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Transfer of ownership

Are you thinking about buying or selling a company? Transfer of ownership raises questions for both buyer and seller. What’s the value of your company? What should you take into account when buying a company and where do you get the financing needed? We have compiled information about these issues in one place.

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We provide financing for the start, growth and internationalisation of enterprises and for protection against export risks.

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Finnvera's year 2016

We want to ensure that Finnish enterprises get the financing they need for good and profitable projects. The objective of Finnvera’s strategy is to raise the competitiveness of Finnish enterprises so that they can also compete on international markets. On our annual report you can learn about Finnvera's operations and its effects in 2016.

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Start Guarantee for the start-up

Start Guarantee is intended for newly launched enterprises that are owned by private individuals and meet the SME definition applied by the EU. The bank will submit an online application for a Start Guarantee to Finnvera on behalf of the enterprise.

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Articles
24.11.2017
Tiny Sri Lanka is having a facelift with Chinese money

Sri Lanka, a relatively little-known country for Finnish companies, wants to become an important port of call for marine traffic. The impact of the Chinese Dream, the new Silk Road, reaches far and wide. A prime example of this is Sri Lanka, a miniature state currently seeing hundreds of millions of euros of Chinese money being invested in its ports and other infrastructure. Finnvera's CEO Pauli Heikkilä welcomed Prime Minister Ranil Wickremesinghe in October in Helsinki to discuss Finnish companies' export prospects to Sri Lanka.The reason for the investment boom is the island’s excellent location.“Virtually all marine traffic in Asia goes past Sri Lanka, and now China hopes to make it an intermediary port for cargo ships”, says Outi Homanen, senior adviser at Finnvera.One of the marketing assets of Sri Lanka is the fact that it has signed free trade agreements with nearby countries. This makes it a convenient gateway to large markets, such as neighbouring India.Right now, the island state is intensely interested in maritime infrastructure projects and especially maritime surveillance. But to carry out such projects, the help of Chinese companies is not enough. Finland’s strength in this respect is its strong maritime cluster of more than 3,000 enterprises.During Prime Minister Ranil Wickremesinghe’s visit to Finland in October, a number of other topics were also raised for discussion. Homanen says that the Finnish health technology, energy sector, power plants, cleantech and education all featured in the discussions.“It is worth noting that the Prime Minister visited Finland only and none of the other Nordic Countries. He found the offering of Finnish businesses particularly interesting.”Potential for Finnish exporters - Finnvera recommends export trade transactions to be securedSri Lanka’s vast investments and important location have not yet drawn the attention of many Finnish enterprises. Statistics by the Customs Finland reveal that the total value of goods exports to Sri Lanka were just EUR 9.4 million in 2016, and even less in the first half of 2017.For comparison, the value of goods exports by Finnish companies to neighbouring India totalled half a billion euros, and even for Pakistan, the figure was EUR 60 million.“The operating environment in Sri Lanka is less complicated than in, say, Bangladesh or Pakistan. The country is agile and its production standards are better in fields such as the textile industry”, Homanen says.She would like to remind companies of the fact that the island state’s virtual official language is English. Its British heritage is also visible in the banking system, which Homanen describes as reliable and practical.Finnvera recommends export trade transactions to be secured with documentary credit, particularly in cases where the buyer is new. For Sri Lanka, it is also possible to consider, in individual cases, medium-term or long-term export financing guaranteed by Finnvera.Financing for investmentsIn spite of Sri Lanka’s dark history of a long civil war that left its marks everywhere, the country’s new political leadership is ready to turn a new leaf.The island state and its 20-plus million population wants to attract tourism and increase the exports of its textile industry. One of the most important export assets is tea.According to Homanen, Sri Lanka’s economy has grown at the rate of 5 to 8 per cent, although the figure has been below five in the last few years.The economic growth has its flipside, too. By the World Bank’s standards, Sri Lanka has entered the category of lower-middle-income countries, which means less concessional development funding.However, Sri Lanka still has access to many partly concessional forms of funding. If you have a project involving Sri Lanka, one of your options is to apply for the Public Sector Investment Facility (PIF) for developing countries, a finance instrument managed by the Ministry for Foreign Affairs of Finland.“One of the major risks in Sri Lanka is the growing of the state debt. While bold investing increases indebtedness, investments are also necessary for economic growth”, Homanen says.Read more on Finnvera's export credit guarantee operationsSee all country classifications

