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
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
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.
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
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
Stock Exchange Release 29 September 2017, 10.00 amFinnvera issued on 27th September 2017 a USD 1 billion three year bond. The subscriptions quickly rose to approximately USD 1.6 billion.The bond is Finnvera’s largest US Dollar transaction to date.Lead managers for the issue were Crédit Agricole CIB, Citi, HSBC and Nordea. The greatest demand came from investors in the Americas and Asia.Finnvera uses the funds for financing export credits as well as the domestic SME sector.The bond was issued under Finnvera’s EMTN (Euro Medium Term Note) programme. The programme is guaranteed by the Republic of Finland. The rating of Finnvera’s EMTN Programme corresponds to the rating assigned to the Republic of Finland for its long-term liabilities. The rating given by Moody’s to Finnvera is Aa1 and that given by Standard & Poor’s is AA+.Additional information:Ulla Hagman, CFO, tel. +358 29 460 2458Mikael Nordgren, Head of Treasury, tel. +358 29 460 2467
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
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
Finnvera is one of the ECA partners of an international export finance conference in the autumn. Annual Global Export Finance Conference (GEF) takes place in Barcelona, Spain 12th–14th September 2017.As the only conference dedicated solely to the export finance market the Global Export Finance conference is the most influential and most established gathering of export finance professionals that gathers participants all over the world. This year the Global Export Finance Conference is being arranged for the 18th time by a global trade and finance publisher Euromoney Trade Finance.Finnvera’s Deputy CEO Topi Vesteri is one of the event’s key speakers. Vesteri is president of the Berne Union that is an association for the global export credit and investment insurance industry.More information about the Global Export Finance Conference.
Finnvera’s new Receivables Purchase Guarantee speeds up the financing of small export transactionsHalf of Finnish SMEs engaged in exports believe that the value of their exports will rise this year. Equally many companies will also increase their investments in internationalisation. These are some of the findings of the SME Barometer Survey that was conducted this spring. The survey encompassed about 4,800 companies, of which 1,100 operate on the international market. However, export companies still face challenges in arranging financing for small export transactions and protecting themselves against export risks. In order to speed up financing, Finnvera has introduced a new Receivables Purchase Guarantee to complement the Bill of Exchange Guarantee and the Export Receivables Loan, which were launched a year ago.The Receivables Purchase Guarantee is typically applicable to continuous exports with a short payment period, when the export products are, for example, consumer goods, raw materials, services or semi-finished products. Finnvera bears the risks associated with financing and the bank is protected from the eventuality that the buyer fails to pay the invoice on the due date. The guarantee is granted directly to the bank that purchases receivables from its own client, i.e. the exporter, in connection with foreign trade.- The instruments used for financing small export transactions should be as simple and easy to use as possible for both the exporter and the bank. We continuously strive to develop our products so that banks would find it easy, with the help of our guarantees, to offer financing for even small export deals. For products aimed at contracts of under two million euros, Finnvera bears more of the risk itself and, by relaxing the terms, strives to speed up financing and promote the business opportunities of Finnish export companies irrespective of their size, says Minna Lindqvist, Development Manager at Finnvera.New products reduce the exporter’s and bank’s riskBoth the Receivables Purchase Guarantee and the Bill of Exchange Guarantee enable the exporter to grant payment time to the buyer while receiving the money for the transaction on cash terms. Both guarantees protect the bank against credit risks associated primarily with the buyer and the buyer’s country. A Bill of Exchange Guarantee can be granted for a payment period of up to five years and it is well suited, for instance, to an individual capital goods transaction, such as exports of machinery or equipment, whereas the Receivables Purchase Guarantee is suited to short payment periods. The products complement each other. For instance, Finnvera does not grant Bill of Exchange Guarantees for exports to Russia, but a Receivables Purchase Guarantee may be granted for this purpose.The Bill of Exchange Guarantee was launched a year ago, and its use is gradually increasing. Applicants for the guarantee include large, small and midcap companies that have exported primarily to European and South American markets. Calculated on the basis of the applications, the average contract value has been EUR 1.3 million. So far the smallest contract guaranteed by a Bill of Exchange Guarantee has been valued at EUR 200,000. Only one in three export companies protect themselves against risksThe new products also provide exporters with additional means of protecting themselves against risks associated with export trade. According to the SME Barometer, Finnish SMEs export goods and services abroad at a high risk. As many as two thirds of export companies trust their customers’ ability and willingness to pay so much that they do not protect their sales receivables.This is the case even if a single credit loss may at its worst endanger the future of the entire company, especially if the company is just starting exports. Protection against export risks is also important now when exports are gaining momentum and the economy is at a very promising stage.- The more important and more tailored the transaction is for the company, the more crucial it is to protect receivables. We encourage export companies to contact us at an early stage of business negotiations if something about the export transaction puzzles them. We are glad to advise about selecting an applicable financing solution. Our goal is to help Finnish companies of all sizes to win contracts and protect themselves from risks associated with exports, says Lindqvist.Inquiries:Minna Lindqvist, Development Manager, Finnvera, +358 50 5267 639, firstname.lastname@example.orgThe SME BarometerThe Federation of Finnish Enterprises, Finnvera and the Ministry of Economic Affairs and Employment jointly conduct an SME Barometer Survey twice a year. The barometer for spring 2017 is based on responses given by about 4,800 SMEs throughout Finland. Nearly 1,100 of the respondents are active on international markets.Read also:More about the Bill of Exchange Guarantee More about the Export Receivables Loan
Russians now believe in cautious economic growth, says Team Leader Anu-Leena Koskelainen.Finnish companies’ increasing interest in Russian markets is reflected as more frequent inquiries at Finnvera’s Representative Office in St. Petersburg. The Russian economy has had a slight upturn. Despite challenges, this is opening opportunities for Finnish companies. Finnvera estimates that demand for financing for Russian trade will pick up this year.The following tip sounds like a cliché but is absolutely true: A company aiming at Russian markets must do its homework well.- In Russia, one cannot think that a good product sells itself. Relations and the trading partner’s trust are important, says Team Leader Anu-Leena Koskelainen of Finnvera.Koskelainen was appointed to lead the management of country and environmental risks in the Large Corporates Unit of Finnvera in April 2017. Before that she had worked as an economic and financial adviser at the Embassy of Finland in Moscow, where she had an excellent view of the development of the Russian economy for three and a half years. She was already familiar with Russia and its neighbouring areas from her previous career at Nordea Bank and its predecessors, and she also knew Finnvera through corporate finance.Compared to the situation in 2014–15, the economic outlook in Russia has improved. The sanctions imposed by the West and Russia’s own counter-sanctions have undoubtedly had an effect, but maybe not as great as had been predicted, Anu-Leena Koskelainen says.- When the economy shrinks, it must also grow at some point. Private consumption, previously the engine of economic growth, is showing a slight upswing after a steep decline. Russia’s foreign trade is increasing after having decreased for two or three years. A turn in sentiments took place in early 2017, and Russians now believe in cautious economic growth.Investments need machines and equipment exported by FinlandFinnish companies also have a more positive view of Russia than before. Although Russia has turned to a more protectionist direction and has an import substitution policy that favours domestic production, opportunities may open for Finnish export companies. For instance, the sanctions imposed by the EU on trade with Russia are still in force, but trade is possible when the sanctions are taken into account.- The development of Russia’s own production calls for investments, and these require technology from abroad. There is then a need for machinery and equipment, the greatest of Finland’s exports, Koskelainen says.Russia is a very noteworthy trading partner despite the fact that exporters must know the local conditions and authorities, get used to the bureaucracy and ponder their attitude to corruption.- Russia encourages foreign companies to shift their production to Russia. Export trade, in turn, is easier without having to become established. However, there are challenges: finding partners; trust; and how to secure receivables from the goods sold.- Among established partners, trade is generally conducted against an invoice. Finnish exporters can insure their receivables from a foreign buyer by means of Finnvera’s export receivables guarantee which is well suited to the short-term exports of raw materials and consumables. At the moment Finnvera is covering credit risks connected to over 100 Russian buyers. When there’s a crisis in Russia, advance payments are common. Then the buyer must trust the seller. A letter of credit is often used to secure receivables, but in Russia it is also a financial instrument.No change in economic policy is foreseen for the next few yearsRussia’s economy is troubled by structural problems, such as the state’s strong role, a low productivity of work and demographic challenges. However, major changes in economic policy are hardly likely before the presidential election in March 2018. In recent years, funds collected from oil revenues have been used to cover the budget deficit.- The budget deficit is one of the biggest problems in the economy. In an economy dominated by the state, this affects the allocation of resources. Now that the economic outlook is better, it is not absolutely necessary to carry out extensive reforms.From the Finnish perspective, Russia is near and geographically huge, when compared against many other export markets. Even though there are problems, Russia has improved its ranking in the Doing Business comparison conducted by the World Bank on business regulations.--“Inquiries keep coming about how Russia is doing”After a break of a few years, Finnish companies are again interested in trading with Russia.- Many clients inquire generally about the market and how Russia is doing. This is a positive feature. It’s also positive that more Russian tourists are again coming to Finland this year, giving a boost to Finnish business on this side of the border. The purchasing power of the rouble against the euro has improved, which makes Finland a more attractive destination for Russian tourists, says Timo Pietiläinen, Head of Finnvera’s Representative Office in St. Petersburg, who has been managing Finnish companies’ relations in the St. Petersburg area for about ten years. During this time, he has been stationed in St. Petersburg for a total of seven years. - I act as Finnvera’s eyes and ears in St. Petersburg, he says, characterising his role.Finnvera’s financing for exports to Russia kept rising in 2014–15, when Finnvera’s exposure in Russia increased 1.5-fold. Since then, the exposure has diminished slightly because Russians are paying back their loans.Tools for networking and efficient expert servicesAccording to Pietiläinen, the Finnish SMEs that invest in Russia at present are primarily those that already know Russian markets as exporters or that are already established in Russia. A production line in Russia helps a company now that Russia is restricting imports from outside its customs territory.Even now, many Finnish companies engaged in the building product industry, wood processing industry and the service sector are operating in Russia.In Russia, Finnvera works in cooperation with Team Finland actors. They help companies to network and create contacts, and guide companies for instance in the use of local expert services. After the initial phase, companies themselves manage most of their contacts with the authorities and other Russian cooperation bodies.In Northwest Russia, Finns have a good reputation as reliable trading partners. Most Finnish companies active in Russia operate in the St. Petersburg area. Knowledge of Finland is not as solid in Moscow or further away. The Astana Expo 2017, being held in Kazakhstan from June to September, will offer Finland the opportunity to raise its profile also outside Russia.Read also:Country classification and mapCredit risks in export trade
Finnish companies’ business deals with Brazil are traditionally very large. SMEs also have good export prospects.The tunes of the samba, Brazil’s national dance, are gradually turning from a minor key to a major key. The economy of the country with the world’s fifth largest population and area has emerged from the worst recession of its history. In 2015, the economy shrank by nearly four per cent, and last year was not much better.- Brazil has traditionally been a strong exporter of raw materials, but both the recession sparked by the global downturn and the political crisis have shaken the business environment in recent years. Modest growth is finally expected for this year, and more growth is predicted for next year, says Mika Relander, Senior Adviser responsible for Latin America at Finnvera.What’s more, statistics support Relander’s view. Brazil’s gross domestic product turned positive early this year. According to Relander, protectionism and bureaucracy still hold sway and issues related to corruption are in the public eye, but attitudes to free trade are gradually becoming more favourable. At the same time, the United States is going in a different direction.- Brazil has a huge internal market, and domestic demand has traditionally been the engine for economic growth. Demand has suffered slightly as unemployment has risen, but there has been a turn for the better even in that respect.Brazil has long been Finland’s most important trading partner in South America. Individual contracts are very large in monetary terms. Finnish exports to Brazil have mainly been machines and equipment for heavy industry, various chemicals and fertilisers. The country also offers enormous opportunities for the exports of SMEs.Relander points out that, with regard to Finnvera’s export credit guarantee exposure, Brazil is still among the three countries with the highest political risks.- Demand for guarantees is continuous and fairly extensive, even though it has been quieter than before in the pulp and telecommunications sectors. Investments in Brazil’s infrastructure are expected to pick up in the coming years. This will create opportunities for Finnish exporters, says Relander.Growth keeps Valmet in BrazilThe developing economy attracted Valmet to Brazil over 50 years ago.Valmet’s current focus in Brazil is on pulp production technologies and the associated automation and service solutions. During the past five years, Valmet has delivered two large pulp mills to Brazil. The value of the deliveries has been hundreds of millions of euros. In addition, Valmet has established service business in the region. At present, the company has about 500 employees in Brazil, divided among five locations. Bertel Karlstedt, President of Pulp and Energy at Valmet, says that Brazil’s economy and political system are much less stable than those in Europe.- The instability naturally has an impact on us and our customers. Brazil has had periods of strong growth, for instance from 2002 to 2011. On the other hand, the country has also gone through periods of recession, like those of the past couple of years. The business environment is still attractive to us, as we operate on global markets and seek growth in developing regions.Karlstedt says that much of the pulp produced by their customers is exported.- Our customers’ investments and profitability of business are largely dependent on global markets. The pulp mills built in Brazil during a period of over ten years have been among the world’s largest.According to Karlstedt, Brazil’s annual inflation has recently been around six per cent. However, in 2015 inflation exceeded ten per cent.- High inflation affects both wages and various supply contracts.Brazil has not been the easiest possible operating environment for Valmet. Competition among pulp technology suppliers is very stiff.- Valmet is one of the leading players in Brazil, but new competitors are also entering the market. We have developed both our own local production and production with a partner network. We must act in this way so that we can ensure competitiveness and, on the other hand, can pay import duties and taxes.Karlstedt remarks that the Brazilian administration has striven to steer production into the country by means of import duties and taxes.- There is pressure to dismantle duties. The internal situation in the country may also drive things to another direction.In Karlstedt’s opinion, a company planning to locate in Brazil should also be prepared for the fact that companies in Brazil bear social responsibility by investing in charity, especially in the company’s own operating area.- Valmet gives significant support to local charity organisations, such as Instituto Ayrton Senna and Instituto Ecofuturo. The goal of the programmes supported is to promote basic education and environmental protection. In addition, we have donated old computers to a school and collected funds for a daycare centre.FACT: Brazil The country category determined by Finnvera for Brazil’s credit quality is 5/7 (questionable credit quality). Gross domestic product: About EUR 1,603 billion (2015). Finland’s gross domestic product is EUR 207 billion (2015). Gross domestic product per capita: EUR 7,838 (2015). Finland’s gross domestic product per capita is EUR 37,827 (2015). Economic growth: -3.6% (2016). The growth expected for this year is 0.6 per cent. Inflation: 10.7% (2015). Exports: EUR 170 billion (2015). Imports: EUR 152 billion (2015). The total value of Finnish exports to Brazil in 2016 was about EUR 381 million. Principal sectors: agriculture, mining industry and pulp industry. Currency: Brazilian Real: The exchange rate is EUR 1 to BRL 3.3. Links:Country classification and mapExport Credit GuaranteesSources: Ministry for Foreign Affairs, Focus Economics, Finnish CustomsMain photo: Mika Relander, Finnvera
On the competitive international market, financing associated with export trade may give a decisive edge to a Finnish player. The guarantee granted by Finnvera and financing offered by Nordea helped Metso to secure a contract in Oman, where Metso will deliver a crushing and screening installation to Al Tasnim, a local cement company. The project is underway and the first equipment deliveries were made in February 2017.This is Metso’s first contract for the delivery of an entire crushing and screening plant to Oman, after a break of many years. It is also the first deal in Oman that was decided with the help of a buyer financing arrangement.Metso gave Al Tasnim an offer where export financing covered 85 per cent of the price of the export contract. The financing was provided by Nordea, and Finnvera covered the credit risks by means of a Bill of Exchange Guarantee.The Bill of Exchange Guarantee covers the credit risks arising from the buyer and the buyer’s country. The most typical risk is the buyer’s insolvency, i.e. bankruptcy.The Bill of Exchange Guarantee is well suited, for instance, to individual capital goods transactions, such as purchases of machinery and equipment. The exporter and the buyer agree in their negotiations that the buyer pays the purchase price on credit terms and the debt instrument is a bill of exchange. The exporter receives the payment in cash and the buyer repays the credit to the bank in accordance with the payment schedule agreed. Finnvera gives the bank a Bill of Exchange Guarantee, i.e. compensates the bank if the buyer is unable to repay the credit.- The Bill of Exchange Guarantee is feasible as a guarantee when the buyer and the buyer’s country are creditworthy and the buyer’s country has working legislation on bills of exchange. The Bill of Exchange Guarantee has the challenge that preparations must be started at a fairly early stage of the transaction. While the exporter and the buyer are negotiating about the product, the financier’s representatives are analysing the terms of financing and the risks associated with the transaction, Eeva-Maija Pietikäinen, Head of Trade Finance at Finnvera, explains.Finnvera has developed the Bill of Exchange Guarantee and wants to promote its use in projects lasting at most five years and valued at a few million euros. In the Oman contract, the buyer’s repayment period for the bill of exchange is three years.- From the perspective of competition, an equally matched trading partner offering financing has an edge over a competing enterprise if the latter is unable to offer a comparable financing package. In international competition, the aim of export credit guarantees is always to promote the competitiveness and exports of Finnish enterprises, says Pietikäinen. The successful Oman contract is a good example of cooperation between the exporter, the export credit agency and a commercial bank.- Winning a competition is based not only on the solutions we offer but also on seamless cooperation between sales and financing. We are committed to lowering buyers’ threshold for signing a deal by ‘meeting them halfway’ in terms of financing. I appeal to our sales teams across the world so that they really listen to customers in order to understand what would ease their customers’ pain during the purchase process, says Olli Kellokumpu, General Manager, Sales and Services, Metso Minerals, Middle East and Eastern Africa.More information about Finnvera's export credit guarantees.Read more about the Bill of Exchange Guarantee.
Export credit and investment insurers are optimistic about growth, despite increasing trade risks and political uncertainty. Berne Union members’ business closely tracks developments in the world economy, but at the same time shows considerably less volatility, says Berne Union President and Deputy CEO of Finnish ECA, Finnvera, Topi Vesteri. The Berne Union is an association for the global export credit and investment insurance industry.According to Vesteri this shows how important the credit and investment insurance industry is to sustaining economic growth.–Last year Berne Union members insured 11 % of total world trade and have paid over USD 40 billion in claims since the beginning of the global financial crisis in 2008. Although we have seen some high claims, these are well within tolerable limits for our business, Vesteri says.The Berne Union held its Spring Meeting in Copenhagen in May.Danish Minister of Finance, Kristian Jensen, addressed attendees to the meeting in a speech highlighting the importance of global free trade in promoting growth, prosperity and peace. The former Danish Minister of Foreign Affairs, Uffe Elleman-Jensen, stressed that “international cooperation and cohesion are more needed than ever before” to restore public trust in international institutions.Additional information:Topi Vesteri, Deputy CEO, Finnvera, + 358 29 460 2679Berne Union's Press Release 19.05.2017.The Berne Union Website.
