ECAs Roll Out an Important Change Improving Rail Finance

 The Export Credit Agencies (ECAs) of most OECD member states have announced an important modernisation of their Arrangement on Officially Supported Export Credits. This is the agreement between ECAs on the terms of support that may be given to exports of goods from OECD states. This modernisation comes after several years of negotiations and is focused on supporting “green” projects. Accordingly, all zero-emission rolling stock will be moved into the Climate Change Sector Understanding. As a result, maximum repayment terms will be extended from 14 to 22 years, and further repayment flexibilities and adjustments to premium rates for credit risk will also be introduced. Coming at a time when the Luxembourg Rail Protocol to the Cape Town Convention is about to enter into force, this will provide a major boost to rolling stock exporters by facilitating cheaper and longer-term export credits. 

The Rail Working Group (RWG) welcomes these reforms. “The critical problem for many rail operators in the Global South who are looking to renew or expand their rolling stock fleets has been finding the resources to purchase this urgently needed equipment,” explains RWG Chair Howard Rosen. “This improvement will help to make private finance for ECA-supported exports of qualifying locomotives and all wagons a more economically sustainable solution.” He points out, however, that this should be just the first step. ECAs reduce their risk premiums by 10% when the Aircraft Protocol to the Cape Town Convention applies, reflecting the incremental security this gives to creditors. “At the very least, this discount must be extended to railway rolling stock once the Luxembourg Rail Protocol applies. Furthermore, taking into account the major environmental benefits delivered by the railways for passenger and freight transportation, it should be significantly higher,” Rosen adds.