Articles
13.11.2017
An extensive network enables shipbuilding

When a ship deal worth billions is concluded, you can hear the champagne corks popping also in places other than just Turku Shipyard. The design and construction of a giant cruise ship is a joint effort by several companies acting as drivers in the project as well as hundreds of subcontractors around Finland. Konecranes is delivering an enormous crane to the shipyard, while a company from Turku is in charge of designing ship interiors. The illustration from Turku Shipyard shows the heights that the new crane from Konecranes reaches. In the background, you can see the old crane that will still continue to be used by the shipyard.A globally exceptional maritime industry cluster has evolved in Finland. A study by Brahea Centre at the University of Turku indicates that the sea cluster is comprised of up to 3,000 companies. Their combined revenue is EUR 13 billion.Roughly one-third of the sea cluster companies are located in Southwest Finland, with Turku Shipyard, owned by the Germany company Meyer, at the core of the cluster.One of the most nostalgic moments at Turku Shipyard will take place in May next year when the enormous shipyard crane delivered by Konecranes will be ready for use. The company’s first Goliath shipyard crane was delivered more than 40 years ago and, as it happens, it was also delivered to Turku.The old crane will continue to be used as well and its modernisation is currently under way. Moreover, Konecranes has concluded a maintenance agreement for both cranes.“You simply cannot pass up these changes. This transaction is one of the most significant for us,” says Matti Malminen, Vice President, Trade & Export Finance, Trade Compliance at Konecranes.The maximum height of the crane is 120 metres and its hoisting capacity is 1,200 tonnes. There is an interesting fact related to the welding stage: the shipyard that ordered the crane has operated as a subcontractor for Konecranes in welding the main support beam.“All critical components come from Konecranes’ plants in Finland. The gearbox, electric systems and hoisting machinery are the heart of the crane,” explains Project Engineer Vesa Pietilä.He has been involved in the crane project for nearly four years. The actual delivery time is two years.Financing playing a key role in transactionsAccording to Pietilä and Malminen, a competent subcontracting network is the key to success for both Konecranes and the entire shipyard. The chain is extensive and quality and delivery reliability are required from subcontractors.“We have invested heavily in the subcontractor network and want it to function smoothly. Companies are trained and monitored,” notes Malminen.The value of the shipyard deal for Konecranes is EUR 35 million, only a fraction of the listed company’s revenue that exceeds EUR 3 billion.International transactions amounting to tens of millions of euros often require financing arrangements. The so-called “Lex Jordan” gave Finnvera the opportunity to issue guarantees for domestic projects, too, provided that they promote Finnish exports. The crane delivery to Turku Shipyard is a good example of this.“Finnvera and SEB Leasing Oy arranged the financing. As we speak, we have four other major export trade transactions in progress, in which buyer credit or Finnvera’s export credit guarantees play a significant role in securing the orders,” says Malminen.Empowered by the networkAccording to Jari Suominen, Managing Director of Naval Interior Team (NIT), a company specialising in ship interior design, the Turku Shipyard cluster is one of the four most significant networks in the world. The three other networks are located in Germany, France and Italy, all connected with local shipyards.“Turku’s best asset is that the network possesses the all-important technology. Elsewhere, shipyards keep it to themselves,” comments Suominen.“Turku Shipyard is vital for us. It is easier to develop operations and introduce new innovations here,” he goes on to say.The family business was founded at the beginning of the millennium and it has witnessed the decline and rebirth of Turku Shipyard. When the shipyard’s future hung in the balance under Korean ownership, the NIT management decided to enter international markets.“We gained a foothold in German shipyards and in Japan. For a while, we also operated in France, but the biggest demand was in Japan. This enabled us to overcome,” says Suominen, thinking back.A total of 75% of NIT’s more than EUR 77 million revenue comes from abroad. The company’s growth figures are impressive: a few years ago, its revenue was only one-tenth of the current level.According to Suominen, NIT is one of the few turnkey suppliers in its field. The most significant success factor is cooperation with the shipyard, the shipping company and architects.In ship projects, the company’s own employees operate as project directors, take care of design and purchasing, manage logistics and act as site supervisors. Materials and installation work are mainly provided by subcontractors.“All solutions must be created from scratch. The key to a successful project is our competent team. It is extremely challenging to build efficient teams,” notes Suominen.The Managing Director finds that Finnvera plays a significant role from the entire cluster’s point of view.“We couldn’t have gone abroad without financing from Finnvera. Shipyards always require us to acquire a security. In addition, we need working capital in the design and production phase.”Last year, the euro amount of new export credit guarantee applications received by Finnvera reached a record-breaking level, EUR 14.6 billion. The strong demand results especially from the order book growth in the shipbuilding industry.Finnvera’s Regional Director Seija Pelkonen says that the success of the sea cluster reflects on the entire country and hundreds of companies. On the first level, there are turnkey suppliers, such as NIT. They need delivery securities and other project funding.Financing-related needs trickle down in the network to the subcontractors of the turnkey suppliers, too.“Companies now have a low threshold to launch international operations as there is another Meyer shipyard in Germany. Competence is cross-pollinated. Finnish subcontractors are also approached because they have a good reputation. We constantly receive inquiries about financing,” says Pelkonen.FACTS: Drivers of exports, the sea cluster A study by Brahea Centre at the University of Turku indicates that the Finnish sea cluster is comprised of up to 3,000 companies. Half of these are limited companies, with information about their financial statements available. In 2015, the combined revenue of the sea cluster was EUR 13.0 billion and the companies had approximately 49,000 employees. The sea cluster companies concentrate in Uusimaa and Southwest Finland. Brahea Centre’s study reveals that almost a third of the sea cluster companies are located in the Turku region. The core of the cluster in Turku is the shipyard. The shipyard’s order book extends all the way to 2024 and includes eight passenger ships. Southwest Finland also boasts a growing automotive and mining industry cluster. Customs’ statistics for the first half of the year show that, as an export region, Southwest Finland comes second in Finland in terms of euros and third in terms of the number of export companies. Read more about credit risks in export trade here. Read more about our working capital for export products here. Read more about financing for the buyer here. Read also: Finnvera to contribute more than EUR 2.5 billion to cruise ship financing