Finnvera and Export Guarantee Fund of Iran (EGFI) signed a memorandum of understanding (MOU) that strengthens cooperation between Finland and Iran to promote trade.Finnvera and EGFI can cooperate in trade promotion also in third coutries.–This agreement promotes readiness to develop trade to Iran which has suffered from the commercial banks’ limited possibilities to finance initiatives, Topi Vesteri, a Deputy CEO of Finnvera, says.The picture shows Managing Director of EGFI, Seyed Kamal Seyed Ali (on the left) and Topi Vesteri in the signing ceremony.
Finnvera issued on 10th May 2017 a EUR 750 million 15-year bond. The subscriptions quickly rose to about EUR 1.5 billion with over 50 investors.STOCK EXCHANGE RELEASE 12.5.2017 10:00The 15 year bond issue was Finnvera’s longest so far.Lead managers for the issue were Citi, Deutsche Bank and Goldman Sachs. The greatest demand came from investors in Germany and France.Finnvera uses the funds for financing the domestic SME sector as well as export credits.The bond was issued under Finnvera’s EMTN (Euro Medium Term Note) programme. The programme is guaranteed by the State of Finland.The rating of Finnvera’s EMTN Programme corresponds to the rating assigned to the State of Finland for its long-term liabilities. The rating given by Moody’s to Finnvera is Aa1 and that given by Standard & Poor’s is AA+.Additional information:Ulla Hagman, CFO, tel. +358 29 460 2458Mikael Nordgren, Head of Treasury, tel. +358 29 460 2467
Energy and telecommunications sector companies in particular are attracted to the country.Having overcome its debt problems, Argentina has aroused interest among more and more export companies. For a long time, the country was out of range for Western financiers but now it attracts, above all, energy and telecommunications sector companies.- Argentina’s new Government is pro-business, and it seems that the country’s foremost companies are able to obtain money from the bond markets at a competitive price. This has created a situation where nearly everyone is enthusiastic about Argentina, says Mika Relander, Senior Adviser responsible for Latin America at Finnvera.According to him, there are many investment needs. Apart from the energy and telecommunications sectors, there is demand for developing infrastructure and for the mining and wood processing industries.- Argentina’s economy is also advanced enough to attract Finnish companies engaged in the exports of services and education, Relander says.Basic structures in placeRelander believes that positive developments will continue in Argentina even if the political risk is high.- The economy was weak for a long time because of unpaid debts, but recovery has been surprisingly quick. It’s good to remember that Argentina was one of the world’s richest countries until the 1950s. The level of education continues to be the best in Latin America, and the institutional basic structures still exist. Compared against many other countries, such as Iran, Argentina may be a more approachable new market area, says Relander.In the wake of the debt restructuring agreement concluded by international creditors in the Paris Club, Argentina’s country risk category rose from the weakest category to 6/7.- At present, Argentina has little public debt because it was not eligible for debt before. It’s now relatively easy for the country to get credit. The resulting concern is that important reforms aimed at restructuring the economy will be postponed and positive development is delayed, Relander ponders.He believes that many financiers are still cautious and are waiting to see how the country’s political development will continue after the next elections. The presidential and parliamentary elections, important for the future direction of Argentina, will be held in 2019.- Financiers have a long memory and most remember the old problems that arose when borrowers did not meet their payments. However, Argentina is a good example of how democracy sooner or later corrects itself.An explosion of ordersThe opening of the markets has also kept Wärtsilä, a supplier of power plants, busy in Argentina.Tuomas Haapakoski, Director, Financial Services at Wärtsilä, says that the company’s order book multiplied in Argentina following the opening of the country’s markets.- We made the decision to be present in Argentina many years ago and we have had a subsidiary there since 1997. At present, our power plant solutions are really in great demand, says Tuomas Haapakoski, Director, Financial Services at Wärtsilä.Last year, Wärtsilä won seven orders for power plants in Argentina. The combined output of the plants is over 500 megawatts, and the orders will multiply Argentina’s power plant capacity in one go. This also opens up possibilities for growth in maintenance services.- The orders are connected to management of the country’s acute energy crisis, where the government strives to cover the capacity deficit accumulated over the years and to curb the rising costs of power production. The power plants to be delivered now will be built to a fast timetable and will serve primarily as first aid. The opportunities in this sector will certainly rise, says Haapakoski.According to him, the situation in Argentina has quickly turned positive for foreign actors.- For example, currency regulation has been relaxed and energy policy has been developed in a direction that encourages investments. On the financial markets, Argentina has been able to break the isolation that continued for years, and the country is currently working with reasonable openness, Haapakoski says.FACT: Argentina Finnvera’s country risk category for Argentina is 6/7. Gross domestic product: About EUR 402 billion (2015). Finland’s gross domestic product is EUR 207 billion (2015) Gross domestic product per capita: EUR 9,653 (2015). Finland's gross domestic product per capita is EUR 37,827 (2015). Economic growth: 2.1% (2015). Inflation: 26.9% (2015). Exports: EUR 52.2 billion (2015). Imports: EUR 55 billion (2015). The total value of Finnish exports to Argentina in 2015 was about EUR 15 million. Principal sectors: Industry, services and agriculture. Argentina’s main export products are soybeans, oil, gas, and vehicles. Currency the Argentine Peso: The exchange rate is EUR 1 to ARS 16.0. More information about Finnvera’s export credit guarantees is available here.Sources: Ministry for Foreign Affairs, Focus Economics, Finnish Customs
Finnvera’s support enabled us to take risks abroad, says Roope Heinilä, CEO of Smarp.It has long been predicted that services will save Finland’s exports. Services related to information technology, in particular, are growing rapidly and account for over 40 per cent of all exports of services, which total nearly EUR 18 billion year 2015.The only security that a company providing services generally has is its cash flow.According to Finnvera’s experts, exports of services require much more creative financing solutions than traditional exports of goods.- Often a company incurs costs before it has even started to produce the service. While an exporter of goods can use, for instance, machines and equipment as collateral, the only security in exports of services is often the company’s cash flow, says Finance Manager Jani Tuominen of Finnvera.This is a vital difference when negotiating for financing.- In exports of services, we concentrate on earnings and business logic. Attention is paid, among other things, to the agreements that the company makes and the type of cash flow it has, Tuominen continues.When exporting goods, it is often simpler to find a solution for financing.- When goods are exported, we can usually look at the company’s history. The company’s financial statements and key indicators reveal how it has exported similar products before. With an exporter of services, we cannot necessarily see the same from the periodic key figures, Ilkka Soininen, Finance Manager responsible for the exports of goods at Finnnvera, explains.A vacillating lineThe rise in exports of services does not show all that clearly in Finnvera’s statistics because, increasingly often, exports of services are included in exports of goods. Finnvera always tailors financing solutions to suit each individual enterprise, which means that the security for exporting goods and the security for exporting services do not necessarily differ from each other.- At present, the services exported are really diverse, as many companies engaged in traditional trading in goods also sell services. For instance, companies in the machine and equipment industry sell maintenance for the equipment, Tuominen says.In his view, the rise in exports of services is due in part to the economic situation. In addition, the market has changed, and more and more services are sold.- Exporters of services usually need a steady presence on site in the buyer’s country. This is especially true for large markets, such as the United States, where many service companies wish to gain a foothold. Singapore, the modern hotspot for business in Asia, also attracts exporters of services.Growth by taking risksSmarp, a software company specialised in employee communication, has been exporting its services for over four years. Finnvera’s support has played an important role for this service company since its inception as a start-up.- Financing has enabled us to take risks, and without risk we wouldn’t have been able to grow, says Roope Heinilä, CEO of Smarp.Smarp has now over 50 employees.According to Heinilä, Smarp has entered international markets by establishing its own offices, by distributing through local partners and by selling their product directly from Finland. Exports have required help, especially when the company has founded offices abroad.Aside from Helsinki, Smarp has now a foothold in Stockholm, London and New York. Next, the company will look to Asia.- Above all, exports must be considered according to the target country. As an exporter, we want to be available on site when the goal is to meet potential customers face-to-face. For example, on the Indonesian market this has not been sensible so far, but in the UK it is vital.FACT: Export financingFinnvera has a wide selection of alternatives for loans, domestic guarantees and export credit guarantees, which can be used to assemble a suitable financing solution for the exporter. Finding a suitable financing solution always depends on each individual case. Loans. Short-term loans are often appropriate financing solutions for exporters or services and goods. For instance, the Internationalisation Loan is intended for financing a Finnish SME’s business abroad. Domestic guarantees. Guarantees granted by Finnvera can be used as security for loans received from banks and other providers of financing, as well as for other contingent liabilities. For instance, by means of an Export Guarantee, an exporter can acquire pre-delivery or post-delivery financing for working capital from a bank. Finnvera can guarantee, for example, accounts with overdraft facility, limits, and accounts with bank guarantee. Export credit guarantees. A Letter of Credit Guarantee protects a confirming bank against commercial or political risks associated with a confirmed letter of credit, whereas a Bill of Exchange Guarantee is best suited for transactions valued at less than EUR 2 million. The Export Receivables Guarantee is intended for short-term exports. It can be used by exporters to insure their receivables from a foreign buyer against credit losses. Text: Pi Mäkilä
International recognition to Finnvera for financing the world’s largest biomass-fired power plantThe arrangement of financing plays an increasingly important role in export trade negotiations, and this trend has gained strength in recent years. The more difficult and the more international the market an enterprise strives to enter, the more probable it is that the buyer sees financing as an edge in competition. The financing solution tailored for the world’s largest biomass-fired power plant, to be constructed in England, brought Finnvera the international Deal of the Year award. Flexible and innovative financing models were also commended by an international team of consultants that assessed Finnvera’s export financing.According to the assessment commissioned by the Ministry of Economic Affairs and Employment, the export financing system implemented by Finnvera in Finland is of a high standard. The international team of consultants considered that Finnvera’s management of risks and responsibilities is at an excellent level in international comparison. Finnvera manages risks both through careful analysis when granting credits and by constantly monitoring the exposure situation. Finnvera has acted in an innovative manner and, in response to demand, has introduced new products and service processes to the market.The assessment report published in March points out that, owing to the structure of Finnish industry, exports are strongly concentrated in a few sectors. This underlines the importance of Finnvera’s risk management system. Moreover, individual export transactions, such as orders for cruise vessels, may be very large.The key task is to support the Finnish exporter’s competitivenessA good example of a flexible financing solution tailored to local conditions is the project where Finnvera provided buyer credit financing for the design and delivery of a boiler plant by the Finnish company Amec Foster Wheeler Energia Oy for the world’s largest biomass-fired power plant in Middlesbrough, England.Construction of the power plant is in progress, and the plant is scheduled to begin commercial operation at the start of 2020. The 299 MW power plant will be fuelled by wood pellets and chips. Construction of the power plant is estimated to cost approximately GBP 650 million (about EUR 750 million). Finnvera’s share of the financing is roughly GBP 100 million (about EUR 115 million).The financing of biomass-fired power plants is challenging in England. One reason for this is the new type of business model. In this model, the proceeds from the plant are based on the CfD feed-in tariff used for renewable energy in the UK. The supply of fuel rests on long-term agreements. Long credit periods are another challenge for financing. The special needs associated with the project were taken into account in the financing solution of the MGT Teesside project, and the export credit agency played a pivotal role in the provision of supplementary financing.- The export credit is financed by Pension Insurance Corporation of the UK, and the credit risk associated with the power plant company is guaranteed by Finnvera. This is not a typical arrangement in a situation where an export credit agency is involved, but thanks to the solution, agreement on the power plant project was reached. We are very proud that this financing project brought Finnvera the Deal of the Year award at the international Trade Finance Awards event. It is especially important for us to support the success and competitiveness of Finnish exporters on international markets, says Executive Vice President Jussi Haarasilta of Finnvera.For more information: Finnvera to provide financing for a large biomass plant in the UKAn international assessment report gives Finnvera a good gradeLate in 2016, the Ministry of Economic Affairs and Employment commissioned a study on the responsibilities, risks and impacts involved in export financing. The assessment was made by an international team of consultants that has solid experience of export financing. Represented on the team were two consulting firms – Antitrust&TradeRx GmbH (ATRx) and International Financial Consulting Ltd. (IFCL) – and Northumbria University.
Norwegians don’t know all the things Finnish companies can do.Norway is seriously overshadowed by Sweden, if the indicator used is exports by Finnish companies. According to the statistics compiled by Finnish Customs, exports to Norway total about EUR 1.5 billion per year, whereas trade with Finland’s western neighbour, Sweden, is valued at nearly six billion.Companies’ enthusiasm to head for the Norwegian market has long been modest, even though Finns enjoy a good reputation in their neighbouring country.- Norwegians often turn their eyes elsewhere, not to Finland in the east. Success on the export market therefore requires local presence. Trade is based on trust. Many companies start exporting to faraway destinations, even though this involves challenges and requires a lot of money and time, says Regional Director /Norway Markus Laakkonen of Finnvera.- A company planning exports should look closer first. Surveys conducted among companies indicate that interest in neighbouring areas has increased. For instance, Norway has regularly ranked the 3rd or 4th as a destination of interest among Finnish companies, he continues.The traditional oil, gas and energy sectors have long attracted enterprises to Norway. Demand in seafaring, fishing and building has also increased lately.Norway is now looking boldly to the future. One example is the country’s strong input into electric vehicles: the Norwegian Government is planning to ban the sale of traditional diesel or petrol-fuelled cars by the year 2025.Laakkonen says that potential exists in many other sectors as well. Economic growth in Norway dipped last year, but according to forecasts, the gross domestic product will increase by about 1.7 per cent this year.Wealth also gives Norway leeway to make investments in infrastructure and health services.- Norway invests heavily in the reform of health services. Finnish healthcare companies would therefore be in great demand in Norway. Know-how and efficiency, in particular, are selling points for Finnish healthcare companies, Laakkonen points out.The blue economy is risingEven more interesting than economic growth is the increase in Norway’s population. According to population forecasts, Norway is one of the fastest growing countries in Europe.- When the population increases, new roads, transport solutions and schools are needed. This creates opportunities for Finnish companies because the natural conditions in Norway are very similar to those in Finland, says Ambassador Erik Lundberg.He believes that Norwegians are now looking to the sea, in particular.- Oil and gas supplies won’t last forever, and Norway must constantly seek new renewable energy solutions. Opportunities are seen especially in what is called the blue economy: the marine industry, the fish industry and the energy sector.The health sector is also reaching out to the sea. As one topic being studied at present in Norway, Lundberg mentions the health effects of seaweed.In Lundberg’s opinion, Finnish companies have been slow in seeking their way to Norway, because in both countries the other party is known rather poorly.- Norwegians don’t know what Finns can do, and vice versa. In numerous sectors, however, there are many points of contact and areas that would offer good opportunities for cooperation.Stiff competitionLundberg emphasises that the Nordic countries, in general, should have more cooperation. Some innovation cooperation has already been launched between universities.- For example, Slush has also been noticed in Norway, and interest in the Finnish start-up sector has risen.Except for the agricultural and food sectors, Norway is part of the EU internal market. Protectionism occurs mainly in those areas.- Norway is quite an open economy. However, it is good for a company dreaming of the Norwegian market to keep in mind that competition is fierce. One must show up well prepared, and solid trust must first be built with the locals.FACT: Norway Gross domestic product: About EUR 486 billion (2015). Finland’s gross domestic product is EUR 207 billion (2015). Gross domestic product per capita: EUR 93,270 (2015). Finland’s gross domestic product per capita is EUR 37,827 (2015). Economic growth: 1.6% (2015). Inflation: 2.3% (2015). Exports: EUR 105 billion (2015). Imports: EUR 71 billion (2015). The total value of Finnish exports to Norway in 2015 was about EUR 1.55 billion. Principal sectors: Industry and services. Norway’s main export products are oil, natural gas, machinery, metals, chemicals and fish. Currency the Norwegian Krone: The exchange rate is EUR 1 to NOK 9.16. More information about Finnvera’s export credit guarantees is available here.Sources: Ministry for Foreign Affairs, Focus Economics, Finnish CustomsRead more: The electric car boom attracted a Finnish company to Norway
CEO of Parking Energy Ltd: Norwegians don’t have similar know-how in high technology.Norway’s heavy input into new technology, and especially into the development of electric vehicles, has also aroused the interest of Finnish companies working in this sector.It’s about time, too: only a handful of Finnish companies have been established in Norway. Currently, a couple of hundred Finnish companies operate locally in Norway. Despite its geographical proximity, Norway is only Finland’s 13th largest foreign trade partner.Parking Energy Ltd, specialising in the charging technology, looks to Norway with optimism. Jiri Räsänen, CEO of Parking Energy Ltd, sees huge potential on the Norwegian market.- Norway is the clear number one on the world’s electric car market, and it’s therefore only natural that we would head for the Norwegian market. With a population roughly the same as Finland, the country now has nearly 150,000 electric cars, says Jiri Räsänen, CEO of Parking Energy Ltd.One in five Norwegian cars runs on electricity, and the Norwegian Government is planning to ban the sale of traditional diesel and petrol-fuelled cars by the year 2025. For companies such as Parking Energy, the market is tens of times larger than in Finland. At present, there are only about 4,000 electric cars in Finland.Communication worksThe Helsinki-based company is also attracted by Norway’s purchasing power and the long-lasting building boom.- From our perspective, the situation is excellent, as there doesn’t seem to be as much competition in new products as there is in the traditional fields. Know-how of high technology is not quite the same as in Finland; nor is the corporate culture in the service sector as wide as, for instance, in Sweden, Räsänen explains.He feels that the Finnish company has been received well in Norway. Exports have been facilitated by the fact that a few other Finnish companies specialising in the recharging of electric cars have already acted as trailblazers.- So far the country has seemed very straightforward. It’s been easy in Norway to get to talk with the local decision-makers and representatives of the electricity sector. Dealing with the authorities is surprisingly similar to that in Finland, and contacts on the whole are very uncomplicated, Räsänen says.- Norway complies with the EU Directives on many issues, but owing to the Norwegian bedrock, electrical earthing is slightly different from elsewhere in Europe. With the exception of this minor hitch, we haven’t had any problems entering the market, he continues.FACT: Norway Gross domestic product: About EUR 486 billion (2015). Finland’s gross domestic product is EUR 207 billion (2015) Gross domestic product per capita: EUR 93,270 (2015). Finland’s gross domestic product per capita is EUR 37,827 (2015). Economic growth: 1.6% (2015). Inflation: 2.3% (2015). Exports: EUR 105 billion (2015). Imports: EUR 71 billion (2015). The total value of Finnish exports to Norway in 2015 was about EUR 1.55 billion. Principal sectors: Industry and services. Norway’s main export products are oil, natural gas, machinery, metals, chemicals and fish. Currency the Norwegian Krone: The exchange rate is EUR 1 to NOK 9.16. More information about Finnvera’s export credit guarantees is available here.Sources: Ministry for Foreign Affairs, Focus Economics, Finnish CustomsRead more: Norway - peeping out behind Sweden and focusing on the new
