Profitability in Export Finance
''Many African countries do not yet have legislation in place enabling large-scale project finance transactions.''
An Interview with Chiara Felicitas-Otto
Managing Director - Exficon GmbH
Our dedicated interview with Chiara Felicitas-Otto, Managing Director at exficon GmbH, showcases one of Germany’s most cutting-edge financial advisory firms delivering expert consulting services and innovative financing schemes, including the implementation of complex financing structures for export and project financings. Executive Global highlights the trail blazers supporting emerging economies and developing countries, with a strong focus on Africa.
EG: What has your tremendous experience analysing the bankability of export and project finance transactions, taught you about the potential of the African market?
Chiara Felicitas-Otto: The first lesson we have been taught was, that there is no “African market”. There are 54 different markets, each one with its specifics, with its own history, its own legislation, and its very own way to do business. We are active in 25+ countries across the African continent and have realised many projects by combining due diligence and subsequent structuring of a transaction in accordance with international standards with the local flavour to make a project a success. We see great potential across the continent in various sectors and we are ready to render our advisory services to anyone who is willing to dig deep into this exciting geographical region.
EG: Since the arrival of exficon GmbH how has the project finance and export finance sector improved for companies requiring multi-country sourcing of equipment and know-how?
CFO: Exficon has been around for almost 10 years. We have structured a number of complex project and export finance transactions with multi-country sourcing aspects and several credit enhancement mechanisms which had to be combined to raise the commercial loans for the project. Complexity does not scare us – we embrace the challenges these constellations bring with them and as advisory team we will be able to manage them, with and for our clients.
EG: And with your extensive knowledge, how do you ensure maximum profitability for your clients?
CFO: We have seen many projects which were primarily designed to maximise the profit – that is not our approach. Together with our clients we design the right project with the best-suited technology for the specific location and then we use our financial engineering knowledge to structure the financing in a way that makes the project economically sound and viable, hence sustainable, and – at the same time – enables the local community to benefit from the project by offering the services or the product at a reasonable and affordable price. It is a fine line to fulfill both the commercial aspects (profitability) and to improve the living conditions of the local population. A top-notch electrified railway does not help if no one can afford the ridership fee. It is our prime intention to structure projects matching the equilibrium.
EG: Having structured transactions for commercial banks and development institutions, how integral was the role of exficon GmbH in delivering solutions to some of the most complex deals?
CFO: Base infrastructure is a field where you typically find international financing institutions as lenders or even as donors. We have seen projects fail after some years when donor funding stopped. Therefore, our most important approach is that projects have to be economically viable on a stand-alone basis. We construct complex financial models to do such calculations and to provide models proving that the project could continue even if there was no grant element provided by a donor or grant elements will phase out over time. In order to attract interest of commercial banks, the project itself needs to be stable enough to sustain. This is – in our humble opinion – the prerequisite of a successful project and we are delighted to assist our clients in building a robust business case for their venture.
EG: Against the backdrop of global uncertainty with Brexit and trade, why is it more important now, for businesses to have expert consultancy and project finance advisory solutions in place? And what are some of the greatest challenges associated with implementing project finance solutions in Africa?
CFO: Many African countries do not yet have legislation in place enabling large-scale project finance transactions. Implementing projects in these countries is extremely difficult and needs tremendous legal efforts. This uncertainty is also reflected in the financing costs as any credit enhancement mechanism will be priced accordingly. Therefore, the greatest challenge is the legal framework of the respective project country.
EG: Tell us more about how your new digital services for electronic procurement may benefit clients in the current market?
CFO: We have been active as procurement or sourcing agent since 2013 having concluded more than 100 processes successfully. To transform our services into the 21st century, we have launched an e-procurement platform this year which enables public authorities and private companies to launch their tenders electronically and to collect the bids electronically, too. Minimizing hard-copy submissions for tenders increases transparency and eliminates fraudulent acts which often lead to lengthy processes and non-awards of tenders for projects which are of great importance for the countries. With this new product we substantially contribute to faster procurement processes, to more transparency and to quicker implementation of the projects. EG