Ex-Im Bank Chairman Highlights Impact on Houston – HPI

The demise and rebirth of the Export-Import Bank in 2015 was part of a broader national political debate over the role of government, but it had specific consequences for a north Houston company that builds and repairs control panels and rotating equipment parts for power generation, oil and gas projects and marine engines.

HPI, which employs about 100 people locally, cited the loss of the bank and its loan guarantees for risky international projects in its decision to cut 10 jobs here last year. HPI says it passed up a number of new engineering and construction opportunities overseas. Those projects typically account for 70 percent of revenue, but fell to 50 percent during the lapse.

“Where we competed against companies that had their own version of Ex-Im but we had no Ex-Im of our own, we were not successful in competing in those markets,” senior vice president for global market development John Ballentine said recently.

On Monday, Export Bank Chairman Fred Hochberg toured HPI’s facilities with U.S. Reps. Gene Green and Sheila Jackson Lee, both D-Houston. Hochberg said the lapse, between the time the bank lost federal authorization in June and its reinstatement Dec. 7, was particularly tough here in the nation’s No. 1 exporting region. On average, the bank supports $4 billion to $5 billion in export financing a year from the Houston area, he said.

Fred Hochberg, chairman and president of the Export-Import Bank of the United States, sitting center, listens to presentation by Jerry Wheelwright, HPI Chief Technology Officer, left, Hal Pontez, President of HPI, and John Ballentine, Sr. Vice President of Global Market Development, right, during a tour at HPI, Monday, Feb. 8, 2016, in Houston.

Ex-Im Chairman Fred Hochberg, right, tours HPI with its President, Hal Pontez, left, and its Chief Technology Officer, Jerry Wheelwright.

“This had a real direct impact on company after company in hiring and putting people to work,” Hochberg said. “And these are good jobs, you can see walking through here. These are not minimum-wage jobs, these are family-supporting jobs.”

About half of HPI’s projects rely on Export Bank backing, its president, Hal Pontez, told the chairman. Ballentine estimated that the company has been able to create 50 jobs in Houston because of support from the bank. Now that the bank is reinstated, HPI hopes to bring the 10 laid-off employees back.

HPI employs about 150 people globally, with nine offices from Houston to Mexico, Nigeria, United Arab Emirates and Egypt. Monday’s tour included discussions with company leaders and workers.

Hal Pontez, President of HPI, left, Jerry Wheelwright, Chief Technology Officer, Fred Hochberg, Chairman and President of the Export-Import Bank of the United States, U.S. Representative Sheila Jackson Lee and U.S. Representative Gene Green, right, are shown during tour at HPI, Monday, Feb. 8, 2016.

Foes in Congress
Last year, politicians led by Texas members of Congress blocked reauthorization of the bank, calling it a vehicle for crony capitalism and arguing that taxpayers shouldn’t be on the hook if companies default. The bank had a default rate of 0.24 percent last year and brought in revenue many times its expenses, sending $431.6 million back to the Treasury.

Supporters, including companies like HPI, counter that domestic exporters can’t compete internationally without the bank’s backing. Dozens of similar government-backed banks based in other countries help finance project bids that U.S. companies compete against. Most of the bank’s work is to guarantee loans made by commercial banks and provide insurance, though it does also make loans.

Loss of the Export Bank helped make 2015 difficult for HPI, Ballentine said. Combined with the effects of the oil downturn, he said, revenue was down about 15 percent.

Thirty percent of HPI’s work has been in the oil and gas industry historically, but with demand dropping off for those projects the company is shifting its focus to power plants, which already made up the majority of its business. Ballentine sees investors shifting toward power-generation projects as returns on oil investments dry up.

“We’re seeing a lot more capital being freed up” for engineering, procurement and construction jobs, he said. HPI is eying demand for electricity in Africa and South America in particular.

The bank wrote in its 2015 annual report that it supported $17 billion in U.S. exports last year by providing loans to companies, or guaranteeing loans made by private banks. A quarter of those went to small businesses, it reported.

About $1.5 billion of the loans and guarantees authorized last year were for oil- and gas-related projects.

Hochberg said the bank’s financing can offer some confidence to companies bidding on projects in a weak oil market.

Positive attention
He also said the controversy in Congress highlighted the Export Bank’s mission and brought it some positive attention.

“We’ve educated a lot of small businesses that there are opportunities out there and that we’re a resource to work with them, and I think that we could not have ever mounted that kind of communications campaign on our own,” he said. “So a side benefit, though I would not recommend it to anybody, is just that we’ve got more companies that are more focused on exports and are thinking about it.”

By Sarah Scully, Houston Chronicle
February 8, 2016