EIFO issues first Ukrainian defence investment guarantee 

Drone used by Ukraine soldiers

The Export and Investment Fund of Denmark (EIFO) has issued its first guarantee and accompanying loan to a Danish company investing in the Ukrainian defence industry.  

EIFO is backing a €1.6mn (DKK12mn) investment by a Danish corporate – which cannot be named for security reasons – in a Ukrainian company involved in developing electronic drone defence systems.  

The deal is part of a government-sponsored programme to support the country’s war efforts against the Russian invasion, as well as “obtain firsthand knowledge” and “solutions developed and tested in combat” for Danish businesses, the export credit agency (ECA) said last week. 

EIFO is not only providing a seven-year guarantee covering 70% of the investment, but also directly financing the guaranteed portion through a matching loan, a spokesperson told GTR. 

This structure allows the company to move forward with the investment while only needing liquidity for the remaining 30% of the project cost, said the spokesperson. 

Through this support, the company will “be able to help address some of Ukraine’s current challenges in defending the country, but also contribute to Danish defence as the products are further developed and optimised”, according to EIFO. 

This marks the first deal to be backed by EIFO’s €134mn (DKK1bn) Ukrainian defence guarantee, a scheme introduced by the Danish government in April this year to get more private capital to “work in and for Ukraine”. 

The initiative is for Danish companies investing at least €134,000 (DKK1mn) in the development and production of weapons, ammunition, drones or software with “significant defence relevance” for Ukraine. 

EIFO CEO, Peder Lundquist, said: “By covering a large part of the risk, we make it possible for both large and small Danish companies to invest in the Ukrainian defence industry.  

“We are open to all projects and technologies that contribute to defence and business development in both countries,” Lundquist added. 

The guarantee can be used for direct investments in Ukrainian companies or in a Danish or foreign company with significant economic activity in Ukraine, or by establishing new companies or subsidiaries producing for the Ukrainian defence sector. 

EIFO’s guarantee runs for a pre-agreed period of up to seven years, after which the Danish company can sell its shares in the Ukrainian company to the ECA at a pre-agreed price. 

Danish companies must pay an ongoing premium for the guarantee, which is linked to an exit fee and a performance fee that must be paid “if the investment performs well”, according to EIFO. 

The Danish ECA also has Ukraine-oriented export credit initiatives available for the Danish defence industry. 

Minister for Industry, Business and Financial Affairs, Morten Bødskov, said: “With this investment, we are emphasising that Danish companies do not hesitate to support Ukraine when it truly matters.  

“Our guarantee is proof that Denmark takes responsibility and stands shoulder to shoulder with the Ukrainians – also when it comes to innovation and protection against Russian drones.  

“It is crucial that we help Ukraine to develop the capabilities that can make a difference on the battlefield and strengthen freedom – both in Ukraine and in Europe,” he added. 

EIFO has been a leading ECA in Ukraine since the invasion began in February 2022, regularly providing funding to businesses investing in the country in a bid to help Kyiv’s reconstruction efforts.