On 7 April 2017, Finnvera’s Annual General Meeting elected new members to the company’s Board of Directors and Supervisory Board.Pentti Hakkarainen, Member of the Supervisory Board, ECB Banking Supervision, was elected to serve as the new Chairman of the Board of Directors. Pekka Timonen, Director General, continues as the First Vice Chairman.The Second Vice Chairman is Terhi Järvikare, Director General, who was elected to the Board as a new member.Ritva Laukkanen, MBA, was also elected to the Board as a new member.The members continuing on the Board of Directors are Kirsi Komi, LL.M., Pirkko Rantanen-Kervinen, B.Sc. (Econ.), and Antti Zitting, Enterprise Counsellor.Antti Rantakangas, Member of Parliament, continues as Chairman of Finnvera’s Supervisory Board and Krista Kiuru, Member of Parliament, continues as Vice Chairman.The new members elected to the Supervisory Board are Pia Björkbacka, Adviser, Trade and Industrial Policy, andOlli Rantanen, Head of Legal Services.The members continuing on the Supervisory Board are Eeva-Johanna Eloranta, Member of Parliament, Lasse Hautala, Member of Parliament, Laura Huhtasaari, Member of Parliament, Timo Kalli, Member of Parliament, Kari Kulmala, Member of Parliament, Leila Kurki, Senior Adviser, Kari Luoto, Managing Director, Veli-Matti Mattila, Chief Economist, Ville Niinistö, Member of Parliament, Carita Orlando, CEO, Eero Suutari, Member of Parliament, Christel Tjeder, II Vice Chairman, Tommi Toivola, Senior Adviser, and Sofia Vikman, Member of Parliament.The Annual General Meeting adopted the Consolidated Financial Statements and the Parent Company’s Financial Statements for the period 1 January–31 December 2016, discharged the Supervisory Board, the Board of Directors and the Chief Executive Officer from liability, and approved the proposal made by the Board of Directors for the use of the parent company’s profits.KPMG Oy Ab was re-elected Finnvera’s regular auditor with Juha-Pekka Mylén, Authorised Public Accountant, as the principal auditor.Inquiries:Pauli Heikkilä, Chief Executive Officer, tel. +358 29 460 2400Risto Huopaniemi, Senior Vice President, Legal Affairs and Administration, tel. +358 29 460 2520
India’s telecommunications sector is experiencing aggressive competition. Finnvera believes that export companies will set their sights this year on five countries, in particular.Among the new, opening markets, the greatest demand will focus on Argentina and Iran. In addition, demand for Finnvera’s guarantees is predicted to increase in India and Mexico. The fifth country on the list is Russia.In these countries, investments associated with the modernisation of infrastructure, in particular, will provide export opportunities for Finnish companies as well.- In India, for instance, export credit guarantees at their best exceeded 600 million euros, but exports have been declining during the past three years, says Senior Adviser Outi Homanen of Finnvera, who specialises in Asia.- However, it has been gratifying to note during the past six months that demand is picking up.She points out that Iran is in a different position from the rest of the quintet. The country is still subject to broad sanctions that hinder exports and restrict the financing of exports. Sanctions against Russia are not as restricting in this regard.Finnvera guarantees export credits granted to foreign companies so that Finnish enterprises can trade with them. One contract may involve hundreds of millions of euros. According to Homanen, Finnvera is needed especially when the repayment period of export credits is too long for the bank’s risk-taking.- In other respects too, the importance of guarantee institutions has risen in the 2010s. Banks are still cautious after the last economic crisis, Homanen explains.Demand for Finnvera’s export credit guarantees and special guarantees rose last year by 50 per cent, to almost EUR 15 billion. Demand for export credits, in turn, increased by as much as 74 per cent, to EUR 12.5 billion. In particular, the increased demand was driven by shipyards and the telecommunications and forest sectors.Risk assessments also on siteWith respect to export credit guarantees, Finnvera’s task is to understand what is happening on the market, while also assessing risks. Some risk assessments are conducted on site.Last year, Finnvera’s representatives together with client enterprises in the telecommunications sector alone visited India, Russia, Nigeria, Dubai, Mexico, Argentina and Brazil.In India, telecommunications operators have seen a fivefold increase in 3G and 4G customers within a few years. New competitors have emerged among the operators, such as the extremely aggressively campaigning Reliance Jio, which has operated in India for about a year.Reliance Jio was one reason why Finnvera and Nokia set off on a joint trip to India last autumn.- India has always been an extremely competed and price sensitive market. With many people, the volumes are large. Major investments for operators are now underway in India. For instance, the 3G network is being updated to a 4G network. Such situations often require discussions on financing, which Finnvera is also asked to attend, says Finance Manager Antti Saviaho, who is responsible for the telecommunications sector in Finnvera.However, not all local operators need export credit agencies.- Internationally large players often have access to their own financing options, Saviaho points out.During the visit last autumn, Finnvera met about half a dozen Nokia customers. Some of them were old customers, some newer acquaintances.- We had good meetings together with the exporter, and we got much additional information about the market situation in India. We actually met all of the operators, and it was interesting to note that they all saw the market situation and the related big changes in a slightly different way.According to Gergely Abraham, responsible for Asia Regional Treasury & Structured Finance at Nokia, Finnvera’s presence in the target country benefits all parties.- It is often vital for Nokia’s local customers and pivotal for Nokia’s competitiveness in terms of financing. In a way this is a question of highly efficient door-to-door marketing, which helps us to meet all the principal parties to the contract, Abraham says.FACT: This is how export financing operates Finnvera strives to ensure the competitiveness of Finnish companies on the export market by providing exporters and their financiers with an export financing system that is of the same level as in Finland’s main competitor countries. The buyer benefits from competitive financing terms. With regard to export credit guarantees, Finnvera’s task is to understand what is happening on the market. Trips taken together with clients help Finnvera to assess risks, improve Finnvera’s recognisability and promote Finnish exports. The service model is the same for all large exporters in various sectors. For granting export credit guarantees, countries are classified into eight categories on the basis of their assessed credit quality. Export credit guarantee activities are regulated by a number of international rules and agreements. Finnvera’s authorisation to provide export financing was raised at the turn of the year. The authorisation to grant export credit guarantees rose from EUR 19 billion to EUR 27 billion, while the authorisation to finance export credits and to provide interest equalisation rose from EUR 13 billion to EUR 22 billion. Each financing decision is always based on careful assessment and analysis. In addition, Finnvera assesses its portfolio on a regular basis. So far, operations have generated nearly EUR 1.8 billion in buffers to cover any losses that might be realised in the future. Read more about export credit guarantees hereRead more about export credits hereRead more about export credit guarantee products here
Finnvera and the European Investment Bank (EIB) have signed a Memorandum of Understanding on cooperation with the European Investment Advisory Hub (EIAH).The cooperation covers such issues as the exchange of information and the sharing of good operating models. It can also mean participation in the EIAH working groups, discussions and, for example, in initiatives intended for the exchange of information or development of a national advisory service.The European Investment Bank and the European Commission have launched the European Investment Advisory Hub as part of the Investment Plan for Europe. The aim of the Investment Plan is to remove obstacles to investments in Europe, to provide visibility and technical assistance to investment projects and to make smarter use of existing financial resources. So far twenty European countries have signed a Memorandum of Understanding with the EIB. As part of the Investment Plan for Europe, Finnvera also maintains advisory service (esir.fi) for the European Fund for Strategic Investments (EFSI).“The cooperation improves the possibilities of Finnish investment projects to make use of the European Investment Advisory Hub. A central feature of this participation is also the development of cooperation with other national Team Finland actors,” says Pauli Heikkilä, CEO of Finnvera.The Memorandum of Understanding will be in effect until the end of 2020.Additional information:Valtteri Vento, Programme Manager, Finnvera plctel. +358 29 460 email@example.com
As in previous years, we have published our annual report online.Each year we also report on corporate responsibility. Our corporate responsibility report is included in the annual report. Finnvera has compiled the reports in accordance with the G4 Guidelines of Global Reporting Initiative (GRI). In our reporting, we concentrate on key issues in terms of the company’s operations and its stakeholders and we adhere to the reporting guidelines of State-owned companies whenever applicable.The annual report is published in Finnish and in English.Open the annual report.
Stock Exchange ReleaseThe Financial Statements, the Report of the Board of Directors and the Statement on the Corporate Governance and Steering System published by the Finnvera Group on 28 February 2017 contained some incorrect information. These errors have no effect on the bonds issued by the company or on the ability of the issuer, Finnvera plc, to repay its loans.The final versions of the Finnvera Group’s Financial Statements, Report of the Board of Directors and Statement on the Corporate Governance and Steering System 2016 are appended to this release.The corrections made: (information before the correction in brackets)Report of the Board of Directors- Balance Sheet on 31 December 2016The parent company’s long-term liabilities as per 31 December totalled EUR 5,175 million (4,962 million).Notes to the Financial Statements- Note B1 Credit risks, figures given in EUR 1,000Debt securities; 193,425 (208,919)- Note B11 Liquidity risk, maturity of assets, liabilities and guarantees, figures given in EUR 1,000Presentation of figures on the row ‘Assets, liabilities and derivatives, net’ has been corrected for the reference year 2015.- Note E3 Investments, figures given in EUR 1,000Investments in associated companies, totalFinnvera Group 31 Dec 2015; 19,860 (2,058,655)Finnvera plc 31 Dec 2016; 0 (2,153,299)Finnvera plc 31 Dec 2015; 0 (2,178,721)Investments totalFinnvera Group 31 Dec 2015; 2,058,655 (19,860)Finnvera plc 31 Dec 2016; 2,153,299 (0)Finnvera plc 31 Dec 2015; 2,178,721 (0)Statement on the Corporate Governance and Steering System- FundingRating given by Moody’s to Finnvera Aa1 (Aaa)Finnvera Group’s H2/2016 and Financial Statements 1 Jan-31 Dec 2016 (PDF)Statement on Corporate Governance and Steering System 2016 (PDF)Additional information:Pauli Heikkilä, Chief Executive Officer, tel. +358 29 460 2400Ulla Hagman, Senior Vice President, CFO, tel. +358 29 460 2458Also read: Financial Statements of the Finnvera Group 1 January–31 December 2016 (PDF)
A year of reviving demand and new authorisationsThe world economy showed some positive signs in 2016, although political events created a degree of uncertainty. Finnish companies also reported greater demand and increasing investments, and individual large export deals gave much-needed impetus to Finland’s otherwise sluggish exports. Owing to the anticipated increase in demand for export financing services, and to respond to higher exposures, Finnvera’s authorisation to provide export financing was raised markedly. In addition, Finnvera received new mandates, such as the Growth Loan for financing projects undertaken by rapidly growing SMEs and midcap companies. New financing solutions relating to the promotion of small export transactions were also introduced on the market during the year.Business operations and the financial trendThe volume of loans and guarantees offered by Finnvera to SMEs and midcap companies in 2016 was 7 per cent less than in the year before. However, financing for growing and internationalising companies and for transfers of ownership picked up in line with the strategy. Financing offered for growing and internationalising companies rose by 6 per cent from the previous year, while financing for transfers of ownership rose by 21 per cent.Demand for export credit guarantees and special guarantees increased by 50 per cent in 2016, to EUR 14.6 billion. Demand for export credits rose to EUR 12.5 billion, which was 74 per cent more than a year ago. Although interest in export credit guarantees, special guarantees and export credits perked up, the offers given by Finnvera for export credit and special guarantees and for export credits fell by 34 per cent and 82 per cent, respectively. The reason was that some projects or their credit agreements were still being negotiated at the closing of the financial period. Finnvera Group 1 Jan–31 Dec 2016 1 Jan–31 Dec 2015 Change % Offered financing, MEUR Loans and guarantees 845 906 -7 % Export credit guarantees and special guarantees 4 438 6 760 -34 % Export credits 760 4 131 -82 % 31 Dec 2016 31 Dec 2015 Change % Outstanding commitments, MEUR Loans and guarantees 2 261 2 285 -1 % Export credit guarantees and special guarantees 18 426 17 436 6 % Export credits 4 782 4 240 13 % 1 Jan–31 Dec 2016 1 Jan–31 Dec 2015 Change % Net interest income and net fee and commission income, MEUR 194 197 -2 % Operating profit, MEUR 69 114 -39 % Profit for the period, MEUR 70 111 -37 % 31 Dec 2016 31 Dec 2015 Change % Balance sheet total, MEUR 9 498 8 418 13 % Equity, MEUR 1 207 1 121 8 % -of which non-restricted reserves, MEUR 955 871 10 % 31 Dec 2016 31 Dec 2015 Change %-point Equity ratio, % 12,7 13,3 -0,6 Capital adequacy, Tier 2 , % 24,3 19,6 4,7 Cost-income ratio, % 27,0 28,3 -1,3 The Finnvera Group’s profit for July–December 2016 was EUR 77 million. Financial performance improved by EUR 84 million when compared against the loss of EUR 7 million entered for January–June 2016.The main reasons for the improvement in financial performance from the first to the second half of the year were the smaller losses from export credit guarantee operations and the smaller provisions for losses recorded by the parent company, Finnvera plc. In July–December, export credit guarantee losses and provisions for losses totalled only EUR 2 million, whereas the losses entered and the provisions made in January–June came to EUR 66 million. During the first half of 2016, a provision of EUR 55 million for guarantee losses was made for Oi S.A. of Brazil when it transpired that the receivables from the company involve an obvious risk.The profit of the Finnvera Group for 2016 was EUR 70 million (111 million). This was EUR 41 million, or 37 per cent, less than in the previous year. As was pointed out above, the reasons for the weaker performance were the parent company’s export credit guarantee losses as well as provisions for losses that were realised during the first half of the year and were markedly greater than those entered the year before.The profit of the parent company, Finnvera plc, for 2016 stood at EUR 65 million (95 million), of which large corporates business accounted for EUR 33 million (82 million) and SME and midcap business for EUR 32 million (38 million). The performance of the large corporates business declined clearly from the previous year, while the performance of SME and midcap business was at a good level for a second year in a row. Finnvera Group H2/2016 H1/2016 Change H2/2015 2016 2015 Change Change MEUR MEUR % MEUR MEUR MEUR MEUR % Net interest income 24 27 -11 28 50 56 -6 -10 Fee and commission income and expenses (net) 77 67 16 68 144 141 3 2 Gains/losses from items carried at fair value -10 -10 0,3 -15 -20 -21 -1 -6 Net income from investments 0,2 0,1 16 0,4 0,3 0,1 0,2 133 Other operating income 12 0,2 - 2 12 2 10 - Administrative expenses -22 -22 -4 -22 -44 -44 0,1 0 Depreciation and amortization -2 -1 157 -1 -2 -1 1 124 Other operating expenses -2 -3 -31 -3 -4 -6 -1 -22 Net impairment loss on financial assets -0,2 -65 -100 -0,2 -66 -15 51 348 Impairment loss on other financial assets -2 0 - 0 -2 0 2 - Operating profit 77 -7 - 58 69 114 -44 -39 Profit for the period 77 -7 - 57 70 111 -41 -37 Outlook for financingThe economic expectations of SMEs have taken a slightly upward turn, which is believed to reflect positively on financing granted by Finnvera to SMEs in 2017. This will probably be seen particularly clearly in financing for growth companies, but the rising trend in financing intended for investments by growing and internationalising enterprises may also continue following the turn that occurred in 2016. It is assumed that financing granted by Finnvera for transfers of ownership will continue at the same solid level as in 2016. It is generally believed that the bond activities of SMEs and midcap companies will gain slightly more momentum and will also be reflected in Finnvera’s financing.Financing solutions offered to buyers play a pivotal role in exports of capital goods sold by large corporations. Demand for export credit guarantees and export credits is expected to rise from the previous year, but the total amounts depend on the timing of individual large export transactions. Ships, telecommunications and the forest industry are still anticipated to account for the bulk of demand associated with large corporations’ exports. Among the new, opening markets, the greatest demand is likely to focus on Iran and Argentina. Exposures for Russian trade declined in 2016 as buyers postponed investments, but new demand is expected in 2017. Other countries where the demand for Finnvera’s guarantees is expected to rise are India and Mexico. In these countries, reforms associated with the modernisation of infrastructure will provide export opportunities for Finnish companies. In Finland, the progress of large investment projects promoting exports have an impact on the demand for guarantees.The year 2017 is expected to be a year of growing demand. It is thought that implementation of the strategy throughout the Group will proceed as planned and that operations will be self-sustainable in the current financial period as well. The uncertainty factors associated with economic trends make it difficult to predict financial performance. If more risks materialise than has been anticipated, the situation may weaken considerably from what is projected.CEO Pauli Heikkilä:“Finnvera’s year 2016 was driven, above all, by the greater demand for export financing and the substantial increase in transfers of ownership. Development of Team Finland activities continued and as a result of this work, 370 internationalising enterprises received tailored service proposals. The Finnish Parliament’s decisions to raise Finnvera’s authorisations guarantee that we’ll be able to contribute to the success of Finnish enterprises on the international market in the coming years as well.With regard to the formation of financial performance, the past year stands out among the preceding years. In terms of domestic financing, the structure of the credit portfolio – and hence the financial result – were at a good level. In contrast, with respect to export credit guarantees, the year 2016 saw the realisation of one major risk. A large Brazilian telecommunications company filed for debt restructuring and, for this reason, Finnvera’s performance at the company level was lower than in past years. Finnvera’s statutory mission is to bear some of the credit risks that are inevitable in all export transactions.It is likely that 2017 will be characterised by increasing demand for Finnvera’s export financing services. In SME financing, transfers of ownership will remain at a high level. Finnvera will serve as an intermediary organisation for the European EFSI financing. The international operating environment will remain uncertain. In order to spur domestic growth, we need long-term improvements in the structure of the Finnish export sector and in cost competitiveness.”Additional information:Pauli Heikkilä, Chief Executive Officer, tel. +358 29 460 2400Ulla Hagman, Senior Vice President, CFO, tel. +358 29 460 2458Financial Statements 1 January – 31 December 2016 (PDF)Statement on the Corporate Governance and the Steering System 2016 (PDF)