News
09.11.2017
Finnvera to contribute more than EUR 2.5 billion to cruise ship financing – the order by Royal Caribbean Cruises is the largest financing project in Finnvera’s history

In October, Finnvera participated in the financing of two cruise ships ordered by Royal Caribbean Cruises Ltd. by providing the shipping company with buyer credit financing and an export credit guarantee, amounting to more than EUR 2.5 billion. This buyer financing is related to the letters of intent published by the shipping company and Meyer Turku Ltd in 2016. As export trade transactions, the ship orders to be executed are remarkably large and will have positive cascade effects on employment and subcontracting for several years.Mainly due to increasing demand for ship financing, the ceilings of Finnvera’s export credits and export credit guarantees were raised at the beginning of 2017.“From the perspective of export prospects and the impact on employment, it is great that the order book extends a long way into the future. This enables many sea cluster companies to make investments and plan their operations over the long term. As an export credit agency, Finnvera plays a major role in financing projects when payment periods are long. Financing again involved cooperation between export credit agencies, this time with Euler Hermes of Germany,” says Jussi Haarasilta, Executive Vice President.Finnvera provided the bank that arranged the transaction with guarantees for a 12-year buyer credit that was financed by Finnvera’s subsidiary Finnish Export Credit Ltd.The shipyard will hand the ICON 1 and 2 ships over to the customer in 2022 and 2024. The ships will be record-breaking in many respects: energy efficiency, low amount of emissions and environmental friendliness. ICON 1 and 2 will use LNG, or liquefied natural gas, as their main fuel. The plan is that part of the energy consumed by the ships will be generated with fuel cells.The largest ship financing project in Finnvera’s historyDuring the year, the decision to raise the ceilings of Finnvera’s export credits and export credit guarantees has proved to be well-founded. In January–June, Finnvera offered export credit guarantees and special guarantees amounting to EUR 6.3 billion, which is over five times more than during the corresponding period the year before. The amount of export credits increased significantly, too: in January–June, the export credits offered by Finnvera totalled EUR 5.7 billion (0.5 billion).The current financing of more than EUR 2.5 billion is the largest ship financing transaction that Finnvera has ever been involved in and, at the same time, the largest individual financing project in Finnvera’s history. Such projects are not only major financing and export projects but also significant for promoting employment.“Securing large individual export trade transactions for Finland may result in hundreds or even thousands of person-years in the exporting company and its subcontracting network. According to reports, the Finnish sea cluster encompasses 3,000 companies. The construction of two large cruise ships will bring up to 25,000 person-years of employment so the impact is truly significant,” notes Haarasilta.Further information:Jussi Haarasilta, Executive Vice President, Finnvera, +358 29 460 2601Read also: An extensive network enables shipbuilding

Articles
26.10.2017
Energy brings companies together in Vaasa -Financing solutions are often important in export trade

