(C) U.S. State Dept
This story was originally published by U.S. State Dept and is unaltered.
. . . . . . . . . .
Assistant Secretary Geoffrey Pyatt’s Remarks at the DFC’s 5th Anniversary Conference [1]
[]
Date: 2024-12
Assistant Secretary Geoffrey Pyatt’s Remarks at the DFC’s 5th Anniversary Conference
Nisha Biswal: As I welcome Mark Kennedy. Let me just give you a quick introduction. He is a former member of Congress from Minnesota, a business executive, and a university president of the several university departments. And now serves as the director of the Wahba Center for Strategic Communications.
Mark, over to you.
Mark Kennedy: Thanks so much, Alicia. We’re thrilled to be talking about the important issue of how DFC is helping to diversify the critical minerals supply chain and at the same time helping to elevate the development impact around the world. And we’ve got three rock star panelists to help us with this.
We start out with Mark Travers – he is the CEO of Brazilian Nickel. Before that, he was an executive with Vale. We also have Geoffrey Pyatt, currently the Assistant Secretary for Energy Resources at State Department, but previously ambassador to both Greece as well as Ukraine. And we have DFC’s own Mateo Goldman, currently Senior Vice President of Investments here at DFC, previously General Counsel at GPI Capital, a New York private equity fund manager.
Let’s start with you, Mark. You know, DFC has just – I guess we had an announcement today – helping you help us diversify the critical mineral supply chain in nickel. Tell us about what kind of an impact that has helped you help us with diversifying the supply chain.
Mark Travers: All right. Thanks, Mark. Maybe just to give a little bit of context. And as most – if not – I think most of you would know, nickel, like most critical minerals, whether it’s lithium, rare earths, graphite, is facing a looming challenge. Nickel in particular, with the growing demand with electric vehicle batteries, there’s going to be a massive increase needed in supply.
But that’s where our problem lies, where the supply is not expanding the way we need it, but also, we have the issue with the focus of the supply chain essentially in one area. What we’ve seen is the decline in production of nickel outside of Indonesia and then a rapid expansion of supply in Indonesia, primarily focused by PRC.
And so that supply chain that is there and is growing is essentially capped with nickel. So where are we going to get our supply of nickel that we need outside of that supply chain? Well, essentially at Brazilian Nickel we have a strategy to bring our supply route, a heap leach process, to the application of certain type of ore bodies. And we think that this process is a great one in terms of simplicity, low capital cost in terms of intensity, low Opex. And with our Piauí Nickel Project in the Piauí state of northeast of Brazil and then a future growth pipeline, we think we can be an answer to the supply chain, part of the answer.
So, in terms of the DFC, I would say that the DFC has been a partner with us from the very early stages. Trying to get a nickel mine up and running requires a lot of support, capital intensity. And I think another thing that we really need to do is we need to prove our process; we need to prove the economics. So, the DFC has been with us from the beginning. It invested through our major shareholders of TechMet, a critical minerals portfolio company, to help us with our large demonstration plant, to help us with our feasibility study, and then now to help us through the construction readiness stage, and which we’re getting to later in 2025.
And then with that support in the early stage, financially through equity, it has now been complemented through what we announced today, an indication of support for a senior loan of $550 million, which will be a cornerstone of our overall financing package.
Mark Kennedy: Very good. Thank you for that overview and an important step forward.
Ambassador Pyatt, tell us about you have the energy resources unit within the State Department. How does that, as well as DFC, fit into the government’s efforts to diversify the critical minerals supply chain or energy supply chains overall?
A/S Pyatt: Gladly, Mark, and thanks for the platform. So my job was created a little more than a dozen years ago to focus on leveraging America’s energy security as part of our overall relationships with partners and allies around the world.
When my job was created, that energy was focused on oil and gas. Fast forward, we’re now in an era of energy transition where we are equally concerned, as Mark alluded to, about the supply chains for the energy minerals, cobalt, lithium, nickel, zinc, copper, rare earths, that we need for electric vehicles, for grid-scale storage, for all of the technologies of the energy transition, which are overwhelmingly controlled by one country, the PRC.