Stiff competition but almost endlessly opportunities on the marketDubai and Abu Dhabi of the United Arab Emirates (UAE) attract a growing number of Finnish enterprises. There is demand especially in the health and technology sectors.- The United Arab Emirates is a peaceful, stable and fairly predictable market area. Dubai and Abu Dhabi have great plans involving large sums of money, says Senior Adviser Jarkko Haapiainen of Finnvera.One of the most important plans concerns the generation of energy.One of the ten largest crude oil producers, the UAE plans to produce 75 per cent of its energy cleanly by the year 2050. Meeting this target requires the adoption of new technologies.According to Haapiainen, Dubai, in particular, is already dependent on imports of high technology.The health sector, in turn, is growing in the wake of health tourism.Dubai has the aim of becoming a leading health tourism city by 2021. At the same time, westernised lifestyles have brought with them lifestyle-related diseases. In consequence, the main goal of the UAE’s national agenda is preventive medicine.Build your networks firstAt present, the United Arab Emirates is Finland’s second largest export market in the Middle East, closely behind Saudi Arabia. About 50 Finnish companies have a registered office in the UAE. In addition, many Finnish companies operate there through local agents.Laura Strandberg, Finance Manager at Finnvera, cautions against rushing to the market in Dubai without good relations. Competition is truly tough because everyone wants their piece of gold in the Middle East.- Before breaking through in Dubai, a company must build a comprehensive network of relations. Building a network calls for patience and may easily take a couple of years. Relationships cannot be created by e-mail.Good partnerships are also needed for navigating through the local legislation, which is amended frequently. Credit insurance and the need for financing both before and during delivery are accentuated, since payment periods are long and the cash flow may be put to test.- On this type of market, it is essential to know the legislation. For example, at least 51 per cent of the ownership of a foreign company must be in local hands. However, a company owned entirely by foreigners can be established in an area known as a free zone. A local distributor is then needed for sales, Strandberg explains.Despite legal intricacies and competition, the United Arab Emirates have much potential, especially for Finnish SMEs.- There is plenty of supply, but at the same time everyone acts as a trailblazer for others. As an area, Dubai operates a bit like Singapore in the Far East. It’s a positive place for foreign operators.The situation in the Middle East is constantly changing. Having shed some of its economic sanctions, Iran is stepping up competition over investments. Qatar also has its own plans, especially for attracting tourists. In five years, Qatar will host the FIFA World Cup in football.The local distributor plays a key roleFootbalance, a company making custom insoles, launched exports to Dubai a little over a year ago.- Dubai is a really interesting market area because of the big money there, says Erkki Hakkala, founder of Footbalance.The first thing that Footbalance did was to draw up a comprehensive marketing plan with a local distributor; this helped the company to get started. The distributor was also helpful in building relations.- Among other things, we learned that setting up one’s own subsidiary is absolutely not what you do at first, Hakkala explains.According to Hakkala, cultural differences have also given rise to amusing situations, as the conversation culture in Dubai is very different from the Finnish one.- At one business meeting, for example, we spent all day touring with our local hosts. We went sightseeing and were offered a dinner with the whole local family. Only in the wee hours of the morning did we start talking about business.Hakkala still sees great potential for growth in Dubai and in the rest of the Emirates. At present, Footbalance has gained a foothold in two of the largest shopping malls in Dubai as well as in Abu Dhabi.- The situation looks good. The Emirates is a place where big opportunities may open really quickly. Help for getting started is available from the local Finnish community and expert organisations, Hakkala advises.FACT: United Arab EmiratesFinnvera has classified the United Arab Emirates into country category 2/7, which means good credit quality. Gross domestic product: About EUR 367 billion (2014). Finland’s gross domestic product is EUR 207 billion (2015). Gross domestic product per capita: EUR 39,579 (2014). Finland’s gross domestic product per capita is EUR 37,827 (2015). Economic growth: 3.1% (2015). Inflation: 3.6% (2015). Exports: EUR 349 billion (2014). Imports: EUR 225 billion (2014). Finland’s exports of goods to the UAE totalled EUR 263 million in 2016. Principal sectors: Services, tourism, construction and oil production. The UAE is among the ten largest producers of crude oil. The daily output is about 3.2 million barrels. Currency, the Dirham: The exchange rate is EUR 1 to AED 3.67. More information about Finnvera’s export credit guarantees is available here.Sources: Ministry for Foreign Affairs, Focus Economics, Finnish CustomsText: Pi Mäkilä
SMEs strongly oriented towards growth are keen to develop their business through company acquisitions. Financing is sought for investments but also – slightly more than before –for working capital.SMEs see a slightly brighter future, though the positive outlook has not been very strong. Despite the slow trend, the share of strongly growth-oriented enterprises has remained steady, and roughly one SME in ten characterises itself as strongly growth-oriented. Interest in company acquisitions is reflected in financing needsOne in five SMEs sees company acquisitions as potential accelerators of growth. It is particularly positive to note that nearly one in three strongly growth-oriented enterprises is interested in expanding its business through acquisitions within the next few years. The interest in company acquisitions also impacts on the need for external financing, since about 80 per cent of these enterprises indicated that potential expansion would require financing.“The survey found that about half of SMEs had no plans for transfer of ownership in the future. On the other hand, 40 per cent said that they will wind up enterprise activities within the next ten years. We want to be there to ensure that sellers start preparing for transactions in good time and companies seeking growth do not miss a deal for lack of financing. There are solutions in place for financing transfers of ownership and company acquisitions,” says CEO Pauli Heikkilä of Finnvera.Transfers of ownership are also reflected in measures to develop enterprise value. SMEs interested in transfers of ownership and company acquisitions are active in monitoring the value of the enterprise, whereas other enterprises show clearly less interest in this.No essential change in the availability of financingThe availability of financing is still at a good level, and slightly over one out of five small businesses reported that they had applied for financing from a bank or some other source. Growth-oriented enterprises in particular have maintained a high level of interest in external financing. SMEs intend to apply for financing for various investment needs and also for growth inputs. Underlying the plans to apply for financing are the quickening economic growth, the assumption that growth will continue, and the consequent increase in investment activity. In this respect, the outlook has improved slightly more since the previous barometer survey. On the other hand, expectations are somewhat uncertain, as indicated by the slightly greater share of enterprises that plan to apply for financing and use it for working capital.The Federation of Finnish Enterprises, Finnvera and the Ministry of Economic Affairs and Employment jointly conduct an SME Barometer Survey twice a year, the purpose being to study the operations and economic environment of small and medium-sized enterprises. The barometer for spring 2017 is based on responses given by about 4,800 SMEs.https://www.yrittajat.fi/suomen-yrittajat/tutkimukset/pk-yritysbarometrit/pk-yritysbarometri-12017-549090Additional information:Pauli Heikkilä, Chief Executive Officer, tel. +358 29 460 2400Jonna Myllykangas, Information Officer, tel. +358 29 460 2740
Finnvera plc is selling about 80 per cent of its holding in Seed Fund Vera Ltd. This deal is one step in the process where Finnvera gradually gives up its venture capital investments.The holding is being sold to Innovestor Kasvurahasto I Ky, a Finnish limited partnership. Finnvera will remain an owner of Seed Fund Vera Ltd, with a holding of about 20 per cent. The Fund attracted interest among both Finnish and foreign buyers. Innovestor’s offer corresponded most closely to the seller’s objectives.Now that there will be a new private company on the venture capital investment market, the arrangement ensures the continuity of the Fund’s investment activities and provides better opportunities to obtain further financing for the portfolio companies.Underlying the deal is the policy decision made by the Ministry of Economic Affairs and Employment, whereby responsibility for the development of early-stage venture capital investments, which used to be vested in Finnvera, has been transferred to Tekes Venture Capital Ltd.The Seed Fund has activated private investment“From the perspective of its impact, Finnvera’s early-stage investment has been important. Through the Fund’s activities, portfolio companies have acquired a total of EUR 350 million in private capital. Of this total, business angels have accounted for about EUR 90 million. These sums are important even in international comparison,” says Pauli Heikkilä, CEO of Finnvera.The sale of Seed Fund Vera Ltd will bring much private capital and know-how to the Fund. This will add stability to the further development of the portfolio companies. The current portfolio companies will gain more networks and new kinds of opportunities for growth.Finnish Industry Investment and Tekes will share responsibility for the State’s venture capital investmentsFrom now on, Finnish Industry Investment Ltd and Tekes will bear the primary responsibility for the State’s venture capital investments. Of these two, Tekes Venture Capital Ltd, which is administered by Tekes, focuses on early-stage investments through investment funds.Seed Fund Vera Ltd began operations in 2005.Additional information:CEO Pauli Heikkilä, Finnvera plc, +358 29 460 2400
The Board of Directors of Finnvera adopted a Code of Conduct for Finnvera on 15 December.Code of Conduct is an internationally established term that is used when describing the business principles – both ethical and legal – that companies themselves have defined and their management has expressed publicly.Finnvera’s operations are closely regulated. Several principles, policies and guidelines have therefore arisen over time to assist compliance with the requirements. The Code of Conduct serves as Finnvera’s joint set of rules. It brings together both the ethical principles and legal rules that we adhere to in our operations and to which we are committed. By using the Code of Conduct we also want to tell outsiders what type of an organisation we are.The Code of Conduct is available here.
The seminar ‘Support for export growth – the role of the State of Finland’, organised by Finnvera on 23 November 2016, focused on the State’s role in ensuring the success of Finnish enterprises in international competition.The seminar was opened by Pauli Heikkilä, CEO of Finnvera, who underscored that Finnvera wants to offer Finnish companies the same starting points as those offered by the export credit agencies of competitor countries in their own countries.“The playing field is increasingly challenging. We compete against bigger players, such as Germany, Sweden and Italy,” Heikkilä said.However, Heikkilä stressed that it is not the purpose, nor desirable, to compete on the terms of export financing.“This should be restricted by international agreements. But until that happens, Finland and Finnvera have to meet the challenge.”Demand for Finnvera’s export financing has increased steeply in recent years. In fact, Parliament is currently debating a Government proposal that would raise Finnvera’s statutory limits for export financing from the current EUR 19 billion to EUR 27 billion.“We can ask whether Finland can afford not to offer its enterprises the same type of services as international competitors do,” Heikkilä pondered.In his address, Topi Vesteri, Deputy CEO of Finnvera and President of the Berne Union, discussed the role of export credit agencies in the changing landscape of world trade.“Globally, exports have grown most rapidly in China. In consequence, Chinese public financial institutions have become the largest providers of export financing. The playing field is less level than ever before because the international rules only apply to OECD members. Now it’s interesting to see whether the Trump Administration will close public export financing in the United States or whether it sees the opportunity to create jobs through exports,” said Vesteri.Panellists: Statutory limits must be sufficiently highThe importance of the State for exports was also discussed by two panels. The members on the first panel were Ilona Lundström, Director General of the Enterprise and Innovation Department, Ministry of Economic Affairs and Employment; Pentti Pikkarainen, Director General of the Financial Markets Department, Ministry of Finance; Tommi Toivola, Chief Policy Adviser, Confederation of Finnish Industries; and Peter Zettinig, Researcher, University of Turku.The panellists considered it important to ensure that the State contributes to the success of Finnish export enterprises. They would like to see more input to support the export efforts of SMEs. However, the panel underlined that risks need to be balanced.The second panel concentrated on the perspective of companies. The panellists were Jan Meyer, CEO, Meyer Turku; Timo Ihamuotila, CFO, Nokia Corporation; Kari Hietanen, Executive Vice President, Corporate Relations and Legal Affairs, Wärtsilä Corporation; and Hannu Puhakka, Managing Partner, MB Funds (Kotka Mills).The panel recognised that Finnvera very often has a major role in bringing export transactions to a successful conclusion. It is therefore important that the statutory limits for export financing are high enough for Finnish companies to do well in the ever more stringent international competition.Jan Meyer, CEO of Meyer Turku, pointed out that when large Finnish companies win major deals, the benefits also trickle down to an extensive network of subcontractors.“The orders for ships secured by the Turku shipyard have a strong positive impact on the SME sector. When smaller enterprises have the opportunity to swim in our tail water, up to 15,000 jobs can be created in Finland,” Meyer said.Additional information:Tarja Svartström, Senior Vice President, Corporate Communications and HR, tel. +358 40 826 2006Finnvera provides financing for the start, growth and internationalisation of enterprises and for protection against export risks. We strengthen the operating potential and competitiveness of Finnish enterprises by providing loans, domestic guarantees and export financing services. The risks involved in financing are shared between Finnvera and other providers of financing. Finnvera is a specialised financing company owned by the State of Finland. It has official Export Credit Agency (ECA) status. www.finnvera.fi
Team Finland is again a main partner of Slush, one of the world’s leading events for growth companies. The technology and growth company event will be held from 30 November to 1 December 2016 at the Messukeskus Expo and Convention Centre in Helsinki, Finland. Now being held for the ninth time, the event brings together companies, international opinion-leaders, investors and the media.Team Finland’s experts will be available at the Team Finland booth in Hall 6. We provide growth companies with information on funding, and growth and internationalisation opportunities. We also advise foreign companies and investors on investment opportunities in Finland, a country with cutting-edge technological know-how.We share our booth with Finnvera, Finpro, Tekes, Finnish Industry Investment, Finnish Patent and Registration Office, the Ministry for Foreign Affairs, Finnfund, Finnpartnership, Enterprise Europe Network and the Registered Association Finnish-Russian Chamber of Commerce.We invite you to our booth to meet Team Finland’s experts and explore the services we offer.Team Finland team.finland.fiSlush slush.org
Companies should pay attention to economic sanctions and currency shortages in some export destinations.In recent years, Finnish enterprises have been active in finding new export destinations where they need various financing arrangements.Finnvera has financial commitments or guarantee applications pertaining to 102 countries. As many as half of these are classified as exotic. Raija Rissanen, Vice President, Country and Bank Risks at Finnvera bases her definition of an exotic country on distance, culture and differences in operating environment.The new destinations have also aroused many questions that companies hope to have answered by financial institutions. In particular, the questions apply to economic sanctions and currency shortages.“These are fairly new issues for companies. If a company wants a pre-payment from the buyer, it’s worth considering which channels to use for the transfer. Banks do not accept money from all countries. Now there are also more and more countries that have profitable enterprises but cannot get foreign currency for paying their import invoices,” Rissanen lists.As examples of emerging economies that suffer from sanctions, Rissanen mentions Cuba and Myanmar. These countries have invested heavily in tourism. Russia and Iran are more traditional export destinations that are also subject to economic sanctions.Currency shortages, in turn, plague Nigeria, Egypt and Venezuela. Previously, Argentina also suffered from the same problem.Even though Finnvera has financial commitments in more than a hundred countries, Rissanen still finds many potential destinations where Finns are conspicuous by their absence.“For instance, the financial situation is good in small countries of the Caribbean and Asia.”Major changes in destinationsCommitments as such do not tell the whole truth about the destinations of Finnish exports. Rather, they indicate the priorities of guarantee and financing needs.There have been many changes in export financing since the start of the millennium. Apart from the emergence of exotic countries, virtually the whole top of the list has changed.“At the turn of the millennium the list was topped by China, Thailand and the Philippines. Now, Russia, Brazil and the USA are there. India and Turkey are also rising,” Eeva-Maija Pietikäinen, Head of Trade Finance, lists.In her view, the reasons are clear. China arranges the financing of orders itself, and Russia’s country exposure has accumulated after the mid-2000s. The rise of the United States, in turn, is an indication of large ship orders.“Exposure statistics reflect large projects that show in our records for years. Most of our commitments concern buyer credits. This means that the credit is granted directly to the Finnish exporter’s buyer-customer abroad. The bank provides the financing and Finnvera shares the risk with the bank,” Pietikäinen explains.“Such credits are often worth tens or even hundreds of millions euros,” she continues.The greatest figures are derived from telecommunications, orders for various machines and equipment, shipbuilding, the forest and energy industries, but the role of SMEs is accentuated in the number of transactions.According to Pietikäinen, to protect their sales receivables, companies use credit insurance and letters of credit for the smallest transactions SMEs have not yet found the newest countries where the economy is booming.“SMEs export mostly to European countries where companies must turn to private providers of credit insurance. EU legislation prohibits Finnvera from granting credit insurance for exports to European countries and a few countries outside Europe. From our point of view, Russia is the most active credit insurance market for SMEs,” says Pietikäinen.Finnvera’s outstanding guarantee commitments for export financing amount to EUR 16.5 billion.FACT: Protection mechanisms for SMEs It pays for SMEs to use secured payment terms when doing business, or to protect their sales receivables, in order to avoid credit losses. The most common protection mechanisms are credit insurance, letters of credit and the Bill of Exchange Guarantee. Credit insurance: Finnvera grants credit insurance directly to the export company. The exporter signs an agreement with Finnvera. The insurance is suited to continuous, short-term trading.EU legislation prohibits Finnvera from granting credit insurance for exports to European countries and a few countries outside Europe. See the list here.If the risks are realised, the insurance includes a self-risk portion of ten per cent. The company can seek compensation after a payment delay of 90 days provided that the claim is uncontested.Credit insurance also suits small transactions: For example, Finnvera has credit limits of EUR 10,000.Letter of credit: A letter of credit means that the buyer-customer’s bank undertakes in writing to pay the purchase price to the seller, i.e. the bank issues the letter of credit. Similarly, the seller has an agreement with its own bank, which confirms the letter of credit. The bank, in turn, can share the risk associated with a foreign bank with Finnvera by applying for Finnvera’s Letter of Credit Guarantee. In all cases, the exporter does not necessarily know that a Letter of Credit Guarantee has been used.Bill of Exchange Guarantee: A Bill of Exchange Guarantee is ideal for fairly small capital goods transactions and continuous exports.The bill of exchange serves both the exporter and the buyer because the exporter is paid in cash while the buyer is given payment time. Finnvera’s Bill of Exchange Guarantee, in turn, protects the bank from any credit losses that might arise.The exporter applies for the guarantee from Finnvera and submits credit data and financial statements on both the buyer and the guarantor, if any, over the past three to four years.It is essential that the financing is planned well in advance before the export transaction. In this way it is possible to select the payment method that suits each deal.Read more about the Credit Risk Guarantee and the Export Receivables GuaranteeAlso, read more about the Bill of Exchange GuaranteeSee Finnvera’s country categories hereText: Kimmo Koivikko