Over the years, the Ostrobothnia region has become home to an exceptionally active hub of companies that promote one another’s growth. All the companies in the cluster work with energy in one way or another. Wärtsilä is one of the companies driving exports in the area. One of the growth companies WE Tech wants to cut the energy consumption of ships by one-third, says CEO Mårten Storbacka.The energy cluster in Ostrobothnia boasts impressive figures. It comprises approximately 150 companies with a combined revenue of over four billion euros. The companies employ a total of 11,000 people, of which over 1,000 work in product development.One of the most successful growth companies in the area is WE Tech, which specialises in improving energy efficiency in the marine sector. The company’s vision is to reduce oil consumption in the global shipping industry by one-third.CEO Mårten Storbacka sees the extensive network of experts as Vaasa’s strength. WE Tech’s key employees used to work at other companies in the cluster before joining the company.“We benefit one another. We have a strong culture of win-win strategies,” Storbacka says.WE Tech uses permanent magnet and variable speed drive technology. To put it more simply, a shaft generator is installed in the ship and it provides energy while the vessel is at sea. The auxiliary engines can be shut down, which reduces fuel consumption.WE Tech’s partners include the wind power company The Switch and Danfoss Drives (former Vacon).“We are the leading company in our sector. Our services cover the entire life cycle of the solution, from sales to maintenance,” Storbacka says.The company’s leading position and the prospect of partnering with larger enterprises also interests suppliers. CEO Storbacka says that smaller companies are interested in collaboration with WE Tech and, on the other hand, WE Tech is constantly on the lookout for new partners.Last year, WE Tech’s revenue amounted to EUR 6.2 million, and this year’s forecast is EUR 12 million. The company has immense potential to grow because hundreds of new cargo vessels are ordered every year.“Our competitors are large, global enterprises, but our technical expertise is unrivalled. We have also collected an impressive list of references of past deliveries. Potential new customers want to know what we have achieved so far. We also rely on our service network of partners that covers over 50 countries,” Storbacka says.Leading export companies teach othersUp to one-third of exports in the Finnish energy sector originate from the Vaasa region.According to John Erickson, Regional Manager for Western Finland at Finnvera, the importance of major companies like Wärtsilä can be seen in the statistics.“These important export companies have also attracted other growth companies to the area, such as engineering offices, component manufacturers and software developers,” Erickson lists.Leading export companies like Wärtsilä also cooperate with one another. Wärtsilä’s Energy Solutions unit in Vaasa exports, among other things, gas and oil power plants.The plants are powered with Wärtsilä’s engines, but Energy Solutions always provides the customer with the entire solution, complemented with support from Wärtsilä’s Services unit during the entire life cycle of the plant. The solution is based on the engine, but it covers the entire package, including services provided by subcontractors and partners.“We play an important role in enabling export trade. We combine the elements into an exportable package,” says Tuomas Haapakoski, Director of Financial Services at Wärtsilä.Wärtsilä helps its suppliers enter international business.“The entire supply chain must meet international quality and other requirements, and also our financial partners must be competitive in the global market,” Haapakoski says.Different funding needsDelivering power stations with a capacity of up to hundreds of megawatts is not small-time business. Sales published by Wärtsilä this year include the delivery of power plants to Indonesia. The company operates globally.“The funding pressure facing our customers also affects us, particularly in developing countries. Large-scale projects require competitive financing,” Haapakoski says.Often, the outcome of potential exports depends to a large extent on financing.According to Petri Vartiainen, Senior Adviser at Finnvera’s Large Corporations, the companies need Finnvera’s help in organising funding because most of the buyers are in developing and growing economies. In most cases, the competitors are supported by the export credit agency of their country.“The typical amount of funding is EUR 50–100 million, with a payback period of eight to twelve years,” Vartiainen says.The exporter usually contacts Finnvera first. In Finnvera’s buyer credit arrangement, the vendor receives the money by the handover of the power plant. The buyer funds the investment using long-term credit, and Finnvera guarantees the buyer credit for the bank.If necessary, Finnvera’s subsidiary Finnish Export Credit Ltd can issue the export credit and offer interest equalisation. Project funding is another option.There are also several funding solutions for SMEs. The needs of different companies differ greatly. Some need funding during the manufacturing phase, while others want to guarantee their receivables after delivery.For example, WE Tech uses the Bond Guarantee. Under a Bond Guarantee, the exporter can insure a bid bond, an advance payment bond, a performance bond or a maintenance period bond issued by a bank in favour of a foreign buyer.Erickson from Finnvera points out that the important thing is to contact the funding partner at an early stage.“Export volumes are increasing, as is the amount of funding we grant during manufacture. Companies have understood that we can offer financing and guarantee their exports. Finnish suppliers, on the other hand, need working capital financing when they recruit more personnel to handle the increasing volumes,” Finnvera’s Erickson comments.FACTS: Drivers of exports in Ostrobothnia The Vaasa energy cluster comprises approximately 150 companies with a combined revenue of over four billion euros. Approximately 80 per cent of the revenue comes from exports. The companies employ around 11,000 people, of which over 1,000 work in product development. There is also another cluster in Ostrobothnia, it is part of the bioenergy and chemical industry cluster in Kokkola, Central Ostrobothnia. According to statistics by Finnish Customs, the share of Ostrobothnia in all Finnish exports is six per cent. Read more about credit risks in export trade here. Read more about our working capital for export products here. Read more about financing for the buyer here.

News
09.10.2017
Buyer financing arranged through cooperation between export credit agencies

The arrangement of financing plays an increasingly important role in export trade negotiations, and this trend has gained strength in recent years. Finnvera facilitated Nokia’s telecommunications equipment deliveries to Verizon, one of the leading teleoperators in the world, by providing financing and and guarantee. In this major transaction, the share of Finnvera’s guarantee and financing is USD 1.5 billion, or roughly EUR 1.3 billion. Targeted at North American operations, financing is a result of cooperation between export credit agencies: the Canadian export credit agency Export Development Canada (EDC) also took part in the arrangement of financing.This financing arrangement carried out jointly by export credit agencies is the first of its kind.“Verizon is one of Nokia’s leading customers for all major technologies, products and services, and we are pleased to have been able contribute to the close Nokia-Verizon relationship with this landmark Export Credit Financing, which was supported by Nokia’s ECA partners Finnvera and EDC,” says Nokia’s Lenny Floria, Head of Regional Treasury & Structured Finance, Americas.The largest telecom sector deal where Finnvera has participated in financingThe more difficult and more competitive the market an enterprise strives to enter, the more probable it is that the buyer sees financing as a competitive edge.As an export credit agency, it is Finnvera’s task to improve the chances of Finnish export companies on the market. What was exceptional for Finnvera in this deal was its size. This is the largest telecom sector deal in which Finnvera has been involved.“This demonstrated that with financing and guarantees, we can promote Finnish companies’ export activities. Even when the buyer is a global company, an export credit agency may play an important role in financing as major corporations aim to seek financing in a diversified manner from various sources,” says Antti Saviaho, Senior Adviser at Finnvera.Finnvera provided Deutsche Bank, the bank that arranged the financing, with a guarantee. The buyer credit was financed by Finnvera’s subsidiary Finnish Export Credit Ltd.“For Finnvera, this is a normal financing arrangement that is based, like other major financing transactions, on careful analysis, risk assessment and self-sustainability, which is a key guiding factor in Finnvera’s operations. Finnvera does not hand out subsidies but instead covers its expenses with income received from customers,” notes Jussi Haarasilta, Executive Vice President at Finnvera.Telecommunications is one of the main export sectors in FinlandDue to increasing demand, the ceilings of Finnvera’s export credits and export credit guarantees were raised with legislative amendments twice during 2016. On the basis of the current year’s figures, the increased authorisations were truly needed. The Verizon deal is a good and large-scale example of how Finnvera uses its increased authorisations to promote the Finnish export sector.As is typical of export credit agencies in general, Finnvera’s export financing focuses especially on three sectors: telecommunications, shipping and shipbuilding industry, and forest industry.Further information:Jussi Haarasilta, Executive Vice President, Finnvera, +358 50 346 9537 Antti Saviaho, Senior Adviser, Finnvera, +358 50 468 4478

