State-owned Nippon Export and Investment Insurance is set to insure overseas infrastructure projects by Japanese companies in US dollars for the first time, reducing a major barrier to the country's effort to export its building skills to developing nations.
The insurance will initially cover projects in Chile and Mozambique, reported The Nikkei.
Tokyo-based lenders Sumitomo Mitsui Banking Corp and Mizuho Bank are among those financing a solar power plant in Chile to be built by trading house Sojitz and utility Shikoku Electric Power. The insurance will kick in at the end of November and cover $47.2 million of the Japanese banks' loans. The coverage will last about 18 years and reimburse up to 90% of the total loan amount.
Since the solar farm plans to sell its output on Chile's wholesale market rather than to a major utility through a purchasing agreement, there is no guarantee that revenue will be sufficient to repay the loan.
A rail and port project in Mozambique co-financed by Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, Mizuho Financial Group, Nippon Life Insurance and others will receive insurance protecting up to 90% of the $1 billion loan. Japanese trading house Mitsui & Co and Brazilian miner Vale are among the project's investors.
Most Japanese companies finance overseas projects in dollars, but NEXI had only provided trade insurance in the yen -- a mismatch that could result in losses if the home currency strengthened against the greenback.