Norwegian export credit agency (ECA) Giek has launched a new lender guarantee for export-related investments in Norway.
The new product will provide guarantees to banks that finance corporate investment in Norway, where the investment directly or indirectly leads to exports. Aimed at boosting diversity in the oil and gas-rich nation, the guarantees will not be applicable to oil and gas processing plants, tourism, real estate development and large infrastructure projects.
“It is designed as a buyer credit guarantee,” a spokesperson for Giek tells GTR.
“The investments should trigger exports, that is, the investment should lead to sales that are directly or indirectly export-related. At least 50% of the resulting revenue must be from export.”
The new cover will be issued within GIEK’s general guarantee scheme, which has a total exposure limit of Nkr145bn (US$17.24bn). On individual guarantees the ECA will cover 50% of the bank’s risk.
“Giek requires a premium for the guarantee, which is equal to the bank’s risk premium and on equal terms,” says the spokesperson.
Plummeting oil prices have pushed Norway, where oil and gas-related sectors make up around 75% of the country’s exports, to rethink its future and its exporting strategy. In his 2015 annual address, the governor of the Norwegian central bank, Øystein Olsen, highlighted that after 40 years of prospering on oil and gas, Norwegians are transitioning from a “unique place” to one of “adapting and restructuring”.
Norwegians, who have enjoyed a strong economy for the best part of two decades and been cushioned from the financial crisis of 2008 – and the global slowdown since – on the back of high oil prices, are now faced with a new reality and must adapt, he said.
For state loans provider Giek and Eksportkreditt, the two main sectors that have been supported, in terms of volume, have been oil and gas maritime vessels and equipment for drilling rigs. For Eksortkreditt, the two sectors accounted for over 95% of loans issued since 2005. Giek hopes the new product will encourage other sectors to seek support.
“The new warranty meets new needs that have arisen in a difficult time,” said minister of trade and industry, Monica Mæland, at the launch of the product.
“Norway needs new export contracts in many industries in the coming years. Companies need to invest in new technology, machinery and equipment. Government guarantees for bank loans can be important to finance these investments. It is important that export companies have the best possible conditions.”
Smarter, greener, more innovative
The new guarantee is in line with the government’s industrial initiative which was put forward earlier this year, its first such plan since 1981. According to the government, the plan aims to address the opportunities and challenges the country is facing “as a result of climate change, new technology, robots and digitisation”, by being “more innovative, smarter and greener” and ensuring its businesses have the right export conditions to be competitive.
For innovation, the government says it will invest Nkr50bn for new test centres for businesses, and will add Nkr10mn for funding so-called enabling technologies that it describes as having the potential to lead to major changes in society. It lists examples of such technologies being in information and communication technology (ICT), nanotechnology, advanced materials, micro and nano electronics and industrial biotechnology.
The need for smarter approaches is also highlighted in the government’s plan. Only 17% of Norwegian industrial companies say that they are advanced users of digitised and automated production, but the willingness to adopt new technology is great, said Mæland during the launch of the plan.
“Technological development and digitisation is occurring at a furious pace,” she said.
“It will create entirely new products, services and business models. Industrial workers’ tasks in the future will be more complex – humans and machines will need to work together in entirely new ways.”
On the greener front, Norway plans to pursue an aggressive policy towards becoming a low-emission society. Despite its abundance in fossil fuel reserves, Norway has for long powered its domestic market predominantly with renewable energy, giving it an important competitive advantage. The government now plans to focus on exporting this expertise to the rest of the world.
Within the plan, the need for a state export strategy and export guarantee products to back Norwegian companies is highlighted. In addition, the government says it will appointment a committee to review whether companies have sufficient access to capital for profitable projects. The new guarantee is part of this new strategy push and comes from a collective effort with the Federation of Norwegian Industries.