Finnvera Oyj - Company Announcement

Economic crisis increased demand for Finnvera's financing

Last year, demand for Finnvera's financing was greater than ever before. Demand
for domestic financing peaked during the first months of the year and for
export financing towards the end of the year. A factor contributing to the
greater demand was the introduction of counter-cyclical loans and guarantees
for domestic financing in March. In export financing, the greatest rise in
demand was noted in short-term credit insurance for exports to industrialised
countries, which became possible at the beginning of July. 

The downturn in the global economy that had started the year before and the
consequent changes on the financial market set the tone for 2009. 
“The recession was reflected in our client companies in different ways. Major
export companies witnessed an almost complete halt in demand, forcing them to
implement radical adjustments to their operations. As to SMEs, the consequences
depended on the sector. Especially among subcontractors for exporters, the
changed situation became evident quickly, whereas for many smaller enterprises
operating on the domestic market the effects began later,” says Managing
Director Pauli Heikkilä. 

During the year, Finnvera financed enterprises' domestic operations by nearly
EUR 1.2 billion, which was 16 per cent more than the year before.
Counter-cyclical financing was granted to over 500 enterprises, in total EUR
187.9 million. The supply of products for microfinancing also increased
markedly. 

The total sum of offers for export credit guarantees fell by about one third,
but owing to the availability of credit insurance for exports to industrialised
countries, the number of offers nearly quadrupled. Offers for export credit
guarantees totalled EUR 4.4 billion (6.3 billion). 

The number of clients increased by nearly 1,000, totalling over 28,400 at
year's end. 

SMEs needed working capital
“The poor availability of bank financing for SMEs was reflected in the demand
for Finnvera's financing especially during the first half of the year, when
demand was as much as 60 per cent higher than the year before. The reasons
underlying this major upturn in financing within one year were the financial
crisis and the subsequent recession, as well as the financing of some large
projects,” Executive Vice President Veijo Ojala explains. 

The structure of financing projects changed considerably with the recession.
The greatest demand was recorded in financing for working capital, whereas the
number of investments fell clearly. As there were fewer company reorganisations
during the recession, the number of Entrepreneur Loans granted also decreased.
However, the total value of projects financed was slightly greater than in
2008, exceeding three billion euros. 

Financing for industry increased the most, by about EUR 121.6 million, or 20
per cent. The most prominent industrial sectors in this respect were the metals
and wood product industries, for which counter-cyclical financing was
particularly important. 

Among regions, demand for financing increased rapidly in Uusimaa, where more
counter-cyclical financing was granted than anywhere else. Similarly,
substantial increase in financing was recorded in Kymenlaakso, Central Finland,
Northern Karelia and Northern Savo. Regions eligible for assistance on regional
policy grounds also received more financing than in 2008. 

Despite the recession, Finnvera provided financing for nearly 3,500 new
start-ups; this had also been set as the target. It is estimated that the
projects financed will generate about 9,200 new jobs. This is clearly less than
the estimated annual numbers of new jobs resulting from projects financed
before the recession because for many companies, the adaptation of business and
maintaining existing jobs weighed more than the creation of new jobs. 

Demand continued to be high for early-stage venture capital investments.
Business angels became increasingly active, and the number of private
individuals investing in early-stage enterprises and registered for the service
exceeded 130 during the year under review. 

A brisk year for export credit guarantees
In 2009, the numbers of guarantee applications, new guarantee offers and
guarantees that came into effect were the second highest within the past
decade. The number of applications for guarantees was over 300 per cent greater
than the figure in 2008, says Tuukka Andersén, Director of Finance. 

Telecommunications accounted for 66 per cent of all guarantee offers given. Of
individual countries, the most guarantees were granted for exports to Japan,
Brazil, Russia and India. 

The value of guarantees that came into effect totalled EUR 3.8 billion (3.8
billion). Telecommunications and shipping each accounted for about one third of
the new foreign risk-taking that came into effect. 

A busy year in the credit insurance business
The short-term credit insurance business brought Finnvera new export credit
guarantee clients and new countries for guarantees. By the end of the year,
applications for guarantees had been filed and guarantees had been granted for
exports to 31 industrialised countries, as well as to customary political risk
countries. The greatest numbers of applications were filed for exports to
Italy, the UK, Spain, France, the USA, Sweden and Lithuania. Exporters in the
wood product industry were the most active in applying for credit insurance. 
Guarantees were granted to 70 applicants, for a total value of EUR 57.6
million. Demand for credit insurance for export transactions in Russia has also
been more lively than normally. 

The shipyard industry: a pivotal sector for domestic and foreign risk-taking
Finnvera participates in the pre-delivery and post-delivery financing of the
world's largest cruise vessels, the Oasis of the Seas and the Allure of the
Seas. The Oasis of the Seas was delivered from the Turku shipyard in October
2009, and Finnvera has granted a Buyer Credit Guarantee for its post-delivery
financing. 

The sister vessel, the Allure of the Seas, will be delivered from the Turku
shipyard of STX Finland Oy in November 2010. Through a Buyer Credit Guarantee,
Finnvera also participates in the post-delivery financing of this vessel. When
these guarantees are included, Finnvera's outstanding commitments for the Royal
Caribbean Cruises shipping company will rise to about EUR 1.5 billion. 

Refinancing of export credits
Refinancing gives banks the opportunity to offer long-term export financing
independent of the banks' acquisition of funds. In refinancing, a bank that
provides financing for a foreign buyer can transfer an export-related buyer
credit to be financed by Finnish Export Credit Ltd, a subsidiary of Finnvera's,
if liquidity problems on the market have made the bank's own acquisition of
funds more difficult. 

There was less demand for refinancing than had been expected. During 2009,
Finnish Export Credit signed one refinancing agreement worth EUR 280 million.
At year's end, the total value of refinancing applications submitted to Finnish
Export Credit was EUR 2.5 billion; refinancing offers totalled EUR 0.9 billion. 

Future prospects
Demand for financing is expected to slow down in early 2010, as enterprises are
reluctant to make investments. Most sectors have plenty of unused capacity for
increasing production. Rising demand on the export market will revive the
metals and wood industries, in particular. 

The number of SMEs in distress and the number of bankruptcies may still
increase, especially on the domestic market. 

Orders for exports will start to revive gradually. However, the revival is slow
and varies from one sector to another. In many sectors, overcapacity or
sufficient capacity postpones the launching of new investments. Finnvera's
relative share of export financing will remain greater than the average, but,
owing to the reactivation of the commercial financial markets, we no longer
expect to reach the record-high volumes of 2008 and 2009. 

On the basis of the existing offers and the projects under processing, it is
thought that the principal outstanding commitments for export credit guarantees
that come into effect in 2010 will be associated with the exports of
telecommunications networks and ships. 

Finnvera's financial statements and annual report for 2009, as well as the
report on corporate social responsibility, will be published on 23 March 2010
on the website www.finnvera.fi. 

Additional information:
Pauli Heikkilä, Managing Director, tel. +358 20 460 7231 
Veijo Ojala, Executive Vice President, tel. +358 20 460 7405 or +358 400 672
401 (Domestic regional financing) 

Tuukka Andersén, Director of Finance, tel. 020 460 7351 or +358 40 593 2449
(Financing of exports) 
Annamarja Paloheimo, Senior Vice President, tel. +358 20 460 7267 or +358 50
309 7368 (Financing for growth and internationalisation) 
Leena Jaakkola, Senior Vice President, Communications and Marketing, tel. +358
20 460 7232 or +358 40 352 9332