Export financing helps bring Norwegian know-how to a global stage

The export finance programme provides a great deal of benefits for customers thinking of buying Norwegian

Companies considering sourcing capital goods and services in Norway have a powerful incentive in the form of the country’s government-backed export financing system. This comprises two branches: Export Credit Norway (ECN) which provides the loans; and the Norwegian Export Credit Guarantee Agency (GIEK) which provides guarantees. Unsurprisingly, for a country with such a strong maritime heritage, what ECN terms ‘ocean industries’ forms a large proportion of goods and services the scheme has assisted with financing. ECN director of lending for ocean industries Olav Einar Rygg spoke with Norwegian Solutions about ECN’s activities and the opportunities it can provide.

Put simply, ocean industries covers any and all ocean-based activities according to Mr Rygg, an economist by training who has worked in export credit for much of his career and headed up the ocean industries department since ECN was set up in 2012, when he was also acting chief executive. Ocean industries covers everything from traditional shipping such as industrial shipping and merchant shipping to fishing, fish farming, offshore wind, offshore oil and gas and passenger vessels such as cruise ships and ferries Mr Rygg said, noting this segment makes up approximately 95% of ECN’s entire loan portfolio. “Export capital goods from Norway is very much about the sea – it’s maritime focused,” he added.

Mr Rygg highlighted the main benefit for foreign companies considering doing business in Norway under the scheme. “They will get long-term financing at competitive terms,” he explained. All loans issued under the system are guaranteed by GIEK or a commercial bank, Mr Rygg explained, and the risk appetite of the guarantors and contract values are the only limitations when it comes to the amount that can be covered by such a loan. “We have no minimum amounts but there are some costs involved in establishing cross-border financing which means that in practice it’s very rare that we see contracts below US$1M being financed,” said Mr Rygg.

To be eligible for ECN’s assistance, foreign buyers should file an application with the scheme before signing a contract with a Norwegian exporter. There is a minimum Norwegian content requirement of 30%, meaning a Norwegian exporter can still source 70% of goods or services to be deliverd from outside Norway. This ratio also carries over to a new fully commercial scheme scheme introduced by ECN to fund the purchase of vessels produced by Norwegian yards intended for use in Norway waters by Norwegian buyers. Under the scheme, GIEK will not guarantee more than 75% of the loan, so a commercial bank must be used to guarantee at least 25%.

To finance small to medium-sized enterprises, ECN has simplified loan documentation and streamlined the process of financing, Mr Rygg said, noting that cross-border financing is now being provided for contracts down to about US$500,000. “It’s more or less the same application process but in co-operation with GIEK we try to simplify the security requirements and documentation needed. We have quite a good pipeline of projects in that sector and a lot of requests so it’s going to be interesting to see how that will develop,” said Mr Rygg.

Discussing the areas ECN anticipates growth in the future, Mr Rygg said “There has been a large turnaround at Norwegian yards. They used to finance offshore vessels and they have now successfully changed over market areas, for instance to expedition cruise vessels. They have a large orderbook of smaller very advanced cruise vessels and passenger ferries, so I expect that will increase further going forward.” Mr Rygg also anticipates growth in the areas of fishing and fish-farming, noting “That is very interesting because the technology used in offshore oil and gas is transferred to construction of offshore fish-farming equipment. So that is a crossover of knowledge and competition from the ocean-based segments.” He added that his department used to be referred to as ‘shipping and offshore’ but was renamed ocean industries precisely because of the increase in such crossover activity between maritime segments, which he sees as a strength.

ECN also expects to see more retrofitting of existing vessels with systems such as scrubbers, ballast water treatment systems and hybrid power solutions such as battery storage, Mr Rygg said.

There are a host of interesting examples of ECN-funded projects in a wide range of maritime areas, including a Norwegian-designed and built factory trawler delivered to a New Zealand-based firm, a catamaran designed to prevent seasickness while transporting personnel in windfarms offshore Germany and purely LNG-fuelled cargo vessels plying the sea routes between Hammerfest in northern Norway and continental Europe, but Norwegian Solutions only has room to highlight a few here.

With ECN’s backing, Norwegian suppliers including Rolls-Royce’s Norwegian arm provided equipment for Edda Passat and Edda Mistral, two offshore wind service operation vessels owned by Norway's Østensjø Rederi/West Energy. ECN provided £25.8M (US$34.1M) funding over 12 years, guaranteed by GIEK. The vessels are contracted with Denmark's Ørsted, formerly Dong Energy, for five years with an option to extend. Edda Passat was built at Spain’s Astilleros Gondan shipyard and delivered in February 2018. It is currently operating in the Race Bank windfarm offshore Norfolk and Lincolnshire in the UK. Sister vessel Edda Mistral is currently under construction at the same yard and scheduled for delivery in August 2018. It will operate at the Hornsea One windfarm, further out in the North Sea west of the East Riding of Yorkshire and north of Norfolk. Norwegian content on the vessels includes the propulsion systems and design package, provided by Rolls-Royce as well as several other items such as paint and an advanced gangway system.

In the passenger shipping area, GIEK guaranteed  Le Laperouse, an expedition vessel built for French cruise operator Ponant at Fincantieri subsidiary Vard’s Søviknes yard. The vessel is one of the Ponant Explorers, a series of seven vessels to be built at the Søviknes yard representing exports of several billion kroner, all of which are guaranteed by GIEK in co-operation with French banks. GIEK head Wenche Nistad noted that Norway’s shipbuilding industry is changing rapidly, with cruise ships making up more than 50% of the order backlog at Norwegian yards. “The cruise market partly compensates for the decline in the offshore industry, and is now the largest market for Norwegian shipyards,” she said.

Inspection, maintenance and repair vessel Skandi Vinland was built by Vard’s Langsten yard for DOF Subsea’s subsidiary Canadian Subsea Shipping Company with assistance from ECN to the tune of C$68M (US$52M), guaranteed 70% by GIEK and 30% by Dutch bank ABN Amro. The construction contract was signed in November 2015, with delivery of the 3,000-dwt vessel, which measures 93.1m long by 30m wide, taking place 19 months later. The vessel entered service on a 10-year contract offshore Canada’s east coast with Canadian integrated energy company Husky Energy in August 2017.