As a result of Argentina’s favourable prospects, the country’s risk classification has been upgraded to category 6/7. After an absence of 15 years, Argentina has returned to the international financial market. The new Government appointed late last year has settled the country’s old debt disputes and has been quick to launch political and economic reforms that lean towards the market economy.“Argentina’s economic situation is still fragile after a long period of economic isolation, but the direction is right. Thanks to recent developments, the country is again eligible for guarantees. The country’s economy is expected to show an upturn next year and the political situation is likely to remain relatively stable, although getting the entire economy onto a sustainable basis will still take time,” Senior Adviser Mika Relander reflects.Difficulties in the Brazilian economy are seen as greater risks, and the country’s risk classification has therefore been downgraded to 5. The slowdown of the Brazilian economy is already in its fifth consecutive year, and together with the political crisis, the outlook has remained uncertain. However, the worst is believed to be over in Brazil, and the economy is predicted to grow slightly next year. The new Government is also expected to make proposals for measures to invigorate the economy.“In the longer term, Brazil is a strong and diverse economy that has the prerequisites for emerging from the recession through domestic demand. However, to achieve stronger growth, Brazil needs both structural reforms and a favourable price trend for commodities important to the country’s exports,” Relander says.Brazil is Finnvera’s third largest market with a country exposure of about two billion euros.Country classification has an impact on the collateral requirements set by Finnvera for financing export trade. In its operations, Finnvera complies with the minimum premium rates determined by the country category.Finnvera takes an active part in the activities of the OECD group of country risk experts, which classifies countries at least once a year.See Finnvera’s country classification map.Additional information:Mika Relander, Senior Adviser, tel. +358 29 460 2725
A theme year may bring new opportunities for the cleantech sector. An upturn in the economy is anticipated.After the dismal past year, Finnish companies are anxiously awaiting positive signals from Russia.During this autumn, individual enterprises have actually had better news to report, but the road to the peak years is still long.Trade between Finland and Russia hit some sort of rock bottom last year, when exports fell by nearly one third on the previous year, to EUR 3.2 billion. In the best years of this millennium, the value of goods crossing Finland’s eastern border exceeded EUR 7.5 billion.According to Finnvera’s experts, the most positive feature of the Russian economy is that the bottom has been reached. Forecasting institutions predict that the economy will grow by about one per cent next year. Growth is fuelled by global oil prices, which also affect the rouble.“Inflation has slowed down and industrial production shows an upswing. In addition, Russia is experiencing a real tourist boom from Asia,” Senior Adviser Outi Homanen lists.In the same breath, she points out that the political situation adds uncertainty to forecasts.Timo Pietiläinen, Head of Finnvera’s Representative Office in Russia, has been surprised at how ready Russians have been to compromise on their own standard of living.In his view, a real change would require an annual growth rate of over three per cent.“Investments are virtually frozen. No economic reforms have been made. These are big problems in the long term,” Pietiläinen says.Pietiläinen is based in St. Petersburg, so he is well aware of Russian investment needs.Finnish companies are able to sell machinery and equipment, for example, to the food industry and agriculture. In addition, Russia needs subcontractors for the maritime industry.“Next year will be the Year of the Environment in Russia, which will open doors for cleantech companies. Otherwise demand focuses on fairly traditional sectors. However, it is possible to export products profitably from here to the Western market if labour and costs are in the local currency, but income is received in a foreign currency,” Pietiläinen believes.As good examples he mentions enterprises that have become established in Russia and specialise in the wood processing and building products industries.Present at difficult timesOn 20 October, the Finnish-Russian Chamber of Commerce held a Finnish Business event in Moscow, where 67 Finnish companies and business organisations were present. In all, the event was attended by about 400 guests.According to Executive Vice President Jussi Haarasilta of Finnvera, one message of the event was that Finnish companies strive to keep trade relations alive even in difficult times.“Russians are really cautious in their investments. Our exposure has decreased and we have good opportunities to help Finnish enterprises. The largest sectors from Finnvera’s perspective are ICT and the forest industry,” Haarasilta explains.Homanen shares Haarasilta’s view. Companies engaged in business with Russia know the local customs and trading partners well. There are few newcomers.“We receive inquiries but projects proceed very slowly,” Outi Homanen says.She recommends credit insurance for short-term trading.“Guarantees are granted for good buyers even though payment defaults have increased. We’re careful when determining the buyer’s creditworthiness.”Timo Pietiläinen also underlines the importance of having an expert on Russia if a Finnish company wants to do business with Russians.“It pays to ensure that the expert has up-to-date information. Know-how is quickly outdated,” Pietiläinen says.FACT: Russia Finnvera’s country risk category for Russia is 4/7, i.e. decreased credit quality. Credit insurance and medium-term and long-term export credit guarantees can be granted for Russia, taking into account the sanctions imposed by the EU. Gross domestic product: Approximately EUR 1,078 billion. Finland’s gross domestic product is EUR 207 billion. Gross domestic product per capita: EUR 7,501. Finland’s gross domestic product per capita is EUR 37,827. Economic growth: -3.7% (2015). The forecast for the current year is -0.9%–1.8%. Consensus forecast for next year +1.0%. Inflation: 12.9%. Exports: EUR 472 billion. Finland’s imports from Russia totalled EUR 6.0 billion. 73% of this were energy products. Imports: EUR 292 billion. Finland’s exports to Russia totalled EUR 3.2 billion. The largest group consisted of chemical substances and products (24.4%). Principal sectors: Agriculture (about 5% of the GDP), industry (about 40% of the GDP, including the coal, oil, gas, mining, chemical and metal industries) and services (about 55% of the GDP, including trade, repair services, real estate agencies and leasing services). Currency, the Rouble: The exchange rate is 1 euro to 68.6 roubles. More information about Finnvera’s export credit guarantees is available here.Sources: Statistics Finland, World Bank, Focus Economics, Finnish Customs.Text: Kimmo Koivikko
Topi Vesteri, Deputy CEO of Finnvera, was re-elected President of the Berne Union – the International Union of Credit and Investment Insurers.The selection was made at the Annual General Meeting of the Berne Union in Lisbon. Chief Operations Officer Mandisi Nkuhlu of ECIC SA, the Export Credit Insurance Corporation of South Africa, was elected Vice-President.The Berne Union members include both State-owned export credit agencies and private and multilateral insurers of credit and political risks. The 82 members represent 73 countries, which together account for 90 per cent of the world’s population.In 2015, the Berne Union’s member organisations insured export transactions for a total of over USD 1.8 trillion.“The world trade volumes reported by WTO fell by 13 per cent between 2014 and 2015. The reason is the drop in raw material prices and the consequent highly cautious investment atmosphere. The increased geopolitical risks and economic sanctions have also had an impact on declining trade volumes. However, the volume of the Berne Union members fell considerably less, only by seven per cent. I consider this an indication of the Union members’ balancing role in world trade,” Topi Vesteri says.Since the onset of the financial crisis in 2008, the Berne Union members have provided USD 35 billion for indemnifying export companies and financing banks against risks.“However, when the premiums charged for risk-taking and the recovery of the claims paid are taken into account, the operations are profitable,” Vesteri points out.Additional information:Topi Vesteri, Deputy CEO, tel. +358 29 460 2676
Finland and Iran have signed a Memorandum of Understanding, which is the first step in efforts to facilitate the financing of Finnish companies’ export projects.For Finland, the memorandum was signed by Executive Vice President Jussi Haarasilta of Finnvera. The signing ceremony took place during the visit to Iran by the President of the Republic Sauli Niinistö.Haarasilta anticipates that Finnish companies will gradually have better export opportunities to Iran.“Following the dismantling of economic sanctions, Finnvera has already provided guarantees for trade with Iran. For us to be able to contribute to the financing of increasingly large business deals, both Finland and Iran must show strong commitment. The signing of the Memorandum of Understanding is an important step on this path. For this we are glad. Finnvera’s mission is to promote the exports of both small and large Finnish enterprises and to secure a competitive export financing system.”Haarasilta sees export opportunities for Finnish companies in several industries.“Cleantech, the bioeconomy and mining technology are good examples of industries important to Iranians where Finns have solid expertise. Infrastructure projects also have potential for Finland,” he assesses.Haarasilta points out, however, that monetary transactions with Iran still involve challenges.“An export company planning to do business in Iran should contact the bank and Finnvera as early as possible,” he stresses.Additional information: Jussi Haarasilta, tel. +358 29 460 2601Photo: The Memorandum of Understanding was signed in Tehran by Jussi Haarasilta (Finnvera) and Mohammad Khazaee (Organization for Investment, Economic and Technical Assistance of Iran). Photo credit: Juhani Kandell/Office of the President of the Republic
Credit insurance and letters of credit help avert unnecessary credit losses, especially on exotic export markets.Most SMEs engaged in exports have rather weak protection against potential credit losses.According to the latest SME Barometer Survey, 15 per cent of export companies use credit insurance to secure their sales receivables. Nine per cent of respondents relied on letters of credit with payment time, while the same percentage used letters of credit at sight.Respondents were allowed to tick more than one answer to questions about financial instruments in export trade. Nearly 6,000 SMEs responded to the barometer published in mid-September. One in five engaged in exports or business abroad. Eeva-Maija Pietikäinen, Head of Trade Finance at Finnvera, recommends that SMEs secure their sales receivables, especially in what are known as exotic countries.“Credit insurance is the simplest means of protection and particularly well suited to continuous, short-term trading. We are also able to provide one-off policies, that is, insurance for a single transaction – something very important for small actors,” Pietikäinen says.Finnvera can grant credit insurance only for countries that are not encompassed by the EU rules on State subsidies.The insurance also includes a self-risk portion of ten per cent and the receivables must be uncontested.“The company can apply for compensation from Finnvera when the payment is 90 days overdue,” Pietikäinen explains.Dozens of destinationsA letter of credit is also suitable for protecting companies in short-term transactions. In a letter of credit, the buyer-customer’s bank undertakes in writing to pay the purchase price to the seller.Pietikäinen sees it as a challenge that some countries do not necessarily have a bank that could assume the responsibility for a letter of credit.“One answer is to use pre-payment, which means that at least some of the purchase price is paid upfront. This procedure can be applied, in particular, in the most exotic countries,” Pietikäinen says.Finnvera has commitments in 90 countries, half of which are classified as exotic.Raija Rissanen, Vice President, Country and Bank Risks, at Finnvera, bases her definition of an exotic country on distance, culture and differences in operating environment. The most exotic destinations where Finnish companies export their products backed by Finnvera’s guarantees include Burkina Faso, Trinidad & Tobago, and Malawi.Besides countries in Africa and South and Central America, the list contains countries in Asia and the Middle East.“Most of our commitments concern buyer credits. This means that the credit is granted directly to the Finnish exporter’s buyer-customer abroad. The bank provides the financing and Finnvera shares the risk with the bank. Such credits are often worth over a hundred million euros. Credit insurance and letters of credit are typically used for smaller transactions,” Rissanen explains.FACT: Protection mechanisms for SMEs It pays for SMEs to use secured payment terms when doing business, or to protect their sales receivables, in order to avoid credit losses. The most common protection mechanisms are credit insurance, letters of credit and the Bill of Exchange Guarantee. Credit insurance: Finnvera grants credit insurance directly to the export company. The exporter signs an agreement with Finnvera. The insurance is suited to continuous, short-term trading.EU legislation prohibits Finnvera from granting credit insurance for exports to European countries and a few countries outside Europe. See the list here.If the risks are realised, the insurance includes a self-risk portion of ten per cent. The company can seek compensation after a payment delay of 90 days provided that the claim is uncontested.Credit insurance also suits small transactions: For example, Finnvera has credit limits of EUR 10,000.Letter of credit: A letter of credit means that the buyer-customer’s bank undertakes in writing to pay the purchase price to the seller, i.e. the bank issues the letter of credit. Similarly, the seller has an agreement with its own bank, which confirms the letter of credit. The bank, in turn, can share the risk associated with a foreign bank with Finnvera by applying for Finnvera’s Letter of Credit Guarantee. In all cases, the exporter does not necessarily know that a Letter of Credit Guarantee has been used.Bill of Exchange Guarantee: A Bill of Exchange Guarantee is ideal for fairly small capital goods transactions and continuous exports.The bill of exchange serves both the exporter and the buyer because the exporter is paid in cash while the buyer is given payment time. Finnvera’s Bill of Exchange Guarantee, in turn, protects the bank from any credit losses that might arise.The exporter applies for the guarantee from Finnvera and submits credit data and financial statements on both the buyer and the guarantor, if any, over the past three to four years.It is essential that the financing is planned well in advance before the export transaction. In this way it is possible to select the payment method that suits each deal.Read more about the Credit Risk Guarantee and the Export Receivables GuaranteeAlso, read more about the Bill of Exchange GuaranteeText: Kimmo Koivikko
A review of environmental risks also benefits Finnish export enterprises.Finnvera conducts an environmental review of all export projects undertaken by Finnish enterprises where the financial institution’s liabilities exceed EUR 10 million and the repayment period of the loan is at least two years.The recommendations have come from the OECD, and all OECD export credit agencies comply with them.When conducting an environmental review, Finnvera’s experts strive to ensure that the foreign investor adheres to the host country’s local legislation and meets international standards. The investor bears the principal responsibility for the background study. According to Lauri Etelämäki, Environmental Adviser at Finnvera, a review of environmental risks is standard practice and, at the same time, an advantage to Finnish export enterprises as it helps to avoid unnecessary damage to reputation.“Exporters are helpful and give us information about the investment. Sensitive areas involving, for instance, poor population groups or endangered plant or animal species, may exist anywhere in the world,” Etelämäki says.An environmental review encompasses the whole project even when export financing applies only to an individual delivery of equipment.Virve Tulenheimo, Finnvera’s second Environmental Adviser, emphasises that on the whole, an investment is not turned down because of environmental assessment.“The financier has the right to set terms for the credit agreement. Projects are so large that the investor usually wants to get things right,” Tulenheimo points out.Four different categoriesThere are four categories for environmental assessment: Categories A, B, C and non-project.Finnvera receives a few Category A projects per year. Category A means that the investment may involve significant environmental and social risks in the host country.“Examples are pulp mill projects, power plants and mines established abroad. In general, Finnish companies deliver larger sets of equipment for mills and plants,” Tulenheimo explains.She says that it takes months to assess a Category A project.- “We also make an effort to visit the project site. The final guarantee decision won’t be made until afterwards,” says Tulenheimo.The small number of Category A environmental reviews indicates that Finnish companies have not gained access to large international industry investments. As a rule, companies use export credit guarantees as protection against potential credit losses.“It has been quieter in recent years. On the other hand, projects are increasingly massive. Ships and oil rigs have been excluded from the review, but we plan to include them in the future,” Etelämäki explains.The second highest environmental category, or Category B, includes, among others, power plants of less than 140 megawatts. Hospitals and mobile phone manufacturing plants are examples of Category C. Finnvera conducts 5 to 10 reviews for Category B per year and dozens of reviews for Category C.“Category B is the most difficult to assess, because the background materials are diverse. Projects in Category C have minor environmental impacts and don’t require background studies,” says Tulenheimo.The fourth environmental category, non-project, has a misleading name. It generally consists of replacement investments.Text: Kimmo KoivikkoFACT: What classification? By using export credit guarantees, exporters and providers of financing for exports usually want to protect themselves against credit losses that may arise when a foreign customer is granted payment time. If needed, it is also easier to arrange financing for a foreign customer to purchase the product if Finnvera covers some of the credit risks Finnvera grants guarantees for countries with adequate credit standing and assesses the creditworthiness of buyers and guarantors If Finnvera’s liabilities for guarantees exceed EUR 10 million or the loan repayment period is at least two years, the project always undergoes an environmental and social impact review In general, Finnvera’s project review encompasses the whole project even when export financing is granted, for instance, for an individual delivery of equipment The owner of the project company or the main supplier for the project is responsible for ensuring that the background studies are made or commissioned. The applicant for export financing is responsible for supplying the information to Finnvera Projects are divided into four categories: A, B, C and non-project Categories A and B: The applicant must provide Finnvera with a report of the assessment of environmental and social impacts. In Category A, impacts are assessed more broadly C and non-project: No background studies are needed A prerequisite for granting financing for Category A projects is that the information on environmental and social impacts is published 30 days before Finnvera signs the agreement on export financing. The relevant parties are asked to give their consent for publication. Read more about export credit guarantees.