State Department’s flagship initiative to tackle that problem is something called the Mineral Security Partnership, launched by Secretary Blinken about two and a half years ago, now composing 15 countries and economies, more than half of global GDP, with two aims: To identify key projects that we don’t want to see fall into the hands of China and to [inaudible] finance to make those projects fair.
So, in that regard, DFC is by far the key enabler of the U.S. government’s participation in the MSP partnership. Today, by the way, the MSP chairs Korea, so it has become a multilateral partnership that will continue on. And I want to especially acknowledge indispensable support from DFC for things like the Twigg Graphite Project in Mozambique and a number of other projects in Angola, in Tanzania, all focused on these key energy minerals, which would not have gotten over the line to FID without DFC’s ability to come in, but also have enabled us to then sit down with JOGMEC, with the Australian government, with the European Union, and to identify how we mobilize the capital that it takes to make these projects happen and also the offtake that makes the projects commercially viable.
But this is going to be a project of many years because we are deep in the hole and we have to think about these energy minerals not as being boring commodities, but as part of our national security strategy. So as former EU Energy Commissioner Simson liked to say, we cannot trade an era of European dependence on Russian fossil fuels for an era of collective dependence on Chinese critical minerals. And that’s why the MSP is so important, but it’s also why the work that DFC does in this area is so strategically impactful.
Mark Kennedy: And we all know what it means from a transportation perspective, but when we think about things like – from an economic coercion, when we take the chip restrictions, China restricts more critical minerals. This is a national security priority that –
A/S Pyatt: Absolutely, look at what China did last week on the three Gs – gallium, germanium, also antimony. These are all commodities that have energy sector applications, but they are also key national security minerals that go into defense applications.
Mark Kennedy: Okay, you’re the Head of investments here at DFC, a lot of priorities, but this has been one – critical minerals. We’ve heard about what’s happening in Brazilian Nickel, but we also heard from previous speakers as to the legal core of how MSP has access to those minerals. Why is this such a priority for the development plans for the project?
Mateo Goldman: Great. Thank you all for being here. It’s a great honor to be here. May I take a further step back behind critical minerals – what is DFC doing in working with our partners in other aspects of the U.S. government in identifying and prioritizing. From a supply chain perspective, what we’re trying to do is look across all the critical supply chains, across all industries and geographies, in terms of what are going to have the biggest impact on U.S. and our allies, our partner companies, economic security, and growth. So, we’re looking broadly at supply chains across various sectors. We’re looking at where those vulnerabilities are, and we’re also then figuring out where we can partner with high-quality private sector, [inaudible] private finance [inaudible] to address some of those vulnerabilities there.
So that’s broadly speaking what we’re looking to do on the supply chain side. Now, energy, the energy supply chain, of course, through our partnership with State, the conversation with State, MSP, that has been front and center. I think that’s not going to be a surprise to anyone here, why energy has been viewed as a critical supply chain and where we should be focusing on.
I think first, from an economic development perspective, you know, energy, widespread access to affordable and reliable energy, [in terms of the benefits of these] economies, that’s first and foremost where you start with. And, you know, these are widely cited numbers, but 700 million people in the world without access to any electricity. And then furthermore, when you talk about the lack of reliable access to energy, you know, electricity is multiple. So I think from a development perspective, how energy security reliability is a focus for us, but much more important, well, maybe not even more important, but certainly just simply as a focus, is for us is, if those are fundamental development objectives, where are the issues with respect to who is dominating which aspects of the supply chains. And as the Ambassador said, where are the critical mineral sites today, it’s very well-cited in terms of who is supplying and who is processing these critical minerals. So, when we’re looking broadly, we’re seeing the development need, we’re looking broadly about where certain aspects of these supply chains dominate, and much more insidiously, in certain aspects of these supply chains, they’re the weapons. And so that, broadly speaking, when we’re stepping back and looking where should DFC be spending its precious time and resources because there is a huge opportunity cost for every project that we undertake.
