OECD Arrangement on Officially Supported Export Credits
At A Glance
The OECD Arrangement on Officially Supported Export Credits (known as the OECD Arrangement or the OECD Consensus) long-awaited revision became effective as of 5 July 2023.
While a more in-depth update will follow on our next edition of the Eye on Emerging Markets newsletter, compared to the previous arrangement (of January 2022) it incorporates amongst other changes:
1. The Modernisation of the Arrangement package reform
This reform package seeks to add flexibility to the Arrangement, so that it better addresses the economic and financial needs of projects, to support a wider range of environmentally friendly transactions.
In the first instance, repayment terms increased from 8.5 years for high income OECD countries and 10 years for all other countries, to up to 15 years. In addition, as part of broader reforms intended to incentivise energy transition, the maximum repayment terms increased to 22 years (instead of 18 years previously) for Nuclear Power Plants and CCSU-eligible projects, such as:
- zero emissions track-bound transportation and associated infrastructure;
- or low emissions rail and enabling infrastructure.
It also introduces (amongst other things) more repayment flexibility particularly for transactions with an imbalance between timing of the funds becoming available to the borrowers, and the debt profile.
It further amends the Climate Change Sector Understanding (CCSU) to widen its scope to:
- environmentally sustainable energy production;
- CO2 capture storage and transportation;
- transmission, distribution and storage of energy;
- clean hydrogen and ammonia;
- low-emissions manufacturing;
- zero and low-emissions transport; and
- clean energy minerals and ores.
2. CIRR reform
Under this reform, CIRR is no longer determined based solely on the repayment period, and it will also consider the drawdown period, and the repayment profile of the transaction. This reform applies to the main body of the Arrangement as well as the Sector Understanding on Export Credits for Nuclear Power Plants (NSU) and the CCSU.
