Finnvera Oyj - Company Announcement

Financing sought for exports and working capital

Information on Finnvera's operations in 2010

Despite rising production, companies made only modest investments during the
period under review. This was clearly reflected in the demand for Finnvera's
domestic financing, which was nearly one-third less than during the record year
of 2009. In contrast, demand for export credit guarantees and special
guarantees rose by about one-fifth. Finnvera provided more financing for
starting enterprises than the year before. 

Thanks to the monetary policy and fiscal policy measures taken in various
countries, the economy started gradually to revive. 

“Economic activity was still fairly modest during the first months of the year.
Signs of economic growth strengthened as the year progressed, but at the same
time new, even surprising crises surfaced in European countries and banks.
Conflicting data on economic outlooks in different parts of the world fuelled
uncertainty,” says Managing Director Pauli Heikkilä. 

In 2010, Finnvera provided EUR 913.7 million in financing for enterprises'
domestic operations; this was 24 per cent less than the year before. In
particular, financing was provided for starting small businesses, and the
volume of venture capital investments was record high. 

Offers for export credit guarantees totalled EUR 2.4 billion (4.4 billion).
Telecommunications accounted for 71 per cent of all guarantee offers given.
Among individual countries, the most guarantees were granted for exports to
Spain, Saudi Arabia, Turkey and Russia. 

The number of clients increased by three per cent and was 29,300 at year's end.

Lively demand for financing among start-ups

“Because of the sharp decline in production, companies' investments plummeted
in 2009, and despite the revival of production, their volume remained
surprisingly low in 2010 as well. The scarcity of investments had a major
impact on the demand for Finnvera's domestic financing, which was clearly lower
than in previous years. Financing was mostly granted for working capital,”
Executive Vice President Veijo Ojala explains. 

Finnvera financed more new start-ups than a year ago. Altogether 3,611 starting
enterprises received financing (3,457). Demand for early-stage venture capital
investments was also high. In all, 17 decisions on initial investments and 61
decisions on continued investments in starting innovative enterprises were made
in 2010. The total value of these investments was EUR 16.3 million. 

Finnvera's counter-cyclical financing was introduced on 6 March 2009, when the
financial and economic crisis was at its height. The counter-cyclical financing
granted by the end of 2010 totalled over EUR 300 million. It has helped over
800 enterprises to overcome financial difficulties caused by the recession. 

Demand for export credit guarantees remained high

Although it will still be years before the Basel III regulatory framework
enters into force, it had an immediate effect on banks' operations, which were
otherwise returning to a more customary level after the crisis. 

“This was seen at Finnvera in that an increased number of applications was
filed for Finnvera's export credit guarantees, especially for large export
projects with a repayment period of over seven years,” says Executive Vice
President Topi Vesteri. 

Measured in euros, the demand for export credit guarantees and special
guarantees was 22 per cent higher than during the previous year. In contrast,
the amounts of new guarantee offers and guarantees that came into effect
declined when compared against 2009. Offers for export credit guarantees
totalled EUR 2.4 billion (4.4 billion) and the total value of the guarantees
that came into effect was EUR 2.6 billion (3.8 billion). Most export credit
guarantees are granted for the principal sectors of Finnish capital goods
exports: telecommunications, shipyards and shipbuilding, power generation, and
wood processing. 

Temporary arrangements for export financing to continue

Owing to the EU rules on State aid, Finnvera as a public export credit agency
cannot insure short-term risks that private insurance companies are able to
insure in normal market circumstances. The European Commission has given
Finnvera temporary permission to grant short-term credit insurance also for
exports to Western industrialised countries. This permission was initially in
force until the end of 2010, but it has been extended until the end of 2011. 

The short-term credit insurance granted by Finnvera in 2010 totalled EUR 103.6
million, of which exports to Western industrialised countries accounted for EUR
52.6 million. 

The Finnish government decided to continue the temporary refinancing of exports
through the Finnish Export Credit until 30 June 2011. During 2010, Finnish
Export Credit signed one refinancing agreement; its value was EUR 77 million.
By the end of the year, the refinancing used totalled EUR 357 million. 

The shipyard industry: a pivotal sector for domestic and foreign risk-taking

The world's largest cruise vessel, the Allure of the Seas, was delivered from
the Turku shipyard of STX Finland Oy in November 2010. Finnvera participated in
the pre-delivery and post-delivery financing of this vessel. Altogether 80 per
cent of the Allure's price was paid with a 12-year buyer credit of USD 1.1
billion, of which Finnvera's Buyer Credit Guarantee covers 95 per cent. 

Domestic risk-taking in export financing is associated with measures to secure
working capital for export projects when export products are being
manufactured, or with domestic ship deliveries. With a Ship Guarantee, Finnvera
is participating in the financing arrangements for a new vessel ordered by
Viking Line. Finnvera's subsidiary Finnish Export Credit Ltd is a lender in the
buyer credit granted for the vessel ordered by Viking Line. The credit is about
EUR 180 million, or about 70 per cent of the ship's price. Finnvera is
guaranteeing 50 per cent of the credit, which is granted on the OECD terms for
export credits; the repayment period is 12 years. 

Future prospects

As enterprises have made few investments, demand for domestic financing has
been exceptionally low.If there is an upturn in the volume of investments,
demand for financing is expected to pick up already during spring. It is
thought that business reorganisations among SMEs will become more common,
especially as increasing numbers of enterprise owners retire and pass on their
businesses to the next generation. 

Demand for export financing is likely to remain at the same level as before.
Outstanding commitments for export credit guarantees are expected to rise in
many sectors. However, at the same time, the volume of existing commitments is
decreasing, and therefore the total commitments are not expected to rise. 


Finnvera's financial statements and annual report for 2010, as well as the
report on corporate social responsibility, will be published on 22 March 2011
on the company's website www.finnvera.fi. 

Additional information:
Pauli Heikkilä, Managing Director, tel. +358 20 460 7321
Topi Vesteri, Executive Vice President, tel. +358 20 460 7238 (Financing of
exports) 
Veijo Ojala, Executive Vice President, tel. +358 20 460 7405 (Domestic regional
financing) 
Annamarja Paloheimo, Senior Vice President, tel. +358 20 460 7267 (Financing
for growth and internationalisation) 

Leena Jaakkola, Senior Vice President, Communications and Marketing, tel. +358
20 460 7232 or +358 40 352 9332