Articles
03.10.2017
Taking SME support to the next level

Ensuring that profitable projects do not fail due to lack of financing, is an important part of Finnvera’s mandate as a state-backed risk financier. Katja Keitaanniemi, executive vice president responsible for SMEs at Finland’s Finnvera, explains what special measures the group takes to look after smaller businesses.Small and medium-sized enterprises (SMEs) have become an important part of our export credit agency (ECA) mandates. We all like to (repeatedly) state this in our strategies and in our communications, both internally and externally. Certainly, many ECAs have streamlined their products and processes to better serve their SME clients.Finnvera too has ‘upgraded’ its products targeting SMEs or small transactions in general. The group recently launched ‘Export Receivables Guarantee’ aimed at the exporter and ‘Receivables Purchase Guarantee’ aimed at banks financing export invoices. Finnvera has also introduced a ‘Bill of Exchange Guarantee’ for markets where bills of exchange work well as a simple way of documenting an export credit. In the trade credit business, these new modified credit insurances and buyer credit guarantees serve the short-term credit insurance with relatively small amounts. However, there has been some discussion about longer credit terms and about the possibility to offer direct cross-border export credits for small transactions – a business area where banks seem to have lost interest due to ever-increasing transaction costs resulting from tightening regulation.Many ECAs have in recent years successfully introduced products such as Working Capital Guarantee. From our perspective this seems curious as Finnvera has been combining domestic SME financing and an export credit agency from the beginning and has always had Working Capital Guarantee in its product portfolio. Providing credit enhancement for the working capital needs of SMEs, has been bread and butter in our business model since the 1960s.When working with SMEs, one must use simplified policies and procedures. Most ECAs have by now introduced SME-friendly approaches to process applications quickly and efficiently and to offer products with a minimal amount of ‘fine print’. But what else can be done for SMEs apart from improving products and processes? In its risk policy, Finnvera has introduced increased flexibility, a more aggressive approach to taking risk in SME exporters’ small transactions compared to larger exporters’ transactions. This may be shown, for example, in accepting a lower level of information required on the buyer. We have experienced a tendency where SMEs often sell or export to other SMEs – and the buyer credit information tends to be insufficient or very scarce. In such cases, Finnvera can be more flexible. The experience so far is encouraging. If loss ratios turned out to be higher, one could argue that the impact of these transactions for SMEs is very high and the SME-related buyer credit portfolio is only a small fraction of Finnvera’s overall portfolio.Focusing merely on products is clearly not enough - and may even be a bit old-fashioned. SMEs may not know which products they need or want. And client managers in commercial banks working with growth oriented SMEs and mid-caps may have gaps in their knowledge of financing instruments used in foreign trade. To bridge these gaps Finnvera has been organising training programmes both for growth oriented companies and their bankers. It is now considering the next step: offering trade finance-related consulting services for SMEs.As a domestic SME financier, Finnvera offers a product palette that covers loans and guarantees from investments and working capital to financing changes of company ownership, environmental guarantees, start-up -guarantees, internationalisation guarantees, etc. Until recently the products on offer also included early stage Venture Capital ‘Seed Financing’ for innovative growth-oriented SMEs. The special focus is to offer a palette that covers financing needs from the start to internationalisation. And for the customer, it does not really matter which product is being used: they just need financing or risk cover.Finnvera focuses specifically on SMEs aiming at growth and internationalisation. Our target clients are growing and globalising enterprises - or ‘global’ companies. The special unit that covers this market segment offers both domestic financing needs and export credit products. It is absolutely essential that our client relationship and credit managers can offer solutions on a larger scale of financing needs so that domestic SME financing and export credit guarantees as operational functions do not work in silos.This of course requires some expertise from the personnel as they need to master a wider range of products. These particular client managers focusing on growth-oriented and export-oriented customers are very experienced and have worked on both the domestic and the export finance side of business. The same specialisation is needed on the credit manager side as Finnvera has separated its credit function from its client function. Finnvera has some 1,000 clients in this customer segment taken care of by around 20 highly skilled customer relationship managers, and the yearly offering reaches to several hundreds of millions of euros.Combining domestic financing solutions with export credit agency offerings is not all: Finnvera is part of ‘Team Finland’, which gathers various official actors together to find synergies when serving customers. Team Finland members include other important state-backed agencies or entities promoting innovation and growth such as TEKES (organisation for financing research, development and innovation), Finpro (Finland’s export promotion agency helping SMEs to export), and TESI (equity / venture capital provider).  These groups share the same premises in the same office building. In total, 600 experts from four separate organisations now share a modern open plan, multi-space office focusing on their joint customer base of growth and export-oriented companies.We are quite sure that the next megatrend in public SME financing will be in external focusing and cooperation, not any more in internal concentration: how to combine forces with your colleague organisations to serve SMEs better. This requires a new attitude, but Finnvera is determined to remain in the frontline in finding new and better ways to support SMEs. In the end, it is results that matter: we need more ‘global’ companies!Katja KeitaanniemiExecutive Vice President, SME's, FinnveraThe article was originally published in Berne Union’s newsletter The Bulletin in September 2017 More information about Berne Union