This is how we landed on supply chains, particularly with respect to energy. So, we’re doing, and we’ve done through the amazing work of the DFC status that Scott talked about today, and I wrote a stat today that 80% of the staff is new to [inaudible]. It’s very remarkable what Scott talked about, that through the incredible talent and hard work of those individuals, we’ve managed a critical supply on the critical mineral side to increase production, and we’re doing and partnering with great folks like Brazilian Nickel to increase nickel production. We’re in Mozambique trying to increase graphite production. We’re in South Africa increasing rare earths.
These are all huge focus areas for us right now, but we’re not just in production. We’re trying to do more in processing, which famously has been difficult to do. We’re working with DOE in trying to help build out, provide a feedstock for a graphite processing facility in Louisiana, and then we’re also doing, we’re looking to build out processing and roll and be affordable for technical assistance.
So, we’re all in this, but it’s not just the critical mineral space. We are looking to do everything on gas, increasing European energy security. We’re looking to do more, and we have done any more in gas storage, and then if you want to [inaudible] the cheapest form of electricity today, that provides not only cheap electricity, but also allows these countries to increase their energy independence – solar, we’ve moved where that is a completely dominated production line in some of our strategic priorities. We’re looking at providing, Scott cited it today, which is a billion dollars in financing for not just solar modules, but panels that we’re now trying to move downstream to the cells, [inaudible] as well as increase those directions. So, supply chain for us, for our agency is a huge priority, and energy for sure is something that we’re going to continue to focus on.
Mark Kennedy: So, as you mentioned, supply chain is critical in this day and critical time, critical to strategic competition, and it isn’t just critical minerals but there is a lot of critical minerals we need to be worried about. Mark, we also worry about positive development in that, and they aren’t necessarily mutually exclusive, the two go hand in hand, as with your project. Tell us about how your project that DFC is supporting, is also helping the local community.
Mark Travers: First of all, the Piauí project is located in Piauí state, northeast of Brazil. It is among the poorest states in the country. And in the local area where our site is located, it’s even poorer. So, by all measures, human development index, this is an area that suffers a great deal. Low formal employment rates, subsistent agriculture, poor sanitation, poor education support, poor health support. So clearly for us to do this right, we have to have a positive impact in the development of the community.
Now that community has seen some other employment opportunities. The renewable energy space is investing very heavily in Piauí, including that area, solar and wind. But there’s much more to be done, and I think it’s a critical part of our strategy to make sure we have a positive and overwhelming impact. So, in terms of direct employment, there will be like 800, at least 800 people at site. That’s direct employment, and then obviously indirect contractors will be much larger than that. Economically, in terms of employment opportunities, there actually will be a very significant impact o the point that we actually really consider training, because we will be tapping on local communities with quite a lot of populations. And that’s really got to be the goal of the future, is to train these people to be the leaders of tomorrow. In terms of our community relations strategy, obviously the absolute focus has to be on certain pillars of health in local communities, whether it be water, sanitation, health, education. But clearly, we need to work with those local communities on what those pillars need to be.
Mark Kennedy: I mean, clearly the developing countries with lots of minerals don’t want to have somebody come take the minerals and then leave them with nothing. We need to leave them in a better state.
Mark Travers: Absolutely.
Mark Kennedy: And we’re on that path to do that with your project.
Ambassador Pyatt, you’ve been an ambassador in Greece, Ukraine. When you were an ambassador, you were out there with all the other countries and competing for countries’ affections. How important is DFC for your toolkit, how important of an impact can it really do for an ambassador?
A/S Pyatt: Well, thank you for asking the question, because this is like low down the center in terms of my role. Especially, I had the great honor to serve in Greece as ambassador for six years under President Obama, President Trump, and President Biden. I arrived in 2016 at the death of the Greek financial crisis, right after China had taken control of what is today the largest transshipment port in the whole Mediterranean, the port of Greece. And it was very clear to me that we faced a juggernaut of Chinese investment. Xi Jinping had identified Greece as the dragon’s head of the Belt and Road Initiative in Europe.
