BULLETIN nordic investment bank february 2003 Investing in cleaner energy Letter from the President

European energy supply demands investment

Secure energy supply is one of the European energy markets, for example, calls for basic prerequisites of economic effi- extensive equipment and systems giving power ciency, and Europe will now be facing consumers a free choice of power supplier.

Matias Uusikylä great challenges in the energy sector. Eastward EU enlargement demands heavy EU enlargement with the advent of investments in linking the applicant countries’ ten new Member States, the introduc- power distribution systems with Western tion of a single energy market for the Europe’s. Energy efficiency improvement and whole of the EU/EEA, climate change reduction of harmful emissions from power pro- and Kyoto Protocol commitments to duction and energy consumption also demand reducing emissions of greenhouse heavy investment. Gas pipelines from Norway gases are new elements added to the and Russia to other parts of Europe are impor- already complex task of ensuring tant instances of major infrastructure initiatives »Eastward EU dependable energy supply for Euro- which will be needed within the near future. pean economic growth. A gas pipeline on the Baltic seabed from Russia enlargement via Finland to Germany can serve as an out- European energy policy addresses standing example. A transmission network unit- demands heavy both the demand and supply sides. ing the Baltic countries with the Nordic power investments.« Measures for greater energy conserva- network—Nordel—is another. tion and efficiency should be given priority, not least where energy consumption in Nordic industry has a great deal of know- buildings and motor traffic is concerned. how, expertise and experience in all the above Targeted energy taxation can play an important mentioned fields. In the years ahead this should part in improving the logistical balance. On the mean good prospects for Nordic firms specialis- supply side much depends on the development ing in energy hardware and software solutions, of a broad, diversified base for energy produc- both at home and abroad. tion, emphasising energy sources with the least possible impact on the environment and cli- From its inception, the Nordic Investment mate. Hopefully, the realisation of an open Bank has focused heavily on the energy sector, common European market for energy will even- and we look forward to supporting Nordic tually lead to more efficient use of available industry, which is certain to play an important energy resources and infrastructure. part in meeting the great challenges which the European energy sector is now facing. There Even with a successful energy policy, are exciting tasks ahead of us. Europe is going to be more and more depend- ent on imports for its energy supply. This is where geopolitical considerations come in. Good relations with energy exporting countries and an efficient infrastructure securely linking the European markets with them are of the utmost importance for future security and pros- perity in Europe.

These future prospects imply big investment Jón Sigur›sson needs in the energy sector. The liberalisation of January 2003

2 bulletin february 2003 10

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COPENHAGEN Landgreven 4 Communication and understanding DK-1301 Copenhagen K 4 9 Danish power lines go underground Denmark 10 Panorama Telephone +45 33 144 242 THEME: ENERGY IN THE BALTIC Telefax +45 33 322 676 COUNTRIES P. 6–9 12 Spearheading food industry technology 6 Baltic energy turning more efficient and 14 News from the Nordic Finance Group environmentally friendly OSLO 15 Fifty years of Nordic cooperation Dronning Mauds gate 15 8 Estonian power production meets (at Eksportfinans) environmental requirements 16 News N-0119 Oslo 18 NIB in brief Norway 9 Latvian investment in more efficient Telephone +47 2201 2201 power transmission 19 Interim report January-August 2002 Telefax +47 2201 2202

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BULLETIN PUBLISHER SINGAPORE NIB’s Bulletin is published in Danish, NORDIC INVESTMENT BANK Regional Representative English, Finnish and Swedish. Fabianinkatu 34, Helsinki, Finland Office P.O. Box 249 78 Shenton Way # 16-03 EDITORS FIN-00171 Helsinki Singapore 079120 Jamima Löfström, Editor-in-chief Telephone: +358 9 18001 Telephone +65 6227 6355 Linda Hintze, Gunilla Nyman, Pelagia Telefax: +358 9 1800210 Telefax +65 6227 6455 Pekonen and Pamela Schönberg Internet: www.nib.int E-mail: [email protected] Translation Roger Tanner, Stockholm Layout Lowe & Partners, Helsinki CHANGE OF ADDRESS Cover photo Printed by Nomini, Helsinki Telefax: +358 9 612 1417 Toomas Tuul

bulletin february 2003 3 Interview

Communication BJARNE MØRK-EIDEM IS – Auditor General of Norway and understanding since 1990, – former Speaker of the Storting (parliament), Norwegian cabinet “The important thing is for us to understand and get to know one minister and MP, – Chairman of the NIB Control another. And so we must be able to communicate,” says Bjarne Committee, – longstanding Chairman of the Mørk-Eidem, looking back on his many years in Nordic cooperation League of Norden Associations and his time on the Control Committee of the Nordic Investment and of the Norden Association in Norway. Bank.

