Finnvera involved in a major forest industry investment
Finnvera is participating in the financial arrangements for the world’s first bioproduct mill, to be constructed by Metsä Group in Äänekoski, Finland. Valued at EUR 1.2 billion, the investment project is the largest ever carried out by the forest industry in Finland.
To facilitate equipment purchases from Finland, Finnvera provides guarantees for about half, or EUR 400 million, of the debt needed for the project. Apart from Finnvera, six commercial banks, the Swedish Export Credits Guarantee Board (EKN) and the European Investment Bank are also participating in the financial arrangements.
Last summer Finnvera was authorised to offer export credit guarantees for financing investments that are made in Finland and generate, or otherwise benefit, exports. Previously, export credit guarantees could only be used to facilitate financial arrangements for transactions abroad and to meet exporters’ needs for working capital and performance bonds. Another objective of the legislative amendment was to balance the competitive standing of Finnish equipment suppliers vis-à-vis their foreign counterparts.
“Metsä Group’s investment satisfies the criteria defined for our new mandate, and we were able to participate in the project financing with our export credit guarantee. The project will have a positive impact on Finnish exports, as it is expected to boost exports by EUR 0.5 billion annually. The investment also has substantial effects on employment,” says Executive Vice President Topi Vesteri, who is responsible for export financing in Finnvera.
“Our project is based on a careful overall assessment of the profitability of the pulp business and the long-term market situation. Financing is a central element of the whole project, and the fact that both Finnvera and the State of Finland are participating in sharing the financing risk significantly reduced the limit load of commercial banks. The loan guaranteed by Finnvera is an important component of overall financing. Conforming to the OECD terms, the loan has sufficiently long maturity and in general offers competitive terms. Finnvera plays one of the key roles in the financing package,” says Kari Jordan, President and CEO of Metsä Group.
According to Jordan, the goal in equipment purchases was to ensure that the technology, delivery reliability and commercial terms were the best available. It is positive that the leading technology suppliers for the pulp industry are companies operating in Finland. For its part, the amendment made to the Act on the State’s Export Credit Guarantees enabled the high percentage of domestic equipment deliveries.
“It is important that Finland has a competitive organisation promoting exports and an operating model that levels the playing field between companies operating in Finland and their competitors. Here Finnvera is doing good work, and the amendment made to the Act on the State’s Export Credit Guarantees in 2014 is an example of dynamic development to secure the prerequisites for exports,” says Kari Jordan.
Construction of the mill has begun. It is scheduled to be in operation by the end of 2017.
Topi Vesteri, Executive Vice President, tel. +358 29 460 2676
Image: Metsä Group