So, I sat down with my country team and said, how are we going to stop this? We have to put a line under this. And so, in that regard, the single most transformative development during my six years as ambassador in terms of this strategic competition with China was, first of all, the passage of the BUILD Act. We practically set off fireworks over the embassy the other day that that happened.
Then I worked with Senator Murphy, in particular, on NDAA package, which authorized DFC investment in high-income countries where there was a strategic impact of nexus to the energy sector. And then we worked with DFC, first with Adam Boehler, and then with Scott Nathan, and with all the DFC experts. And we had a wonderful, I think, Scott got tired of taking my phone calls about this. One of the lessons I took was you got to keep at it. But the end result was a $125 million DFC investment in the largest operational shipyard in Greece, the Elefsina shipyard, had a transformative impact on that facility, bringing new life into an asset which is important to the European economy but it’s also important to Sicily and European Command, because you need to have the capacity to repair ships in theater, and also facilitates the investments that Greece is making on offshore wind, on additional LNG, that transaction would not have happened without DFC coming to the table. And it really demonstrated for me how important it was to have that tool.
I would add, I think ultimately, I would say it was a good project. And there were also commercial finance options. But it was so, so important to have the American flag on that project. The operator is the American company, Onyx but having the U.S. government put its efforts behind that simple message to everybody in Greece that we were not taking it [inaudible]. And I think, ironically, almost a decade later now, China’s reputation in Greece, among a group of public opinion, has declined significantly. In part, although the Piraeus port investment has been a huge success. Piraeus continues to grow under COSCO management, but China has not done well on the local community engagement side and the Elefsina shipyard has.
And just to do a quick note also on Ukraine, both in terms of my former ambassadorial role, but also my current role at the State Department, where I’ve been coordinating a lot of our work, especially on the investment sector. So, I think at one stage, Scott Nathan was probably the Biden Administration official who had traveled to Ukraine most frequently and it’s made a huge difference. And anticipating that in 2025, there’s going to be some kind of an inflection point in Ukraine and if there is a cessation of hostilities, the issue of economic reconstruction and investment is going to be front and center. Our interest as Americans is to ensure that American companies play a leading role in that reconstruction process. So, the products that DFC is deploying, for instance, the reinsurance project with ARX, is a critical catalyst to putting American companies at the front of the queue as we begin to think about this next phase of Ukraine’s journey to become a member of the European Union.
Mark Kennedy: That’s an important project that is wholly partway down the path and we’re going to need to continue that even with more migrancy in the months and years ahead. Mateo, we’ve heard about several of the instruments that you’ve used within DFC to help advance this. Help us understand the various instruments, how are you using them to diversify the supply chain?And also, what more would you want, how can you have even bigger impact?
Mateo Goldman: First, before I get into the question, I met Mark in Piauí, Brazil, a couple of years ago. I cannot overstate what he means when he talks about the quality of the jobs that are being offered. There’s lot of whys for Piauí has been incredibly popular state and I was within [inaudible] an amazing opportunity because there was a sort of staff party when we were there and I’m the only person [inaudible], but I kind of infiltrated myself into this party just as a diligence. I tried to figure out and I started talking to the folks. And you couldn’t really overstate how important it was for the people that come from very far and it was the only game teller in terms of the jobs. We spent a lot of time speaking with Mark’s team in terms of what they were doing to ensure these are quality jobs and the standards that they were imposing on themselves, and you could feel it from speaking with people.
So, I think, you know, an administrator, the power [inaudible], very interesting things this morning about not getting under the developing focus for the U.S. This is a perfect example of where some of these might be challenging places where there’s not a lot of opportunity and I saw firsthand how those kinds of projects were being carried out.