Speaking as a veteran of the Nordic of parliamentary cooperation were laid Saying everything is as it should be scene with a broad experience from more partly through cooperation in the sporting because the economy is doing well can be than 30 years of active Nordic commit- world and trade unionism.” unfair and lopsided.” ment, Bjarne Mørk-Eidem is convinced Bjarne Mørk-Eidem denies that EU that Nordic cooperation is deeply rooted membership has made Nordic coopera- Nordic cooperation today is focusing in the hearts and minds of the people, and tion less important. If anything the EU more and more on the Baltic region. This not just a matter of fine speeches or pure- has made it both broader and deeper. is perfectly natural, and so too is NIB’s ly the concern of politicians. He counts “Cooperation is easier when the frames participation. The Bank was originally set himself fortunate to have been a part of are larger.” up for the Nordic countries. Today we can Nordic cooperation for such a long time Nordic cooperation has also had some see that the Nordic area has grown too and to have witnessed its development in big challenges to face over the years. The small in a number of fields. The Baltic Sea various fields. Among other things he debates have been numerous and inten- is an important environmental theatre and served as Norwegian Minister for Nordic sive, but fruitful. Bjarne Mørk-Eidem exemplifies the shift of perspective follow- cooperation and on the Nordic Council recalls a number of quite stormy meetings. ing the obliteration of natural boundaries. until 1990, when he was elected Auditor “As a politician, all this cooperation and Pollution in the Nordic area does not General of Norway. debate were a fantastic experience. I’ve come from the Nordic countries alone. For many years Bjarne Mørk-Eidem had as much rough and tumble debating “It is gratifying that NIB’s loans to the headed the activities of the Norden with politicians from other Nordic coun- Baltic countries are no longer special loans Associations, politically independent tries in the Nordic Council as with with special guarantees but are registered NGOs, promoting Nordic cooperation in Norwegian politicians on my home as ordinary lending, like credits to the rest all fields. He speaks with enthusiasm of ground.” of the Nordic area. The initiative now in the important role they have played in progress in the Arctic region, in northwest shaping the Nordic perspective. Mr. The usefulness of Nordic cooperation is Russia and in the Barents region is hugely Mørk-Eidem makes special mention of the a perpetual topic of discussion in various important. I’m glad that work has begun North Calotte cooperation, which has connections, not least in comparisons with on modernising the Pechenga Nickel become an important meeting point for EU cooperation, for example. In the mid- smelting plant in the Kola Peninsula. That the Northern regions. The initiative came 1990s an evaluation of the Nordic benefit is a feather in NIB’s hat, not least. The from the Norden Association, with the of the Nordic institutions resulted in project is one of great consequence for the Nordic Council joining in later. about ten of them being closed down. At whole of the Arctic region and for “In a manner of speaking,” says Bjarne that time the Nordic Council was looking Norway, Sweden and Finland.” Mørk-Eidem, “the Nordic Council has towards Europe, following the accession Mr. Mørk-Eidem is closely acquainted been the executive arm of the Norden of Finland and Sweden to the EU. Mr. with NIB’s activities. He is currently Associations. The basis of Nordic cooper- Mørk-Eidem says that he was greatly sur- Chairman of the Bank’s Control Committee ation emerged from the history of the prised by the definition of “Nordic ben- and had a hand in starting the Bank itself. Norden Associations. It would never have efit” and disapproves of economic criteria “NIB has played a considerable role in won such a degree of popular acceptance having been made the starting point. the 25 years of its existence, and is also one without the strong support received from “For one thing, this means lower prior- of the most successful organisations the the civic organisations. The foundations ity for the arts, which usually cost money. Nordic Council has helped to create dur-

4 bulletin february 2003 ing its 50-year history,” he says with a touch of pride.

