Sinosure provides hundreds of scrubber finance package for MSC

Enhancing Cooperation with Leasing Companiestop 10 leasing companies record $13.2b in 2018

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