The number of growth-oriented SMEs has increased since last spring, and the number of enterprises with a strong desire to grow has already reached the level that prevailed before the-financial crisis. Yet problems exist in the application for financing.The positive trend observed already last spring has continued and among SMEs, economic expectations for the near future are considerably more optimistic than before. The same trend is also visible in growth orientation: 11 per cent of enterprises already say that they have a strong desire to grow while 39 per cent seek growth according to their possibilities.Internationalisation is seen as the key avenue for growth. The number of SMEs with a strong desire to grow has already reached the level that prevailed before the financial crisis.The availability of external financing has not changed. Slightly more SMEs than before plan to apply for financing within the next year. On the other hand, one in ten respondents reported that they would have needed financing during the past 12 months but had not applied for it. Nor has the will to apply for internationalisation financing risen at the same rate as growth orientation.“About 80 per cent of enterprises that had applied for financing said that the terms or availability of financing had no negative impact on the implementation of projects. Since as many as one in ten do not apply for financing because they assume that availability, in particular, is poor, we must communicate to SMEs ever more clearly that financing is indeed available for profitable projects,” says Katja Keitaanniemi, Executive Vice President, SMEs at Finnvera.However, a positive signal of the functioning of the financial market is that 46 per cent of the enterprises that had not applied for financing – despite their needs – reported that they had in any case implemented their project according to plans.Expectations for exports and investments on the riseThe respondents to the SME Barometer Survey also have positive expectations for exports, and exports are assumed to increase steeply in all sectors. Financing is now sought for investments slightly more often than before, while the number of applications for working capital has decreased.The Federation of Finnish Enterprises, Finnvera and the Ministry of Employment and the Economy jointly conduct an SME Barometer Survey twice a year. The goal is to study the operations and economic environment of small and medium-sized enterprises. The barometer for autumn 2016 is based on responses from over 6,000 SMEs.SME Survey on The Federation of Finnish Enterprises websiteAdditional information:Katja Keitaanniemi, Executive Vice President, SMEs, tel. +358 29 460 2888Jonna Myllykangas, Communications Officer, tel. +358 29 460 2740
The world’s largest power plant fuelled solely by biomass will be built near the town of Middlesborough, England. The circulating fluidised bed boiler and the flue gas cleaning system are delivered by Amec Foster Wheeler Energia Oy. Finnvera’s contribution to the financing of the project is GBP 100 million, or roughly EUR 120 million.The construction of the power plant is estimated to cost approximately GBP 650 million, or about EUR 780 million.Preliminary construction work for the MGT Teesside plant will begin within the next few months. Commercial operations are due to start during the first quarter of 2020. The 299 MW power plant will be fuelled solely by clean wood pellets and chips.“We’re glad of this opportunity to contribute to the export of Finnish renewable energy technology. Finland has solid expertise in this type of renewable energy technology. Elsewhere in the world – surprisingly– it is still often perceived as something new,” says Tuukka Andersén, Vice President and Head of Underwriting at Finnvera.“Finnvera’s participation in the project enabled long-term financing of 15 years. This is a key factor if a project of this type is to succeed,” he adds.Jaakko Riiali, VP, Commercial Operations at Amec Foster Wheeler Energia Oy, the company delivering the power plant boiler, sees the project as a good bridgehead for large biomass boilers of the power company class in Central Europe. In addition, the project serves as an example for more northern countries as well, showing that biomass as well as fossil fuels can be used to fuel large baseload plants. “Finnvera’s inclusion in the financial arrangements gave stability to the negotiations and made it considerably easier to reach an agreement on project financing,” Riiali says.Fuel from responsibly managed forestsIn order to ensure the sustainability of fuel supply, the biomass-fuelled power plant uses fuel acquired from FSC Forest Management certified forest areas. FSC certification guarantees that the fuel is derived from responsibly managed forests.The price paid by the British government for electricity produced using clean biomass is considerably higher than the normal price of electricity. The purpose is to support the attainment of the targets set by the UK Government and the European Union for CO2 emissions and to promote the objective of reducing coal combustion at both small and large power generation units.Additional information:Tuukka Andersén, Vice President, Head of Underwriting, Finnvera, tel. +358 29 460 2688Jaakko Riiali, VP, Commercial Operations, Amec Foster Wheeler Energia Oy, tel. +358 40 585 1590
After a long decline, investments by enterprises seeking growth on international markets seem to have picked up in the first half of the year. The information is based on applications for financing that Finnvera has processed during the first six months of the year.“I think this is a good signal showing that enterprises feel more confident about investing. The change is particularly significant because the growth is based on intangible investments, such as research and development, and on various corporate reorganisations,” says Katja Keitaanniemi, Executive Vice President, SMEs.Intangible investments have in recent years accounted for 2 to 3 per cent of internationalising enterprises’ projects financed by Finnvera. However, during the first half of the current year, their share almost doubled. The amount of financing needed for corporate reorganisations also nearly doubled when compared against previous years.Keitaanniemi stresses the importance of intangible investments for developing long-term competitiveness.“When operating on international markets, Finland’s problem has been the relatively small company size, which means that the resources available are also small. When the company size increases, there are more opportunities to invest in international growth.“No single region or sector explains the growth in investments. The probable reason is therefore an increase in general investment activity,” Keitaanniemi presumes.The surveys conducted by the Federation of Finnish Financial Services and the Confederation of Finnish Industries also corroborate the positive trend. Despite the increase in investments, the working capital required by growth is still the greatest single need for Finnvera’s financing.Links:Growth > InvestmentsGrowth > Business operations abroadFill in the contact request form
Contacts helped a health technology company to find a retailer. Outotec, in turn, has been doing business in Iran for over 40 years.Networks and contacts may be important in Finland, but in Iran they can be the lifeline of success.NewIcon, a Kuopio-based company specialising in automation solutions for medicine supply, was able to sign their first contract in Iran thanks to a good retailer. The following contracts also largely depend on the local retailer.According to Marketing Director Jori-Matti Savolainen of Kuopio-based NewIcon, good contacts helped the company to find the right retailer in Iran.“We were warned that everything proceeds slowly in Iran – especially as our customers are hospitals, that is, the public sector – and so we were surprised at how straightforward everything has been in comparison to other Middle Eastern countries,” says Jori-Matti Savolainen, Marketing Director of NewIcon.The company from Kuopio has customers the world over, for instance in Russia, Poland, Israel, the United Kingdom, the United Arab Emirates, Denmark and Sweden. However, most of the roughly EUR 5.5 million in turnover still comes from Finland.NewIcon can thank the Chairman of the company’s Advisory Board for finding the retailer.“Through the retailer’s contacts, our CEO was invited to Iran, to get to know our end customers. They were impressed that he actually came. At the turn of the year, we invited a delegation to Finland and showed them around at other health technology companies, too,” Savolainen reminisces.He is amazed at how much the Iranians know about Finland.“Thanks to Nokia, Finnish technology is appreciated. Our contacts also know of top-class Finnish surgeons we have never even heard of,” Savolainen says.In Iran for decadesThe history of Outotec, a listed company, differs somewhat from NewIcon. The company has been in Iran since 1973 – 43 years now.Adel Hattab, Executive Vice President, Markets Unit at Outotec, says that conducting business in Iran requires much time and presence.Adel Hattab, Executive Vice President, Markets Unit, says that their customers appreciate the fact that Outotec did not leave Iran even in hard times.“We have been open with respect to Iran and everything is done with security first. The trade embargo was a difficult period. We have big teams ensuring that we don’t sell anything inappropriate,” Hattab explains.Outotec’s projects are associated with the concentration processes of raw materials and the refining of metals. The company designs, builds and maintains equipment.Having visited Iran dozens of times, Hattab says that Iranians value interaction and bilateral relations.“They are demanding negotiation partners and shrewd in seeking good deals for themselves. People need to be known at all levels, including political decision-makers. As customers, Iranians are loyal,” Hattab lists.Savolainen of NewIcon agrees with Hattab’s characterisations. The Marketing Director says that their company has also had tough contract negotiations with their retailer.There are other differences in the business environment as well.“Patience is required in Iran and aggressive selling does not work. You need to talk about this and that with people. The first day you talk about sports and the family. It’s not until there’s a suitable moment on the second day when you start talking business,” Savolainen explains.Hitches in money transactionsAt NewIcon, assessment of the risks in the Iran deals was more about sufficient resources and economic risks.However, both Savolainen and Hattab name a risk that is shared by all companies: financing.“Investments don’t live up to their potential when the financial market is not functional. I hope that the bank system would recover and reach the same stage on average as elsewhere. Customers have big problems with letters of credit,” Hattab points out.He continues that the willingness of Western banks to take risks also depends on the United States’ attitudes towards Iran.Jori-Matti Savolainen of NewIcon advises Finnish companies to conduct their business in euros. Nor is it good to rely on any particular bank.“In Iran you should monitor which bank handles foreign transactions at any single time,” Savolainen advises.Text: Kimmo KoivikkoMore information:Credit risks in export tradeCountry classification
Different factors explain the success of small and large enterprises. According to studies, the company’s management is the most important factor for an SME. A large enterprise, in turn, has access to wider markets for management recruitment and, for instance, the option of transferring operations from one country to another to gain cost benefits. In consequence, for a large enterprise, the single factor having the highest correlation with the company’s success is simply its line of business. Since we at Finnvera have the opportunity to follow the stories of thousands of different enterprises and to observe the cause and effect relationships contributing to a company’s success – or sometimes, sad to say, its failure – I would claim that the owner is even more important for an SME than the management. Of course, these two are often the same person. But even when they aren’t, the owner has more direct influence over management selection and may intervene in the company’s day-to-day operations more than the owners of large corporations do. A good or a bad owner can be critical even for a large corporation – an example might be the revival of the Turku shipyard after its Korean owner was replaced by a German owner – but for an SME, the owner almost always has an absolutely pivotal role in the development and success of the Enterprise. Finnvera provides financing for over a thousand transfers of ownership each year. Statistics on the age structure of entrepreneurs reveal that the need for transfers of business to the next generation, and for business acquisitions, will continue at an exceptionally high level even for the next ten years. Surveys indicate that the principal bottlenecks are the matching of suitable buyers and sellers, accurate value determination and issues pertaining to taxation and law. Financing follows next. Together with enterprise organisations, Finnvera works actively to help eliminate all these bottlenecks. Throughout the country, we organise numerous events where buyers, sellers, experts in various fields and financiers can meet each other. Our goal is to ensure that as many enterprises as possible, after having been brought by their current owners along their own unique paths to this point in time, will find a good new owner who has the resources and the desire to continue in the future to the next success story! Pauli HeikkiläCEORead more about Finnvera's financing for transfers of ownership.
Next year Kazakhstan will also host the Specialised Expo 2017. Protection of sales receivables is important.Finland may have a long land border with Russia, but it cannot rival with Kazakhstan in Central Asia.The border shared by Kazakhstan and Russia is no less than 6,500 kilometres long, and the border with China is measures 1,500 kilometres. The former Soviet republic is the world’s largest landlocked country, whose most famous ‘resident’ is probably the bumbling TV reporter Borat created by comedian Sacha Baron Cohen.Yet laughs end abruptly when the Silk Road is mentioned. Under China’s leadership, the ancient trade route is seeing a new prosperity, and Kazakhstan has a central location as a transit country.China has invested much prestige and tens of billions of euros to give new life to the Silk Road. An indication of the massive scale of the project, known as ‘One Belt, One Road’, is the fact that the Silk Road connects 64 countries covering an area that is home to 4.4 billion people.The aim is to create frequent train and airline connections as well as a road network between Europe and Asia.“China acts as the engine. Since the projects are really big, it may prove difficult for Finnish companies to get a foot in the door. Working as a subcontractor might be a more suitable role,” says Outi Homanen, Senior Adviser at Finnvera.Foreign companies are needed at least when planning and implementing infrastructure, transport, logistics, and information and communications technology.Homanen continues the list for Kazakhstan.“Kazakhstan has identified sustainable development as its goal, and the government supports renewable energy projects, for example. In addition, know-how in cleantech, education and mining attracts interest,” she explains.Next year in the spotlightIn other respects, too, Finnish companies should take a closer look at Kazakhstan. The reason is the Specialised Expo 2017 to be held next year in Astana.Finland will have its own pavilion at the event. More information on this topic is available here.“Participation in the Expo will entail much positive visibility and new opportunities for Finland, especially in the cleantech sector,” Homanen believes.Despite the Expo and the opportunities brought by the Silk Road, Finnvera classifies Kazakhstan as a high-risk country.The decline in oil prices has almost halved export revenue and inflation is soaring at over ten per cent. The value of the currency collapsed last year but is now more stable. The difficult financial situation has also accentuated the role of State-owned companies.Partly for these reasons, Finnish companies are not a familiar sight in Kazakhstan.“The business environment is challenging. It may therefore be difficult to predict how companies will behave. In general, timetables stretch. On the other hand, cash may be found if there is an urgency. It is highly important to protect receivables, and we recommend that letters of credit be used,” says Homanen describing the situation.A letter of credit is a written undertaking given by the buyer’s bank for the payment of the purchase price to the seller.Homanen also mentions the political situation as an additional question mark. Kazakhstan has only had one president, Nursultan Nazarbayev.“It’s very uncertain what will happen after him. One must be prepared for major changes,” Homanen muses.FACT: Kazakhstan in figuresFinnvera’s country risk category for Kazakhstan is 6/7. Kazakhstan is an important exporter of oil and gas. The country is also rich in other natural resources. The country’s indebtedness has increased in step with the collapse of oil prices, which weakens the income flow.Kazakhstan’s political situation is currently relatively stable. Finnvera’s country exposure is about EUR 10 million. When assessing country risk categories, Finnvera cooperates with the OECD group of country risk experts.Kazakhstan is currently a member of the World Trade Organization (WTO).Gross domestic product: EUR 110 billion (2015). In 2014, the GDP was EUR 185 billion. Finland’s gross domestic product is EUR 207 billion (2015).Gross domestic product per capita: EUR 6,230 (2015). In 2014, the gross domestic product per capita was EUR 10,600. Finland’s gross domestic product per capita is EUR 37,827 (2015).Economic growth: Forecast 0.1–0.7% (2016). The growth rate was 1% in 2015 and 4.3% in 2014.Inflation: 13.6% (2015).Exports: About USD 46 billion (2015).Imports: About USD 30 billion (2015).Principal sectors: Oil and gas industry, ore and metal industry. Kazakhstan is a Top 20 oil producer country. Oil production averages around 1.5–1.6 million barrels per day, or roughly the same as Norway. The world’s average oil production is 80 million barrels per day.Currency, the Tenge: The exchange rate is 1 euro to 376 tenges.Finnish citizens can travel to Kazakhstan without a visa when they stay for a maximum of 15 days. The visa waiver is limited in time and expires at the end of next year.More information about Finnvera’s export credit guarantees is available here.Sources: Statistics Finland, World Bank, IMF, Asian Dev Bank, Focus Economics.Text: Kimmo Koivikko
A marked rise in Finnvera’s authorisations – performance slightly negativeDuring the period under review, the maximum amounts of export credits and export credit guarantees that Finnvera is authorised to grant were raised through legislative amendments. The main reasons behind the need to raise the authorisations were the steep rise in ship financing within the past few years and the increase in the volume of export projects undertaken for telecommunications and the forest industry. The Group’s performance for the first six months of the year was EUR 7 million in the red, owing to losses and provisions for losses in export credit guarantees. The negative result for the first six months of the year does not affect the realisation of the cumulative self-sustainability of Finnvera’s export credit guarantee activities.The need for funding increased alongside the greater demand for export financing sevices. The fixed-rate bond of EUR one billion issued by Finnvera in April was the company’s first euro-denominated bond with a maturity of ten years.In April, Finnvera and enterprise organisations launched a joint campaign to speed up transfers of ownership in SMEs. Various activation measures are applied to increase enterprises’ awareness of issues such as valuation and taxation. During the first half of the year, transfers of ownership financed by Finnvera showed a rise of 17 per cent when measured in euros.In line with the Government Programme, Finnvera introduced a new debt-based mezzanine financing product onto the market: the Growth Loan. The new product is intended for financing SMEs and midcap companies in major growth and internationalisation projects.Business operations and the financial trendDuring the period under review, demand for Finnvera’s export and special guarantees and export credits rose steeply on the previous year: 50 per cent and 90 per cent, respectively. In contrast, demand for SME and midcap financing fell by 17 per cent on the previous year.Although the demand for export and special guarantees rose, the offers given by Finnvera for export credit and special guarantees and for export credits fell by 76 per cent and 87 per cent, respectively. The reason for this was that some of the projects or their credit agreements were still being negotiated at the end of June. The amount of loans and guarantees granted to SMEs and midcap companies fell by 11 per cent when compared against the first half of 2015. Finnvera Group 1 Jan-30 June 2016 1 Jan-30 June 2015 Change % Offered financing, MEUR Loans and guarantees 483 541 -11 % Export credit guarantees and special guarantees 1 226 5 124 -76 % Export credits 477 3 601 -87 % 30 June 2016 30 June 2015 Change % Outstanding commitments, MEUR Loans and guarantees 2 322 2 285 2 % Export credit guarantees and special guarantees 16 896 17 436 -3 % Export credits 4 718 4 240 11 % 1 Jan-30 June 2016 1 Jan-30 June 2015 Change % Net Interest income both fee and commission income and expenses, MEUR 93 102 -8 % Operating profit, MEUR -7 56 -113 % Profit for the period, MEUR -7 55 -113 % 30 June 2016 30 June 2015 Change % Balance sheet total, MEUR 9 166 8 418 9 % Equity; MEUR 1 116 1 121 0 % - of which non-restricted reserves, MEUR 865 871 -1 % 30 June 2016 30 June 2015 Change % points Equity ratio, % 12,2 % 13,3 % -1,1 % Capital adequacy, Tier 2, % 18,9 % 19,6 % -0,7 % Cost-income ratio, % 30,6 % 28,3 % 2,3 % The Finnvera Group’s financial performance for January–June showed a loss of EUR 7 million, as against a profit of EUR 55 million the year before. The result was EUR 62 million less than for the first six months of 2015.The principal factors affecting the negative result during the first half of the year were the increased losses and provisions for losses recognised by the parent company, Finnvera plc, for export credit guarantees. Losses on export credit guarantees and provisions for losses together amounted to EUR 66 million (2 million). During the period under review it emerged that the Brazilian Oi S.A. Group poses a risk that, if realised, might cause a loss that is currently estimated at about EUR 55 million. In consequence, the provisions for losses were increased during the period. Provisions for losses are current estimates. Their amount may still change considerably as more detailed information is obtained.The result of EUR -7 million recorded for the parent company, Finnvera plc, during the first half of the year (56 million), was broken down as follows: Large Corporates, EUR -17 million (48 million); SMEs, EUR 10 million (8 million).During the 17 years that the company has been in operation, the Group’s performance has been positive for all financial periods and, since the early 2009, for all six-month periods, until the recently ended period of January–June 2016. The parent company’s export credit guarantee activities have also been cumulatively self-sustainable throughout the company’s operations, even considering the negative result for January–June. Finnvera Group H1/2016 H1/2015 Change Change *2015 MEUR MEUR MEUR % MEUR Net Interest income 27 28 -2 -6 56 Fee and commission income and expenses (net) 67 73 -7 -9 141 Gains/losses from items carried at fair value -10 -6 4 63 -21 Administrative expenses -22 -22 0 1 -44 Other operating expenses -3 -3 0 -5 -6 Impairment losses, guarantee losses -65 -14 51 352 -15 Loans and domestic guarantees -15 -72 -57 -79 -87 Credit loss compensation from the State 15 60 -45 -74 83 Export credit guarantees and special guarantees -66 -2 64 - -10 Operating profit -7 56 -63 -113 114 Profit for the period -7 55 -62 -113 111 Outlook for financingIt is expected that demand for export credit guarantees and financing provided by Finnvera will continue to increase. Measured in euros, demand will probably continue to focus on cruise vessels, telecommunications and forestry. An internationally competitive export financing system plays an important role in these sectors, owing to the large scale of individual investments.New export markets have opened up, for instance, in Iran and Argentina. With opening markets, public financing sources, such as Finnvera’s export credit guarantees, are important for the realisation of export transactions. Among countries where Finnvera is exposed to risk, the situation in Brazil, Turkey and Russia is expected to remain uncertain. This will pose challenges to enterprises operating in these countries. On the other hand, Brazil’s and Russia’s weakened local currencies reinforce the operating conditions of export companies active in these countries. This may boost interest in investments and may provide export opportunities for Finnish businesses. The result of the British referendum on exiting the EU is likely to cause uncertainty in Europe for several years.During the first half of 2016, demand for Finnera’s SME financing was slower than a year ago. The financing granted was also at a lower level than the year before. During the first half of the year, Finnvera prepared the adoption of the Growth Loan, a new mezzanine financing product, and was getting ready to serve as an intermediary organisation for the European Fund for Strategic Investments. Together with the recently adopted programme on transfers of ownership, these developments are likely to increase the demand for and granting of financing in the latter half of the year.According to the estimate made in early 2016, the financial performance for the current year is likely to fall below that for 2015. The negative result for the first six months of the year does not affect the realisation of the cumulative self-sustainability of Finnvera’s export credit guarantee activities.CEO Pauli Heikkilä:“Finnvera’s exposure figures have risen higher than ever before, and it is expected that demand for export credit guarantees and financing provided by Finnvera will continue to increase. It is important to ensure the functioning of our export financing system so that Finnish companies can compete over export deals on equally good financing terms as their competitors.With respect to SME financing, the growth in the volume of enterprise acquisitions has been gratifying. We shall continue our efforts to encourage transfers of ownership; the greater the number of companies that continue their operations, the better it is for the overall economy of Finland. New owners often bring development ideas and the wish to grow.The Team Finland network is under intense development. Improvement of the joint domestic service model will continue for the rest of the year. So far the feedback from customers within the scope of the service has been positive. Team Finland cooperation will get a boost in practice with the impending move of Finnvera, Finpro, Tekes and Finnish Industry Investment to joint premises in Team Finland House, in the Ruoholahti district of Helsinki.Finnvera’s statutory mission is to bear some of the credit risks that are inevitable in all export transactions. Some of these risks were realised during the first six months of the current year.”Half Year Report 1 Jan - 30 June 2016 (PDF)Additional information:Pauli Heikkilä, Chief Executive Officer, tel. +358 29 460 2400 Ulla Hagman, Senior Vice President, CFO, tel. +358 29 460 2458
