KUKE’s guarantees provide new business opportunities for Polish exporters
Winning a contract for supplying equipment, technological lines or performing construction works for a foreign buyer requires presenting a guarantee. Solutions from the new system of support for exporters, which is being finalised by KUKE, allow Polish companies to effectively compete for orders all over the world. Last year, the guarantees issued by KUKE covered export projects worth over PLN 5 billion.
It was not only the pandemic and its consequences for the global economy that made export business exceptionally difficult last year. Apart from new types of insurance protecting export receivables, KUKE adapted its offer of contractual guarantees granted with the support of the State Treasury to the changed market conditions. The related procedures and documentary requirements have been simplified, the scope of goods and services covered, and the possibilities of their use have been significantly expanded. Using KUKE guarantees strengthens exporters’ financial capacity, positively influencing their relations with financing banks and enabling them to significantly increase the scale of their operations.
“It hardly ever happens that the purchaser of goods or services does not request a financial security in case of problems with contract performance. Contract guarantees are a common method of securing the performance of contracts in domestic and foreign trade. KUKE has been providing such guarantees for years. The emerging challenges in international trade caused by the coronavirus and the changing market realities encouraged us last year to make significant modifications to our contract guarantees offer in order to strengthen the capabilities of Polish exporters in competing with competitors from other countries supported by their governments”, said Piotr Maciaszek, Director of the Insurance, and International Cooperation Department at KUKE.
The most frequently issued contract guarantees include performance bonds, warranty bonds and advance payment bonds. Several hundred Polish companies have benefitted from guarantees issued by KUKE - from small companies, acquiring guarantees for several thousand Euros, to large enterprises, where the guarantee amount reached several hundred million Euros. KUKE cooperates with entities from various industries, including energy, transport, shipbuilding, and construction.
“Our instruments guaranteed by the State Treasury are used by companies entering into contracts primarily in the European Union, but also in other developed and developing countries, including in high-risk markets. The contracting party may be a public or private entity. Thanks to recently introduced modifications concerning guarantees, they may be used jointly by members of a consortium, which, apart from a Polish company, also includes entities from the local market. We have done away with the existing documentary obligations, making the process of obtaining guarantees faster and simpler” - emphasised Piotr Maciaszek.
KUKE guarantees bring measurable benefits to the exporter as well as to the financing bank. The latter, using KUKE's counter-guarantee, which secures up to 80 percent of the assumed liability, can reduce its risk of a single guarantee to as little as 20 percent, or, while maintaining the original level of risk, can increase its limit per exporter fivefold. As a result, the exporter is able to raise further financing for its development. This solution extends the financial potential of all parties involved.
“KUKE’s guarantees can be a very useful solution for banks. They make it possible, in accordance with prudential regulations, to assign even zero risk weight, thus making it possible to provide further support to clients. The possibility of issuing guarantees in the form of counter-guarantees for domestic and foreign banks and insurance companies, the availability of guarantees both in Polish zloty and in other convertible currencies, and above all the clear mechanism for exercising rights under the guarantee ensure the attractiveness of this instrument. It can be an important element of support for the development of exports, and thus for the Polish economy”, emphasised Michał Mężykowski, partner, head of the banking and finance team at CMS.
In 2020, KUKE supported 62 projects worth more than PLN 5 billion implemented by Polish entrepreneurs outside our country, either by issuing direct guarantees or counter-guarantees for guarantees issued by banks. The total amount of guarantees issued has been growing rapidly in recent years. In 2019, it amounted to PLN 395 million and a year later - despite the pandemic – it increased to PLN 460 million. The export guarantee portfolio has for years been dominated by guarantees granted to the shipbuilding industry, which boasts contracts in such demanding markets as Norway, France, and Canada. Other key sectors which use the collateral offered by KUKE when securing contracts include construction and means of transport.
KUKE will in the coming period introduce further financial solutions under the new export support system, including, among others, guarantees for financing investment projects in Poland for exporters, guarantees for repayment of working capital credits and insurance of repayment of credits for takeovers or acquisitions of enterprises abroad, cooperating with CMS law firm in the area of documentation for clients.