Articles
19.09.2017
Risk mitigation is an element of export credit insurance

Through reinsurance, Finnvera prepares for increased exposures and, in particular, strives to mitigate the concentration of risks in certain sectors.As part of the company’s risk management strategy, Finnvera has revised its portfolio reinsurance for export credit guarantees. Through reinsurance, Finnvera prepares for increased exposures and, in particular, strives to mitigate the concentration of risks in certain sectors.Owing to the structure of Finnish industry, exports are heavily concentrated in a few sectors. This underlines the importance of Finnvera’s risk management system. In addition, individual export transactions, such as orders for cruise vessels, may be very large. According to the international evaluation report published in March 2017, Finnvera’s management of risks and exposures is at an excellent level in international comparison. In reinsurance, Finnvera is a pioneer among export credit agencies.The renegotiated, more extensive portfolio reinsurance entered into force on 1 July 2017. Portfolio reinsurance covers a significant share of Finnvera’s risks related to export credit guarantees and is tailor-made to cover Finnvera’s risk profile. The revised portfolio reinsurance has multiple levels so that it would encompass all of the necessary exposure volumes. In order to ensure the scope of coverage, reinsurance is provided by several international reinsurance companies.Internationally, Finnvera is one of the first export credit agencies whose risk mitigation strategy has included systematic risk mitigation through reinsurance for years. In addition, Finnvera’s activities are always based on controlled risk-taking and an analysis of the buyer, sector and country.“Systematic commercial reinsurance is not necessarily a part of the functions for all Export Credit Agencies. The expectation for long-term self-sustainability for export guarantee facilities are derived from international legislation but also included in the direct legislation governing Finnvera’s activities. This means that we are obliged to cover our expenses with our income. Reinsurance covers us from export risks much in the same way as a normal home insurance covers your house or belongings in advance, before an accident has materialized. It’s too late to think about purchasing home insurance when your kitchen is on fire,” says Senior Adviser Jenni Ruotsi from the Large Corporates Unit of Finnvera, who is responsible for reinsurance.“We are concerned because surveys indicate that only one third of Finnish SMEs have coverage against export risks, and we want to practice what we preach. To ensure the continuity of our activities, we must have coverage against risks that cannot always be predicted. As a state-owned export credit agency, our task is to support Finnish export companies so that they can secure deals abroad. Without Finnvera’s risk-taking, many export transactions would not materialiseOur exposures are large, but we must act so that the potential realisation of the risk would not endanger self-sustainability even over the long term,” says Ruotsi.Sectoral concentration, a typical feature of export credit guaranteesFinnish companies have signed large export deals, which is positive for the Finnish economy. Owing to increased demand, the maximum amounts of Finnvera’s export credits and export credit guarantees were raised twice during 2016 through legislative amendments. On the basis of figures from the first few months of the year, the increased authorisations have really been needed.Finnvera’s export financing has focused particularly on three sectors: telecommunications; shipping companies and shipyards; and the forest industry. So far the only larger risk realised during Finnvera’s existence was in the telecommunications sector. In 2016, Finnvera reported that it was preparing for a more substantial loss in Brazil. Thanks to reinsurance, the loss is considerably smaller than it might be otherwise.Sectoral concentration is a well-known factor that is part of the nature of export credit guarantees.“It is typical of export credit agencies that their exposures weigh heavily on an individual sector that dominates the industrial structure of the country in question. For instance, in Denmark the focus is on wind power, in Norway on the oil sector and in Italy on the shipbuilding industry. The emergence of concentration risks is also the reason why export credit agencies, in the end, need support from the government for their activities.”Search for new insurance methods part of risk management strategyIn addition to portfolio reinsurance, Finnvera uses and actively develops other methods for insuring covered exposures, such as one-off policies pertaining to a specific risk. The same risk can be covered in various ways, and in the same way as the buyer of a house uses the house purchased as collateral, the export trade may also include the use of collateral.“The search for new insurance methods is part of Finnvera’s risk management strategy. Our aim is self-sustainability in the long term, and we want to be proactive. Reinsurance is one area where we want to continue to be a pioneer among the world’s export credit agencies.”Inquiries:Jenni Ruotsi, Senior Adviser, tel. +358 50 352 2430

Press Releases
17.08.2017
Half-Year Report of the Finnvera Group for 1 January–30 June 2017