But to the question you asked me, because I’m going to get [inaudible] in a second. The architects of BUILD put together an unbelievable suite of products available to us. The DFC and the U.S. government now, because of BUILD and the architects, we have a full suite of financial tools to take a project from ideation stage, where we can provide technical assistance, all the way through each element of it. So, we’re in the early stage, we can provide growth capital for some expansion plans. We can do large-scale CapEx projects either from a corporate lending perspective or from a project finance perspective and we can de-risk a huge portion of that product for the incredible PRI tool, Political Risk Insurance tool.
So, the suite of tools available for us are amazing. Now, the lending, the world of lending is about lending against somewhat an always unpredictable cash flow. And that is why we are able to, if you have a predictable level of some level of cash flow, that is why you can come up $500, $750 million, a billion-dollar loan, because you can price that at some level of affordability because of the predictability. But for us, where we see the hugest demand, and the demand for that product is there, because these are incredibly challenging environments, but we’re seeing huge demand for our tools, of course, at this time, because that’s [inaudible] the hardest capital to fund. Why it’s hard to find is, of course, because you don’t have these predictable levels of cash flows. You have an operating company that wants to extend a new job for [inaudible] to try a new product working. These are things that have unpredictability.
You have large-scale, infrastructure projects that maybe take some sort of risk and you may not extract that revenue. We don’t know where, we the lenders and the financiers, we do not know exactly the level of drivers showing up on the toll roads. Maybe we’re selling electricity to the grid, or it’s not contracted for a long-term agreement. There are these kinds of projects. And then you have these critical minerals projects, which these mines are unbelievably expensive, and almost certainly they will be cultivating more expenses than you originally think, and they will take longer than you think. Like, as sure as I’m sitting here, for the majority of the projects, that’s going to be so.
So how do you finance those projects, and how are you able to make sure that we, DFC, as an agency, are able to take all those projects that the private sector is not able to finance, and that’s through equity insurance. So, I’m almost certain that if you were sitting here today, you have heard some of the barriers to doing more on the equity and so, I’m not going to talk about the equity scoring, but how it is assumed that we will lose all that equity, if [inaudible]. If we are going to assume we’re going to lose 100% of our investment from a scoring perspective and it is a barrier to getting more out the door.
We’ve been managing this group, and I was part of managing the group, the equity program for a couple of years. The program is doing well, we’re getting money out the door. When we started to come back in, even though it’s only a few years in, we had a few bright spots, we were well-diversified. India is having its amazing moment in the sun right now. It’s impacting the public capital markets, we’re seeing good monetization over there, we’re seeing dividends come in, the portfolio is [inaudible] as well. So, I don’t know what’s going to happen to the portfolio, certainly, we’re not losing 100% of it. So those sorts of things are huge ways in which we’re going to do a lot more at DFC.
Mark Kennedy: A very important effort that you’re doing, as you say, equity is needed. And what we find when we go to other development financial institutions around the world, they have those equity tools. And when we don’t show great equity tools and only want to have senior deposition or something like that, we don’t come up with good partners.
And I think we heard earlier from Scott talking about the partnerships with other advisors around the world, how important they are, and what we need to do. So that brings up we need to make sure we get development finance corporation reauthorized, hopefully with more flexible equity tools, and hopefully with, as the Ambassador was saying, that you have done some work at getting the energy into Eastern Europe. There’re parts of the world you want [inaudible] to invest [inaudible] having DFC to provide those extra tools.
And too often we forget when we think about it comes to having supply chain resilience. We think if we just have a checkbook that we can buy something, that we can get that. But as Mark laid out, it takes a long time to get a nickel mine up and running, and you can’t just turn it on overnight. So, this requires investment, a very important tool that DFC provides in helping us secure supply chains, critical minerals, and elsewhere.
[END]
---
[1] Url:
https://www.state.gov/assistant-secretary-geoffrey-r-pyatts-remarks-at-the-dfcs-5th-anniversary-conference/
Published and (C) by U.S. State Dept
Content appears here under this condition or license: Public Domain.
via Magical.Fish Gopher News Feeds:
gopher://magical.fish/1/feeds/news/usstate/
