Commodities trader Trafigura signed a $1.5 billion, five-year loan backed in part by a German government guarantee to finance a long-term deal to supply natural gas to SEFE Securing Energy for Europe, the state-owned company Berlin took over after Russian supplies were cut off.
The loan supports a contract under which Trafigura will deliver more than 150 terawatt-hours of gas to SEFE over the next five years, mainly from its global gas portfolio. The first cargo is scheduled for Nov. 1.
A state guarantee for supply security
A syndicate of nine banks arranged the facility. It is covered in part by Germany’s Untied Loan Guarantee program, run through export-credit agency Euler Hermes, which the government uses to lock in long-term deliveries of strategic commodities. KfW IPEX-Bank, the project and export finance arm of state development bank KfW, is acting as facility agent and export-credit coordinator and committed $300 million of the total.
Untied loan guarantees differ from conventional export credit because they don’t require the borrower to buy German goods. Instead, the guarantee is justified by the flow of raw materials into Germany, which shifts much of the credit risk to the state and lets banks lend for longer at lower cost than they otherwise would to a trading house.
Prepaying for molecules
The structure resembles the prepayment financings that commodity traders have long used to secure oil and metals supply, applied to European gas security. Germany and its neighbors have relied on liquefied natural gas imports and long-term contracts with traders and producers to replace pipeline gas from Russia, and they face declining domestic and North Sea production. For Trafigura, the government backing turns a large, multiyear supply commitment into bankable paper without tying up its own balance sheet.