Rising export industry orders have increased demand for Finnvera’s export financingThe upturn in the Finnish economy and the rise in export industry orders have increased the demand for Finnvera’s export credit guarantees and export credits. The ceilings for Finnvera’s export credit guarantees and the authorisation to finance export credits were raised from the start of 2017 to help the company meet the increased demand especially in ship financing. Raising the ceilings for Finnvera’s and export credits proved useful during the first half of the year. The higher ceilings were really needed, not only for securing new large orders but also, for instance, in the telecommunications sector. Demand for SME and midcap financing remained steadier during the first half of the year. The Group’s financial performance was strong in the first six months of the year. The profit was EUR 57 million (-7 million).The maximum amounts of Finnvera’s export credit guarantees and export credits were raised from the beginning of 2017. The authorisation to grant export credit guarantees was raised to EUR 27.0 billion, while the authorisation to grant export credits was raised to EUR 22.0 billion. According to an external evaluation of Finnvera’s activities commissioned by the Ministry of Economic Affairs and Employment, the company’s risk management is at an excellent level internationally. When granting financing, Finnvera manages risks through careful analysis. Exposure is monitored constantly and, whenever possible, protective measures are taken using for instance reinsurance.During the period under review, Finnvera’s funding responded to the increased demand for export credits. In May, Finnvera issued a 15-year bond of EUR 750 million, which attracted a great deal of interest. By means of a private placement, the bond sum was raised by EUR 100 million at the end of June. This has the longest maturity among the bonds issued by Finnvera to date.Business operations and the financial trendThe value of the export guarantees and special guarantees offered by Finnvera in January–June totalled EUR 6.3 billion, or over five times more than during the corresponding period the year before (1.2 billion). Significantly more export credits were also offered. The value of export credits offered by Finnvera in January–June totalled EUR 5.7 billion (0.5 billion). Some large individual projects for instance in the shipbuilding and telecommunications sectors contributed to the growth.Finnvera continued to speed up the financing of small export transactions by launching the Receivables Purchase Guarantee, which is suitable for short-term export transactions of less than EUR two million. The goal is to boost financing and to promote the operating potential of Finnish export companies of all sizes.The total exposure for export credit guarantees and special guarantees, including current exposures and offers given, totalled EUR 22.4 billion at the end of June (18.4 billion). Total exposure increased by 22 per cent during the period under review. The increase was attributable, in particular, to the rise in offers given. Current exposure accounted for EUR 15.8 billion of the total exposure at the end of June, or only 2 per cent more than at the start of the year. At the end of June, the exposure included in the maximum authorisation of EUR 27 billion for export credit guarantees totalled EUR 17.2 billion (14.4 billion).In January–June, the demand for SME and midcap financing was slightly higher than the year before. However, as financing was available on market terms, the volume of loans and guarantees offered during the period under review was 6 per cent less than in the previous year. Domestic loans and guarantees in SME and midcap financing stood at EUR 2.2 billion at the end of June; this was 2 per cent less than at the start of the year. SME and midcap financing still focuses on working capital, but a positive feature is that financing is now more closely targeted at investments and growth enterprises. During the period under review, Finnvera continued its well-received campaign to accelerate transfers of ownership in SMEs. The goal is to increase the number of growth enterprises through transfers of ownership. By the end of June, Finnvera contributed to the financing of ownership arrangements for nearly 550 enterprises, which was 3 per cent more than the year before. Expressed in euros, financing for ownership arrangements was 18 per cent less than during the same period in 2016. Finnvera Group         1 Jan–30 Jun 2017 1 Jan–30 Jun 2016 Change % Offered financing, MEUR           Loans and guarantees 454 483 -6 %     Export credit guarantees and special guarantees  6 262 1 226 411 %     Export credits 5 748 477 1105 %           30 Jun 2017 31 Dec 2016 Change % Outstanding commitments, MEUR            Loans and guarantees 2 226 2 261 -2 %      Export credit guarantees and special guarantees  22 397 18 426 22 %      Export credits 5 043 4 782 5 %           1 Jan–30 Jun 2017 1 Jan–30 Jun 2016 Change % Net interest income and net fee and commission income, MEUR 90 93 -4 % Operating expenses, MEUR 23 25 -8 % Operating profit, MEUR 60 -7,4 913 % Profit for the period, MEUR 57 -6,9 929 %           30 Jun 2017 31 Dec 2016 Change % Balance sheet total, MEUR 9 986 9 498 5 % Equity, MEUR 1 264 1 207 5 %  -of which non-restricted reserves, MEUR 1 012 955 6 %           30 Jun 2017 31 Dec 2016 Change %-point Equity ratio, % 12,7 % 12,7 % 0,0 Capital adequacy, Tier 2 , domestic operations, % 23,1 % 22,5 % 0,6 Cost-income ratio, % 25,4 % 27,0 % -1,6 The Group’s profit for January–June 2017 was EUR 57 million, as against a loss of EUR 7 million during the corresponding period the year before.The main reasons for the improvement of financial performance from the previous year were the smaller losses from export credit guarantee operations and the smaller provisions for losses recorded by the parent company, Finnvera plc. In January–June, export credit guarantee losses and provisions for losses totalled only EUR 2 million, whereas the losses entered and the provisions made in the reference period amounted to EUR 66 million. In the report period, the Group’s guarantee losses and provisions as well as impairment losses on loans amounted to EUR 9 million (65 million), or EUR 57 million less than during the corresponding period the year before. The entries for impairment losses and