During its first year, Finnvera’s Start Guarantee attracted applications for 1,600 financing projects. An entrepreneur considers the guarantee convenient for start-ups.Both banks and entrepreneurs have found Finnvera’s Start Guarantee, which has been in use for a little over a year.According to Team Leader Leena Waarna, banks have submitted applications for Start Guarantees to Finnvera for 1,600 financing projects.The bank applies for the Start Guarantee on behalf of the entrepreneur. In other words, the entrepreneur only deals directly with his own bank. Finnvera’s guarantee coverage can be at most 80 %. However, the total sum of Start Guarantees granted to one enterprise may not exceed EUR 80,000.“The Start Guarantee is also well suited for smaller projects, for instance from 30,000 to 50,000 euros in size. Therefore, entrepreneurs should not be discouraged even if they don’t have proper collateral for the bank,” Waarna says.She encourages starting entrepreneurs to contact local advisory services first. They have information, for instance, on competition in both the region and the sector involved.Companies’ initial costs and financing needs vary widely.A few tens of thousand euros is enough for the initial working capital for example in the service sector, whereas considerably more money is needed for investments in projects involving production.“Entrepreneurs are generally pretty good at calculating their expenses in advance. In contrast, turnover forecasts are easily over-optimistic. It is expected that turnover will start to accumulate quickly, and payment schedules are drawn up accordingly,” Waarna says.“Realistic overall calculations and correctly dimensioned credit with its repayment periods help the fledgling entrepreneur to avoid the worst pitfalls,” she continues.A faster startTuure Parkkinen, an entrepreneur from Helsinki, praises the Start Guarantee lavishly.“The Start Guarantee was unusually easy because the bank filed the application for us. From the entrepreneur’s perspective, there was little red tape. In the end, we decided to withdraw 25,000 euros,” Parkkinen reminisces.Together with his partners, he founded ResQ Club late last November. Using the digital service developed by the enterprise, consumers receive information on food that is about to go to waste in restaurants, bakeries, cafés and hotels.The service gives consumers the opportunity to buy food at discounts exceeding even 50 per cent. Restaurants, in turn, can reduce their waste.Parkkinen says that the founders had little savings when establishing their enterprise.“Even if we ourselves worked without pay, some expenses are inevitable at the start. Now we were able to kick off more quickly.”From the very start, ResQ Club’s services have attracted interest among both investors and consumers.With private individuals and venture capitalists as new investors, the company issued a financing call of over 300,000 euros. At the same time, ResQ Club announced that the service is also being launched in Sweden.The service has about 20,000 registered users and 150 partner suppliers.FACT: What’s a Start Guarantee? The Start Guarantee is intended for start-ups and enterprises that are no more than three years old. The enterprise must be owned by private individuals. The Start Guarantee is particularly well suited for small-scale financing, especially if the entrepreneur has insufficient collateral for the bank. Finnvera’s guarantee coverage is at most 80 per cent. The total amount of Start Guarantees granted to an enterprise cannot exceed 80,000 euros, in which case the maximum loan sought from a bank under the Start Guarantee is 100,000 euros. For collateral, the principal shareholders lodge special guarantee undertakings that must cover at least 25% of Finnvera’s guarantee sum. The enterprise presents the financing application to its own bank. Thereafter, the bank assesses the credibility of the business and checks the calculations and the applicants’ creditworthiness before granting financing. The bank submits the application for the Start Guarantee to Finnvera on behalf of the enterprise. The Start Guarantee is intended especially for the working capital and investment needs of start-up enterprises. It cannot be used for financing company acquisitions or purchases of business premises. The Start Guarantee may also be one part of the enterprise’s aggregate of loans. The maximum repayment period for loans under the Start Guarantee is ten years. More information about the Start Guarantee is available here.More financing solutions for setting up a company are found here.Text: Kimmo Koivikko
In South America, the Argentinian economy is gradually opening up for foreign business again. Finnvera’s experts see opportunities for Finnish companies in Argentina.Argentina’s economy collapsed at the turn of the millennium and, owing to unpaid debts, the country remained outside international financial markets for many years. However, the new conservative administration has taken quick action to resolve any unsettled disputes with Argentina’s creditors. In consequence, the country is gradually able to renew its relations with international providers of financing. The new Government has also lifted the restrictions on foreign trade.According to Jussi Haarasilta, Executive Vice President at Finnvera, Argentina is gradually becoming a potential export country for Finnish companies.“Necessary reforms were neglected during Argentina’s long period of isolation. For instance, the infrastructure is in urgent need of development, and that’s where Finns might well have a lot to offer in the coming years. This could mean, for example, telecommunication and electricity networks, mining, wood processing and the construction of harbours,” Haarasilta lists.“In short, the traditional Finnish export portfolio is well suited to Argentina’s future needs.”Haarasilta stresses that with its population of 43 million, Argentina is now becoming an attractive market for many companies.“Competition will be stiff for certain,” he predicts.“Realisation of large projects calls for financing, which in turn requires that the counterparty is creditworthy. Argentina was outside export credit guarantees for years. At present, Finnvera can support the financing of trade and is investigating how to guarantee long-term credits,” Haarasilta says.“It pays to look into partners’ backgrounds”Many companies have already contacted Finnvera to inquire about the situation in Argentina. Senior Adviser Mika Relander visited Argentina recently and underlines that even if Argentina offers promising opportunities, companies considering business there should still exercise caution.“The operating environment continues to involve risks, especially in the public sector, as the country’s economy is still rather weak and will require many long-term reforms. Good examples are the large subsidies for electricity and petrol prices that need to be dismantled before the public economy can be balanced.”“Otherwise, too, it pays to investigate customers’ solvency and the partners’ backgrounds in advance together with Finnvera,” Relander says.However, according to Relander, Finnvera always strives to seek and tailor financing solutions that would make the export transaction possible.“Still, in the case of Argentina, we also need to be rather cautious,” he adds.Additional information:Jussi Haarasilta, tel. +358 29 460 2601, jussi.haarasilta (at) finnvera.fiMika Relander, tel. +358 29 460 2725, mika.relander (at) finnvera.fi
Recruiting the right people and the owners’ capacity to take risks are crucial for a company’s growth.Everyone makes mistakes, but you should learn from them, growth entrepreneur Lennu Keinänen urges.Keinänen says that he himself has stepped on all possible mines, from market analyses to financing. Despite that, he has taken part in founding nine enterprises. Of these, the best known is Paytrail, a provider of online payment services. The Danish company Nets acquired 80 per cent of the enterprise two years ago.However, Keinänen identifies the team and its importance as the biggest mine.“Team members must have sufficiently diverse backgrounds. It’s not necessarily a good idea to hire your course mate,” Keinänen points out.In his view, building the right team can start once the entrepreneur understands what he or she is actually doing.“Corporate culture must be created first. In the end, culture is shaped only through people, but its desired state must be known so that the entrepreneur can make the right recruitment choices.”Despite his young age, Keinänen has already been an entrepreneur for 20 years. He set up his first enterprise, in Kuopio, at the age of 15. Growth, internationalisation and financing are all interlinked. Growth has always been at the core of Keinänen’s enterprises as well.“Growth calls for bigger thinking, that is, leaving one’s own sandbox. One of the worst things is underfunding. Growth is always more expensive than you had originally thought,” says Keinänen.He agrees with Kim Väisänen, a successful entrepreneur who says that a company has only one crisis and that is the cash crisis.From bikinis to a growth trackStudies indicate that young people are eager to start their own enterprises. Young entrepreneurs have recently gained visibility otherwise, too, with the selection of the Young Entrepreneur of the Year in Jyväskylä last Friday.Last year this recognition went to Varusteleka, which has also sought growth outside Finland.One of the finalists this year was Biancaneve of Tampere, a maker of individual sports garments. Biancaneva was ranked third in the national competition. Entrepreneur Elina Loueranta acknowledges that she has also stepped on various mines.“My dream was only to make clothes. At first I didn’t even calculate any profit margins,” Loueranta says.The awakening came three years ago at a growth camp where other companies were making plans for internationalisation. “We were so small next to the others. One company was selling a million screws to Russia and we were talking about bikinis. We were asked if we really believed that we could grow and become international. It didn’t occur to me to answer that each bikini cost 600 euros,” Loueranta recalls.Not even all of the team members believed in growth. The entrepreneur says that one team member aroused doubt in the others, too.Intervening in the situation required a lot, but it was necessary.“I stood up from behind the sewing machine and started to look at the big picture,” Loueranta says.With its turnover of about half a million euros, Biancaneve is living a strong growth phase. This summer, the company is launching a webcam service that will allow customers to order Biancaneve’s tailored bikinis from anywhere in the world.At present, growth is brought by a luxury-focused sportswear collection designed for women. The marketing of this product line also takes the entrepreneur outside Finland.“We wanted to go abroad and we were asked whether we were ready to travel. Now this has come to pass. Relations can only be created face to face,” Loueranta concludes.FACT: Ways to break the glass ceiling on growthAccording to research, one out of five enterprises has hit the glass ceiling on growth.The main factors keeping a glass ceiling on growth are sales and marketing skills, the availability of competent staff, the acquisition of financing and the capacity of owners to take risks.Growth entrepreneurs believe that the glass ceiling can be broken if the management or the owners have sufficient capacity to take risks. That is the most important single way. Other important ways are product and service innovations, sales and marketing expertise, the availability of competent personnel and customer demand.Obtaining adequate financial resources is another tool for breaking the glass ceiling.This information is based on the Growth Enterprise Survey, conducted by the Kauppalehti business periodical and sent to 715 entrepreneurs, of whom 92 responded.There are several financing solutions for working capital needs and for starting business abroad.Text: Kimmo Koivikko
For its own part, Finnvera wants to ease the financing of smaller export transactions carried out by enterprises. The first step is the new Bill of Exchange Guarantee, which is best suited to transactions of less than two million euros.Finnish exports are concentrated in a few sectors and are dominated by large corporations. SMEs account for only about 15 per cent of the total value of exports.“It is evident that Finland needs more SME exporters. In general, simpler financing options should be available for small export deals. Complex credit documents and their high costs are often obstacles to financing the smallest transactions. The first product we are launching is the Bill of Exchange Guarantee, where we have considerably relaxed our requirements for both the exporter and the bank. We’ll continue making our services increasingly responsive in order to help Finnish exporters in their sales efforts,” says Executive Vice President Jussi Haarasilta.A bill of exchange is a traditional means of paymentThe use of bills of exchange has gradually increased in foreign trade in recent years. The bill of exchange serves both the exporter and the buyer because the exporter is paid in cash while the buyer is given payment time. Finnvera’s Bill of Exchange Guarantee, in turn, protects the bank from any credit losses that might arise. Compared to a loan agreement, for example, a bill of exchange is a quick and cheap payment instrument.“Our new Bill of Exchange Guarantee requires no security for small transactions of under two million euros. We trimmed the contents of the guarantee agreement and simplified pricing. We also cover risks stemming from the application of laws and regulations on bills of exchange that have been passed in various countries. We want to boost transactions of this size class in particular by increasing flexibility in our guarantee terms associated with export bills of exchange,” Team Leader Eeva-Maija Pietikäinen explains.The exporter applies for the guarantee from Finnvera and submits credit data and financial statements on both the buyer and the guarantor, if any, over the past two to three years. Additional information is requested, if necessary. Finnvera always makes guarantee decisions individually for each project.Finding the right kind of payment method requires cooperation with the exporter, the exporter’s bank and Finnvera. It is essential that the financing is planned well in advance before the conclusion of the export transaction. In this way it is possible to select the payment method that suits each export deal. This is important particularly for bills of exchange because not all countries use them as a means of payment.Additional information:Jussi Haarasilta, Executive Vice President, tel. +358 29 460 2601Eeva-Maija Pietikäinen, Team Leader, tel. +358 29 460 2674Products > Export Credit Guarantees > Bill of Exchange Guarantee
Marju Silander, Managing Director of the Women Entrepreneurs of Finland, sees many solutions for improving the state of the economy. One key factor is to seek growth through internationalisation and transfers of ownership.Finnish working life and enterprise structure have been in turmoil in recent years. Marju Silander, herself an entrepreneur by background, has been on the front line of this restructuring. Prior to her appointment as Managing Director of the Women Entrepreneurs of Finland, Silander had earned her stripes, among others, at the Regional Organisation of Enterprises in Helsinki.“We have changed from a Finland of large corporations to a Finland of micro-enterprises.”According to Silander, Finnish legislation is still living in the time of large corporations even though the current Government strives to revise the structures of working life and to dismantle unnecessary regulation.“Most jobs are created in small and micro-enterprises. By following the Think Small First principle of the EU, Finland Ltd could be brought to the present day,” Silander ponders.Small enterprises face a new situationSilander is concerned about the lack of international growth. Economic growth centring on Europe does not seem to trickle to Finland.“Small enterprises face the challenge of how to reach the international growth market. A strong domestic market is not enough to stop the spiral of increasing government debt: in practice we are sitting at the same table circulating money from one purse to another,” Silander summarises the situation.She believes that technology-driven industries, in particular, have growth potential. Sustainable development and the circular economy, ageing of the population and the health and wellness boom offer diverse opportunities for creating new products and services for the international market. Younger entrepreneur generations also have the enthusiasm to venture out into the world.“It’s no longer necessary to think that first we’ll establish a company and then we’ll go international. Instead, there can be a bigger picture from the very start,” Silander says.Being an entrepreneur has become attractive: young entrepreneurs are increasingly eager to seize the opportunity to build exactly the kind of life they have dreamed for themselves.“In addition to the cultural shift, the many years of entrepreneur training given by educational institutions and entrepreneur organisations are finally starting to bear fruit,” Silander rejoices.Transfers of ownership add momentum to Finnish work life Internationalisation is not an option for all entrepreneurs. Certain local services cannot be globalised or digitised, and boosts for business must be sought through other means. Silander says that transfers of ownership are a pivotal tool for growth in the Finnish economy.“At present we have more than 80,000 entrepreneurs over 55 years of age. Nearly one third of them have announced that they will wind up their business when they retire. It is also known that, in general, one transfer of ownership affects on average four people. This means that many jobs are in the danger zone,” Silander ponders.Lack of information is one reason why there are so few transfers of ownership.“Especially sole entrepreneurs are often too modest when putting a value on their enterprise. As a trade association within the Federation of Finnish Enterprises, we also conduct serious dialogue with Finnvera about how we could make entrepreneurs understand the realisable value of their enterprises so that they can continue to offer jobs in the future as well,” Silander explains.She mentions a case where a woman entrepreneur was about to wind up her enterprise for good, but decided in the end to ask for advice about selling the enterprise. The outcome was that the entrepreneur was able to supplement her pension income with a profit of nearly 10,000 euros by splitting up the company’s inventories and operations into packages ready to buy.“In a way, we squander our assets if no deals are made. Entrepreneurs should feel proud and pleased for having created something that is useful for others, too,” says Silander.Finding the right partner is rewardingFor a starting entrepreneur, buying an existing enterprise is an excellent way to pick up speed quickly. The entrepreneur does not need to start from scratch, since networks, premises and processes are already available. In fact, persons who have become entrepreneurs by buying an enterprise are on average more satisfied with being an entrepreneur and feel that they have made a go of it.According to Silander, buyers’ knowledge of company acquisitions is also scanty.“Many people come to Enterprise Agencies with their own ideas. If the idea isn’t viable, it could be proposed that a development partner be sought in an existing enterprise,” Silander suggests.When a novel idea is combined with an operating enterprise, the result may be something brand new. Earning money on the basis of one’s own idea will then take less time and, on the other hand, the idea may also be refined in the process.What’s more, transfers of ownership are an excellent way to expand existing business operations.“When two enterprises are put together, the result may sometimes be greater than two. It would be really valuable to get people together at an earlier stage instead of waiting until the enterprise has suffered from years of underdevelopment,” Silander sums up.Silander compares selling an enterprise to selling a home: usually everyone selling their home makes sure that they get as good a price as possible when closing the sale. She urges entrepreneurs to keep this philosophy in mind at every stage of developing their companies. Quotes “Finland is such a small country that cooperation is extremely important. We cannot waste time by arguing among ourselves; instead, we must stand as a united Finland against China, Germany or Sweden.” “If the only plumber in the village closes up shop, it should be in the interest of towns and municipalities to look for a new entrepreneur in the locality rather than letting operations cease and allowing residents’ basic services to decline.” “Business Infrastructure Analysis, which is a public service provided free of charge, is an excellent way of keeping abreast of a company’s development potential and value. It would be good if every company were given a kind of ‘annual inspection’ at certain stages of the life cycle.”Text: Noora Puro Photo: Heidi Strengell
