Export-Import Bank executive emphasizes its support of energy
The Export-Import Bank of the United States, an independent federal agency, provides financial support to help promote U.S. exports — including international trade by the U.S. energy sector. Last year its $20.5 billion in authorizations included about $1.4 billion to help finance oil and gas sector exports.
The bank’s authorization expires at the end of June, and some powerful lawmakers including House Majority Leader Kevin McCarthy, R-Calif., have advocated its closure, arguing that it helps huge companies that don’t need government support.
Paula Swain, managing director for downstream at the bank, spoke with the Houston Chronicle about how the bank works and what the future may hold. Excerpts, edited and condensed for clarity.
Q: What’s the role of the Export-Import Bank?
A: It’s supporting U.S. exports to help increase or sustain U.S. jobs. We help small businesses with credit insurance and working capital so they can produce goods and services for export. We help banks with loan guarantees to support their customers who export. And we support large projects with loan guarantees and direct loans for big infrastructure like power plants and petrochemical facilities or wind and solar power.
Q: The bank is mostly known for supporting purchases of commercial passenger aircraft. Where do Houston and the energy industry fit in?
A: Houston is the largest manufacturing area in Texas, and Texas is the largest exporting state. Because we’re the epicenter of oil and gas, so much of what we do at the Ex-Im Bank supports the Houston economy. In the last five years, we’ve supported Texas exports of $26 billion, and $20 billion of that came from the Houston area.
Q: What are some of the companies around town that have benefited from the bank’s support?
A: Large companies like National Oilwell Varco, Halliburton, KBR and Baker Hughes. All of those companies are very involved. We support their exports everywhere.
We also support a tremendous amount of small businesses. We have a special small-business facility for Pemex. They buy specifically from small businesses. Annually, it’s about $200 million a year. That facility, this past year, supported 224 small businesses, and 171 of them were in Texas. One of my favorite small businesses that benefits from our support is Applied Machinery in Houston. They do rig manufacturing.
Q: Take me through a typical transaction for a small business.
A: A small businesses will get a contract — say, a rig contract — for a rig that will be used in Mexico. Say it’s a $75 million rig. That small business needs working capital so they can produce the rig and send it to Mexico for Pemex to use. They’ll go to the bank with the contract for the rig. The local bank looks at the contract and looks at the financial strength of the company. It becomes obvious they need the working capital.
Depending on the size of the bank, they can do the loan under their own authority or send it to Washington for review. The bank will make the working capital loan to the businesses, and we guarantee the loan. The bank wants our guarantee because the bank won’t feel comfortable taking $75 million exposure to Pemex for construction of the rig, since it’s a foreign receivable.
Q: What other types of transactions do you support?
A: I’m on the downstream side. I typically work on largeproject financing. A recent transaction was the Star refinery, a project in Turkey. There were so many countries involved in that financing. It was a very large scope. Without Ex-Im Bank’s support, there wouldn’t have been $330 million of exports from the U.S., from companies that make pipes, electronics, valves — anything and everything that goes into a refinery.
When we were first approached, we didn’t think the U.S. component would be more than $50 million or $75 million. Because we were active in the negotiations of the transaction, and we were able to sway the project sponsor about the competitiveness of U.S. exporters, we were able to increase the dollar amount. In effect, we took exports from the Koreans and the Spanish.
The project sponsor was an Azerbaijan company, and our support in that transaction was a direct loan.
Q: Some policymakers want to scrap the bank. Would that be a disadvantage for U.S. exports, since so many other countries have similar institutions?
A: The Star refinery involved the Japanese, the Koreans, the Spanish, the Italians, the French and the U.S. There’s 59 different counties that have export credit agencies. Whether you’re talking about smaller transactions or larger transactions, everyone’s competing. Without the support of the Ex-Im Bank, I know in the case of the Star refinery, there would have been a big chunk of U.S. exports that wouldn’t have done to that project.
Q: What’s the impact of the uncertainty around the bank’s future? Last year, Congress opted to extend the bank only through June 2015, and many top Republicans want to see the bank go away.
A: When people come to talk to me about projects, one of the first questions they always ask is the status of our authorization. That’s difficult. I know foreign competitors are taking advantage of that. We hear it from U.S. exporters. We hear it from project sponsors. I can’t really worry about reauthorization. My focus is on making sure companies in Houston are able to be competitive with our support.
Q: Will the opening of Mexico’s energy sector to international investment prompt more work for your office?
A: I’m personally very excited about this. My professional career has been largely focused on Mexico for the last 20 years. We will continue to support Pemex. They’re one of our best and biggest borrowers. But we also look forward to supporting U.S. companies that will go in and take advantage of the new opportunities.
Q: How are falling oil prices affecting Ex-Im’s role in supporting Houston exporters?
A: I don’t think it’s going to be harder for us to provide support. We’re here to do the more difficult transactions. I think oil prices will certainly have an impact on the Houston business community. If there’s ever a time when the Ex-Im Bank is needed, it’s right now. Small businesses and others will find themselves in a much more competitive environment. Exploration and production companies everywhere are cutting back on their capital budgets.
Q: What did you do before you worked for Ex-Im Bank?
A: I started off my banking career in middle-market banking in Texas in the 1980s. I worked in D.C. for Ex-Im Bank for eight years in the 1990s. Then I came back to Texas in 2000 to work for El Paso Corp. for 10 years. I was able to rejoin Ex-Im under the condition that I could stay in Houston and help Houston companies.
Ex-Im Bank is here because of Jesse Jones (a 20th-century Houston financier and Houston Chronicle publisher). He was actually the first president of the Export-Import Bank. It came out of the Reconstruction Finance Corporation. It was a bank to put America banks to work after the Great Depression, and out of that came the Export-Import Bank.
When I go to a meeting in our chairman’s office, I rub the brass plaque on his desk because it’s the original desk of Jesse Jones. ryan.holeywell@chron.com twitter.com/RyanHoleywell