provisions for losses are estimates. Their amounts may change even substantially as the volume and accuracy of information increase.Apart from smaller guarantee losses and provisions, the gains from items carried at fair value contributed to the Group’s improved performance during the period under review. These totalled EUR 3 million (-10 million). The increase in gains from items carried at fair value was mainly attributable to changes in the fair values of derivatives, liabilities and venture capital investments.In addition, financial performance was improved by the decrease of 8 per cent, or EUR 2 million, in operating expenses. Above all, the lower operating expenses were the result of a decrease in personnel, lease and property expenses.The profit of the parent company, Finnvera plc, stood at EUR 53 million (-7 million) in the period under review. The profit was broken down by the divisions as follows: Large Corporates accounted for EUR 40 million (-17 million) and SMEs and Midcap for EUR 13 million (10 million). The subsidiaries had an impact of EUR 4 million on the Group’s profit for the period (0.1 million). Finnvera Group H1/2017 H1/2016 Change Change 2016   MEUR MEUR MEUR % MEUR Net interest income 23 27 -3 -12 % 50 Fee and commission income and expenses (net) 66 67 -0,3 -1 % 144 Gains/losses from items carried at fair value 3 -10 12 127 % -20 Net income from investments -0,5 0,1 -0,7 -496 % 0 Other operating income 0,6 0,2 0,4 202 % 12 Administrative expenses -22 -22 -0,4 -2 % -44 Depreciation and amortization -0,8 -0,7 0,2 25 % -2 Other operating expenses -1,0 -2,6 -1,6 -61 % -4 Net impairment loss on financial assets -9 -65 -57 -87 % -66 Impairment loss on other financial assets 0 0 0 0 % -2 Operating profit 60 -7,4 67 913 % 69 Profit for the period 57 -6,9 64 929 % 70 Outlook for financingIt is expected that the demand for export credit guarantees and export credits provided by Finnvera will continue to be strong. Total volumes will be largely dependent on individual major projects, especially in shipbuilding and telecommunications. Large corporations’ trade negotiations requiring long-term financing often take a long time, and we do not foresee any significant changes in the demand forecast previously.More often than before, demand focuses on Western industrialised countries, which indicates the importance of long-term financing in the export of capital goods. Ships, telecommunications and the forest industry are still expected to account for the bulk of demand associated with large corporations’ exports. Among Finnvera’s major country exposures, Russia has shown signs of modest economic growth. It is also believed that demand for export credit guarantees will pick up when compared against previous years. Despite the problems in the Brazilian economy and administration, demand for guarantees is expected to continue and focus widely on different industries. New demand is also visible in the Middle East region.Driven by Finland’s good economic growth, the demand for and granting of Finnvera’s SME financing are expected to pick up speed towards the end of the year. In the first half of the year, an increasingly large percentage of the financing was granted to growth enterprises. Launched in 2016, the volume of loans guaranteed for banks by the European Investment Fund (EIF) increased, as did Finnvera’s partial guarantees. During the first six months of 2017, the volume of partial guarantees tripled, to about EUR 24 million, when compared to late 2016. This predicts that demand will continue to be strong.The campaign to accelerate transfers of ownership continued in the first half of 2017. The number of transfers of ownership financed during the first six months was record high when compared to previous years. The demand for financing for transfers of ownership is also expected to continue at a good level for the second half of the year.With respect to financial markets, it is likely that the trend in demand for both export financing and domestic SME financing will remain at the present level for the second half of 2017 as well.CEO Pauli Heikkilä:“Judging by the demand for Finnvera’s export credit guarantees and financing, it can be assumed that Finnish exports are reviving in other sectors as well. The barometer surveys published last spring also forecast rising investments and greater demand for financing in Finland, but this has not yet been seen as definite growth in the demand for Finnvera’s domestic SME financing. We assume the explanation to be that the Finnish banking sector operates well and can respond to the demand for financing on market terms. The economic outlook is good, and companies seeking financing are economically in a better shape than before, which may reduce the risk-sharing role sought from Finnvera. In addition, there is a new option: a guarantee granted by the European Fund for Strategic Investments, which banks can use as an alternative to Finnvera’s guarantees.The use of Finnvera’s authorisations means at the same time that the State’s total exposure associated with export financing has risen rapidly. However, it is worth noting that the increase in authorisations is associated with export deliveries taking place in the future. The growth of Finnvera’s real commitments based on current disbursements is clearly more moderate. Finnvera manages risks through careful analysis when granting credits and by constantly monitoring the exposure situation. According to the international assessment report commissioned by the Ministry of Economic Affairs and Employment and published in March 2017, the export financing system implemented by Finnvera in Finland is of a high standard, and risk management is on a par with the best international practices.Financially, Finnvera’s first six months of 2017 were strong. On the whole, our objective continues to be that Finnvera’s activities remain self-sustainable in the long term and that our activities are funded by proceeds from guarantee activities. Our statutory task is to bear credit risks that arise, for instance, from export transactions. The realisation of individual risks is impossible to predict in every respect.”Half-Year Report 1 January–30 June 2017 (PDF)Inquiries:Pauli Heikkilä, Chief Executive Officer, tel. +358 29 460 2400Ulla Hagman, Senior Vice President, CFO, tel. +358 29 460 2458

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