It often comes as a surprise when sales lag behind expectations. An entrepreneur’s advice is to seek local partners.Growth companies entering international markets badly underestimate their need for financing.There are many reasons for this.The most common reason is that the business launches organised by enterprises abroad are in fact much more expensive and more time-consuming than had originally been planned.The discrepancy between plans and reality is explained, among others, by unexpected turns of event and more sluggish sales of products or services on targeted markets.“The costs are always at least twice as much, and the need for external financing three times greater than what had been planned. When drawing up their budgets, companies are slightly overoptimistic. The fact is that an enterprise must get loads of visibility on the consumer market. Achieving credibility in business between companies takes time,” says Titta Mantila, Vice President, SME Financing at Finnvera.She heads the Growth and Internationalisation Team at Finnvera.According to Mantila, Finnish companies are told repeatedly about the importance of sales skills. However, skills in financing and economics should not be underestimated.Shareholders’ equity should account for almost one third of the total need for financing. Additionally, it would be good to think about what happens to the company if everything goes wrong abroad. In other words, risk tolerance.“Nor does it hurt to learn about the target countries and their business culture,” Mantila continues.There are no major differences in the financing needs of growth companies and companies with a slower growth pace. Working capital is the most common reason for seeking external sources of financing.With growth companies, everything is just a lot bigger. The financing granted to a growth company by Finnvera is on average about EUR 400,000.“No one can set up an international business with 100,000. Companies turn to us to obtain financing for expanding their own organisation, recruitment, sales and marketing, and for launching on international markets,” Mantila lists.She says that, for instance, Finnvera can offer several financing solutions for working capital needs and starting business abroad.Seek partners Katja Lindy-Wilkinson, Marketing Director of Picote Oy Ltd and CEO of Picote Solutions Inc., admits that a perpetual shortage of resources has also slowed down the growth of the company based in Porvoo, Finland.The company renovates drainage pipes and develops and manufactures pipe lining tools, and has been able to forge ahead abroad in step with financial resources.“Equipment sales abroad began in 2012. Our German partner wanted to become a reseller, and that gave us a good start,” Lindy-Wilkinson reminisces.Today, foreign buyers account for 88 per cent of Picote’s equipment sales. The company, with a turnover exceeding six million euros, has 19 resellers around the world.Lindy-Wilkinson, who has lived in the United States for years, says that resellers are supported in many ways in their efforts to succeed. In return, resellers bring added value with their knowledge of the local markets.“The chances of success are much better if you find local partners. It’s also worth remembering that there are many Finnish expatriates living all over the world. We, too, hired a Finnish consultant in the USA. That person was an excellent support for us,” Lindy-Wilkinson says.FACT: Does the lack of money slow down growth? According to companies, the main factors keeping a glass ceiling on growth are sales and marketing skills, the availability of competent staff, the acquisition of financing and the capacity of owners to take risks. During the first months of the current year, Finnvera’s financing for enterprises exceeded 300 million euros. Growth companies accounted for 49 per cent of this. Despite their potential, not all companies seeking solid growth have a long, economically profitable history behind them. In consequence, their rating may not be high enough. Rating affects the price and availability of money. The rule of thumb is that loan financing must be accompanied by a sufficient amount of equity. It can be considered that 30 per cent is a sufficient amount. Text: Kimmo Koivikko
At the beginning of April, Finnvera’s selection of financing services was supplemented with a new loan product, the Growth Loan.Kalle Åström, Program Manager at Finnvera’s SME Unit, for what types of projects is the Growth Loan designed?– The Growth Loan is intended for financing SMEs and midcap companies in major growth and internationalisation projects or corporate reorganisation. The idea is that the loan would attract financiers operating on market terms to invest in projects where risks are high but profitability and effectiveness are deemed to be good.Who can apply for a Growth Loan?– Finnvera’s Growth Loan may be granted to SMEs and midcap companies that have been in operation for over three years. The loan is not suited for the very start of business or for small projects. In these situations, some other financing product we provide may be the solution; for instance, Finnvera’s Start Guarantee, where the bank submits the guarantee application to Finnvera on behalf of its customer.The Growth Loan is a debt-based mezzanine financing product that combines the features of both equity and debt financing. The company’s self-financing portion must always be at least 20% and the share contributed to the total financing by financiers other than Finnvera must be at least 50%.The Growth Loan is granted for each project on a case-by-case basis. Project profitability and eligibility for financing are assessed together with other financiers.Read more: Growth Loan
Interview of Joonas Mikkilä, Organization Manager at the Federation of Finnish EnterprisesFederation of Finnish Enterprises’ survey reveals: University students, in particular, have embraced entrepreneurship. One out of five students sees being an entrepreneur as a probable career direction.How has interest in entrepreneurship developed among young people?JOONAS MIKKILÄ: Attitudes are undergoing a major generational shift. In consequence, the young people entering the labour market now are increasingly entrepreneurial. According to the Global Entrepreneurship Monitor survey, in 2015 as many as 20 per cent of young people between 18 and 24 years of age deemed that they would set up an enterprise within the next three years. At the turn of the millennium, only a few per cent of the same age bracket thought in this way.How actively do Finnish young people start enterprises when compared against young people in other countries?JM: Fairly actively. About five per cent of working Finns under 30 years of age work as entrepreneurs. In the rest of the Nordic countries, the ratio of young people working as entrepreneurs is 2–4 per cent. The EU average is about seven per cent.How are young people encouraged to become entrepreneurs in Finland and what kind of mentoring is available?JM: The development of entrepreneur training in basic and upper secondary education has been one of the focal points of Finnish education policy since the 1990s. The results are now becoming clearly visible. Universities have also gradually realised the importance of entrepreneur education for strengthening young people’s skills on the labour market. University students themselves have also established communities that promote growth enterprise culture on campuses.The association Suomen Yrityskummit provides mentoring for young entrepreneurs. Enterprise Agencies, in turn, give high-quality enterprise consulting to people planning to start a business. Business accelerators, operating in connection with universities and regional development companies, provide services for those seeking faster growth. Our Young Entrepreneurs programme aims to offer peer support and ready-made networks for starting entrepreneurs.What are the biggest challenges facing a young entrepreneur?JM: Apart from financing, many young entrepreneurs seeking to expand their operations are concerned about the risks involved in employing people. The significant increase in the number of one-person firms in the 2000s is an indication of the high threshold for hiring others and the rigidity of our labour markets. In certain sectors, the amount of regulation and administrative oddities also causes concern. How is financing arranged?JM: Getting financing from a bank is currently challenging for a starting entrepreneur who has little capital. However, supplementary financing from Finnvera and Tekes has helped to ease the situation. New crowdfunding forms are also becoming clearly more popular. How could young people be inspired to buy already existing companies?JM: Persons who engage in entrepreneur training and consulting must communicate to young people that continuing the operation of existing companies is an excellent channel to entrepreneurship. As entrepreneurs age, these opportunities will be available increasingly often in the coming years. Additional information:www.yrityssuomi.fiwww.uusyrityskeskukset.fiwww.yrittajat.fiwww.nuoretyrittajat.fiwww.yrityskummit.fiwww.nuoriyrittajyys.fiwww.yes-keskus.fiPhoto: Jaakko Översti
Finnish exports to Russia fell by one-third, but inquiries about Finnvera’s guarantees come in steadily.Lower oil prices, the weak rouble and the sanctions imposed in consequence of the Ukrainian crisis have cramped Finnish companies’ exports to Russia.According to customs statistics for last year, exports to Russia plummeted by 32 per cent, to EUR 3.2 billion. The first months of the current year have not changed this trend.The last time when exports fell below four billion euros was in 2003. At the same time, Russia has dropped to rank fifth among the most important export markets.As a counterbalance to the gloomy news, enterprises have fortunately woken up to the situation.According to Jussi Haarasilta, Executive Vice President at Finnvera, companies’ crisis awareness has increased and they more actively seek to protect their claims.“We want to advance Finnish companies’ opportunities to engage in export trade. We will therefore continue to grant guarantees for exports to Russia, but we will observe how larger transactions, in particular, affect the level of total exposure,” says Haarasilta.Outstanding commitments have remained steadily around 1.5 billion. This accounts for a little less than ten per cent of total outstanding commitments.“Even now we have dozens of clients that export to Russia. There is a constant flow of inquiries about guarantees. Immediately after the sanctions were imposed, many companies hurried for guarantees, but not all projects have proceeded,” says Haarasilta.Know your partner’s backgroundMost of Finnvera’s guarantee commitments involve the exports of large corporations. According to the Finnish-Russian Chamber of Commerce, hundreds of companies carry out regular exports to Russia.“We grant short-term credit insurance for good buyers, but since the outbreak of the crisis, payment defaults have increased. We are particular about the buyer’s creditworthiness. In large projects that require credits, export credit financing is often channelled through a bank that is backing the Russian buyer,” Haarasilta explains.He advises companies to investigate their trading partners’ background.“Who is the buyer and the actual owner of the company making the purchase. The seller may start to pursue the issue too easily, without verifying the background.”Russia’s economy will continue to slip this year. The IMF’s forecast for the change in the GDP is -1.8 per cent. The situation caused by the sanctions adds to economic uncertainty.“The weak economic situation has caused a cut in imports. This means that many important investments or supplies for maintenance are sorely needed. This may gradually be seen in demand for imports in some sectors,” Haarasilta believes.Finnvera has many tools for financing and guarantees that companies can use in their exports. More information about the various alternatives is available at: www.finnvera.fi/eng > Export.Text: Kimmo Koivikko
The Growth Loan introduced by Finnvera at the start of April provides an instrument for financing major growth and internationalisation investments in SMEs and midcap companies.The Growth Loan is intended for SMEs and midcap companies that have been operational for more than three years and seek funding for major growth and internationalisation projects and corporate restructuring. Midcap companies are enterprises that are larger than SMEs and have a turnover of less than EUR 300 million.- The purpose of the Growth Loan is to attract market-based financing to projects where risks are high but that are expected to be profitable and effective, explains Katja Keitaanniemi, Executive Vice President, SMEs at Finnvera.The Growth Loan is a debt-based mezzanine financing product combining features of equity and debt financing. The company must provide at least 20 per cent of the financing and the contribution of Finnvera and other financiers must be at least 50 per cent.The Growth Loan is granted on a project-specific basis and Finnvera and other financiers jointly evaluate the profitability and financing eligibility of each project.Further information: Kalle Åström, Program Manager, SMEs, tel. 029 460 2747
Half of all decision-makers in Finnish SMEs follow changes in the value of their enterprises. Less than half of all Finnish SMEs have made preparations for ownership changes. These are some of the findings of a survey conducted among Finnish SMEs.Each year thousands of companies find themselves in a situation where they have to find a new owner for their business. Despite this, more than half (56%) of them have not made any plans for the situation. Retention of value is a particularly low priority in companies with the smallest number of employees and the lowest turnover.- It should definitely be a greater concern. Making sure that the company retains its value should be a top priority and the owner should also develop the business operations throughout the company’s life cycle. This helps to ensure that the company is in good shape when a new owner has to be found, says Katja Keitaanniemi, Executive Vice President, SMEs at Finnvera.Finnvera, the Federation of Finnish Enterprises and the Ministry of Employment and the Economy jointly conduct the SME Barometer Survey twice a year. In this year’s survey the respondents were specifically asked about changes in ownership. About 6,000 SMEs took part in the spring 2016 barometer and the findings on ownership changes are based on the responses provided by them.Boosting growth through company acquisitionsEven though company acquisitions may be a good way of expanding business, some 80 per cent of all SMEs taking part in the survey said that they are not interested in acquiring other companies or business operations. However, strongly growth-oriented companies see more opportunities in this area and about 40 per cent of them said that they would be interested in such acquisitions.- From the perspective of growth, acquiring an existing company would open up new opportunities and it might also be smarter economically than organic growth. A company acquisition is also a good idea for new entrepreneurs because that would give them a well-tested business concept for further development, explains Anssi Kujala, Deputy Managing Director of the Federation of Finnish Enterprises.The Yrityspörssi website of the Federation of Finnish Enterprises is a place where companies are sold and acquired. It is Finland’s largest market place for SMEs and nearly 25,000 people interested in company acquisitions check the ads on the site each month. Yrityspörssi now also provides basic information about valuation, business practices, financing and taxation. In addition to the nationwide Yrityspörssi, there are also ten regional Yrityspörssi websites.Further information: Katja Keitaanniemi, Executive Vice President, SMEs, Finnvera plc, tel. 029 460 2888 Anssi Kujala, Deputy Managing Director, Federation of Finnish Enterprises, tel. 0400 567 925Finnvera provides financing for the start, growth and internationalisation of enterprises and guarantees against risks arising from exports. Finnvera strengthens the operating potential and competitiveness of Finnish enterprises by offering loans, guarantees and other services associated with the financing of exports. The risks included in financing are shared between Finnvera and other providers of financing. Finnvera is a specialised financing company owned by the State of Finland and it is the official Export Credit Agency (ECA) of Finland. https://www.finnvera.fi/eng/ https://www.finnvera.fi/eng/Finnvera/Media/Media The Federation of Finnish Enterprises promotes the interests of small and medium sized enterprises in Finland. With a membership of more than 115,000, 400 local associations, 20 regional organisations and 63 branch organisations we are Finland’s largest business federation. Self-employed individuals account for half of our members, while the other half consists of employer enterprises. Our members provide employment for about 650,000 people. Further information: http://www.yrittajat.fi/en-GB/. http://www.yritysporssi.fi/en
Brazil is expected to play a major role for Finnish exports in the coming years as well. Despite the current economic difficulties, it is believed that Brazil will continue to offer business opportunities in many of the strong sectors of the Finnish export industry.According to Jussi Haarasilta, Executive Vice President at Finnvera, Brazil is an important and, above all, growing market from the viewpoint of Finnish enterprises.“Brazil’s devalued currency, the real, stimulates demand in the export-oriented sector of wood processing and pulp manufacture. Moreover, the great potential in the country’s bioenergy and cleantech sectors is finally being realised and, as we know, Finland has volumes of first-rate expertise in these fields,” says Haarasilta.“In addition, Brazil has made extensive investments in telecommunications, which has also benefited Finnish enterprises.”Haarasilta says that Brazil’s economy of 200 million people would also have great demand for consumer goods.“The consumer market will certainly experience vigorous growth in the future. So far Finland’s exports to Brazil have focused on capital goods and, at least yet, Finland has not been able to profit from the consumption potential of the growing middle class.”Economic recession is hoped to remain shortJussi Haarasilta judges that Brazil’s economic problems and domestic policy crisis inevitably make an impact on the business environment of foreign enterprises in Brazil, at least to some extent.“It is clear that more caution and deliberation than normally is advisable when planning business deals in Brazil. However, I’d like to stress that despite the current problems, Brazil has many good enterprises and sectors that can serve as trading partners,” he says.“In the longer term, Brazil still has much potential as an export country for Finland, and sales to Brazil could be much higher than at present. We naturally hope that the recession of the Brazilian economy will be as short-lived as possible.”According to Haarasilta, Finnvera for its part is willing to support Finnish companies’ export efforts in Brazil as well, but keeps a close eye on the development of the country’s economy.“The more contracts Finnish export companies can win, the better it is for the whole of Finland.”Finvera’s guarantees for exports to Brazil account for the third highest country exposure among all countries. Apart from Finnish companies’ active efforts in Brazil, the exposure is explained by the fact that individual transactions in Brazil often have a very high monetary value.Additional information:Jussi Haarasilta, Executive Vice President, tel. +358 50 346 95 37
The ceilings for the Finnvera Group's export credits and export credit guarantees have been raised. The Finnvera Group can continue to provide Finnish export companies with internationally competitive financial arrangements for their export transactions. The legislative amendments will enter into force on 15 April 2016.The authorisation to grant export credits will rise from EUR 7 billion to EUR 13 billion, while the authorisation to grant export credit guarantees will rise from EUR 17 billion to EUR 19 billion. The authorisation to provide interest equalisation will also increase, from EUR 7 billion to EUR 13 billion. The purpose of the increases is to improve the competitiveness of Finnish companies engaged in the exports of capital goods and to enhance their opportunities to secure export contracts.– “Long-term financing plays an important role in negotiations for export-related purchase agreements. Bank regulation has affected banks’ possibilities to finance long loan periods. For this reason, Finnish Export Credit Ltd is needed in large financial arrangements. Some individual large export deals have increased our exposures close to their maximum limits. The increases in the authorisations enable Finnvera to participate in financial arrangements for Finnish companies’ export transactions and for their foreign buyers in the coming years as well,” says CEO Pauli Heikkilä.The parent company Finnvera’s total commitments for export credit guarantees and special guarantees amounted to EUR 17.4 billion at the end of December 2015. The outstanding commitments for export credit guarantees in accordance with the ceiling laid down by law totalled EUR 14.2 billion. The outstanding export credits and ship credits granted by the subsidiary Finnish Export Credit totalled EUR 4.2 billion. The granting of export and ship credits always requires an export credit guarantee. In other words, the risks associated with the project are covered with an export credit guarantee. According to the goal of economic self-sustainability set for Finnvera’s operations, the income received from the company’s operations must, in the long run, cover the company’s operating expenses. The self-sustainability of export financing has been realised over Finnvera’s history of 17 years, and Finnvera’s operations have not caused any costs to the State.Finnvera acquires the funds needed for credits from the market, by issuing State-guaranteed notes. The maximum amount of loans guaranteed by the State was raised from EUR 9 billion to EUR 15 billion. Additional information:Pauli Heikkilä, Chief Executive Officer, tel. +358 29 460 2400Jussi Haarasilta, Executive Vice President, tel. +358 29 460 2601
On 6 April 2016, Finnvera issued a ten-year, fixed-rate bond of EUR one billion. Among the euro-dominated bonds issued by Finnvera so far, this one has the longest maturity.The bond attracted much interest, and subscriptions rose to about EUR 1.9 billion.Over 60 investors from 15 countries participated in the arrangement. The greatest demand came from investors in Central Europe, especially Germany, Austria and Switzerland (36%), the Benelux countries and France (30%), Finland (17%) and other Nordic countries (7%).Finnvera’s EMTN Programme and the bonds issued under it are guaranteed by the State of Finland. Finnvera uses the funds both for SME financing and for financing export credits.The bookrunners for the issue are Citigroup, Credit Agricole, Danske Bank and HSBC.Finnvera acquires funds from international capital markets within the Medium Term Note Programme. The programme is guaranteed by the State of Finland.The rating of Finnvera’s EMTN Programme corresponds to the rating assigned to the State of Finland for its long-term liabilities. The rating given by Moody’s to Finnvera is Aaa and that given by Standard & Poor’s is AA+.Additional information:Ulla Hagman, CFO, tel. +358 29 460 2458Mikael Nordgren, Head of Treasury, tel. +358 29 460 2467
On 6 April 2016, Finnvera plc issued a ten-year, fixed-rate bond of EUR 1.0 billion.This is Finnvera’s first euro-denominated bond with a maturity of ten years.The bond was issued under Finnvera’s EMTN (Euro Medium Term Note) Programme.Finnvera’s EMTN Programme and the bonds issued under it are guaranteed by the State of Finland. Finnvera uses the funds both for SME financing and for financing export credits.Additional information: Ulla Hagman, CFO, tel. +358 29 460 2458Mikael Nordgren, Head of Treasury, tel. +358 29 460 2467
On 23 March 2016, Finnvera's Annual General Meeting elected new members to the company's Supervisory Board. No changes were made to the composition of the Board of Directors.The new members of the Supervisory Board are Laura Huhtasaari, Timo Kalli, Krista Kiuru, Kari Kulmala, Ville Niinistö and Eero Suutari, Members of Parliament; and Kari Luoto, Managing Director; Carita Orlando, Managing Director; and Christel Tjeder, Second Vice Chairman.Antti Rantakangas, Member of Parliament was elected Chairman and Krista Kiuru, Member of Parliament Vice Chairman of the Supervisory Board. Eeva-Johanna Eloranta, Member of Parliament; Mika Harjunen, Information Security Manager; Lasse Hautala, Member of Parliament; Olli Koski, Chief Economist; Leila Kurki, Senior Adviser; Veli-Matti Mattila, Chief Economist; Tommi Toivola, Senior Adviser; and Sofia Vikman, Member of Parliament will continue as members of the Supervisory Board.Markku Pohjola, B.Sc (Econ.), will continue as Chairman, Pekka Timonen, Director General, as First Vice Chairman and Marianna Uotinen, Specialist Counsel, as Second Vice Chairman of Finnvera's Board of Directors. The following persons will continue as Board members: Kirsi Komi, LL.M.; Pirkko Rantanen-Kervinen, B.Sc (Econ.); Harri Sailas, B.Sc (Econ.); and Antti Zitting, Chairman of the Board.The Annual General Meeting adopted the Consolidated Financial Statements and the Parent Company’s Financial Statements for the period 1 January–31 December 2015, discharged the Supervisory Board, the Board of Directors and the Chief Executive Officer from liability, and approved the proposal made by the Board of Directors for the use of the parent company’s profits.KPMG Oy Ab was re-elected Finnvera’s regular auditor with Juha-Pekka Mylén, Authorised Public Accountant, as the principal auditor.Further information:Pauli Heikkilä, CEO, tel. +358 29 460 2400Risto Huopaniemi, Senior Vice President, Administration, Legal Affairs and Administration tel. +358 29 460 2520