Negotiations for a Nordic investment Pamela Schönberg bank had been going on since the 1960s, but developments gathered speed in 1975 when the formation of the bank was the principal item on the agenda of an extraordinary session of the Nordic Council. “There was disagreement as to whether a Nordic investment bank should be start- ed or not,” Mr. Mørk-Eidem recalls, “and hot words were exchanged. NIB is a pol- itical bank that was formed after a major political contest. For one thing, Norwe- gian and Danish conservatives and Finnish communists saw no need for any such bank at all.” But as Bjarne Mørk-Eidem sees it, the existence of the need has been clearly demonstrated by the Bank’s activities. Bjarne Mørk-Eidem steps down as chairman of NIB’s Control Committee. NIB came about as an experiment which has since proved highly successful. Mørk-Eidem says the time has come to “Nordic cooperation has given me great “NIB today stands forth as perhaps the make way for new blood, and he recently fulfilment and made me a better politician. most successful project of Nordic cooper- announced his intention of standing down I count myself privileged to have been a ation, both economically speaking and in from the Control Committee after a total part of this for such a long time and to terms of the effects on the Nordic area as of twelve years’ service. have seen so much happen.” a whole. The Bank has also made an Mr. Mørk-Eidem says that the inde- important difference to the individual pendent committee, in itself a unique Understanding of languages and ability countries and the development of their arrangement, has worked excellently. It to communicate with each other, Bjarne enterprise sectors. Having observed devel- is appointed by the Bank’s owners and Mørk-Eidem maintains, are among the opments at close quar- supervises compliance most important things of all. Effective ters, I can say that of the Bank’s opera- communication is needed so that trust and they have been quite »NIB has made an tions with their wishes. opportunities of cooperation can develop. fantastic.” important difference The Auditor General The important thing is for us to under- The NIB Control adds that it is the stand and get to know one another. Committee is a special to the individual Control Committee Much has been accomplished but much controlling body countries and the that elects the Bank’s remains to be done through the Bank, tasked with ensuring professional auditor. whose owners have been very cautious. that the Bank’s opera- development of their “I feel the owners could have given the tions are conducted in Bjarne Mørk-Eidem Bank rather more latitude and opportu- agreement with its enterprise sectors.« feels that more empha- nities. They will one day, but things Statutes. The Com- sis could have been laid always take a bit longer to happen than mittee is also responsible for auditing, and on the role of the Nordic Council and the you first believed. NIB is a young bank but presents an annual audit report to the Nordic Council of Ministers. The Nordic in many different fields has contributed Nordic Council of Ministers. It has ten Council is above all important as a vital towards real progress and understanding members—two from each of the Nordic channel of communication for Nordic between the Nordic countries. Which of countries—five members being elected by politicians, a meeting point where they course was the whole point of founding the Nordic Council as parliamentary rep- have been able to exchange thoughts and it.” resentatives and five being nominated, as ideas and learn from each other. The governmental representatives, by the Nordic societies today are relatively simi- national governments. The chairmanship lar, and in this respect the Nordic Council circulates between the Nordic countries. and Nordic cooperation generally have After three stints as Chairman, Bjarne been a contributory factor.

bulletin february 2003 5 Theme: Energy in the Baltic countries

Baltic energy turning more efficient and environmentally friendly

Estonian Eesti Energia and Latvian Latvenergo are committed to effi- ciency and environmentally friendly solutions. Their extensive invest- ments are being financed partly with long-term credits from NIB.

Great changes are in progress in the power plants on the Daugava River which Eesti Energia to comply with EU require- Baltic energy sector. Energy markets will provide roughly 70 per cent of the coun- ments and Estonia to honour the agree- be opened up as a result of impending EU try’s electricity output. ment with Finland. membership, and the thing now is to “In addition to the purely economic ensure that operations are competitive. benefits,” says Mara Kalnina, Latvenergo’s For several years Eesti Energia negoti- Eesti Energia produces the greater part Environmental Protection Manager, “the ated with the American NRG Energy of Estonia’s electricity and heat in two investments will also have positive envi- Power Corporation for a privatisation of power plants fuelled with oil shale in the ronmental impact.” the Narva power plants, but the negotia- city of Narva, in the country’s north-east- Environmental and quality standards tions were broken off at the beginning of ern corner. The mining and combustion based on ISO 14 001 and ISO 9 001 have 2002. The Estonian government decided of oil shale are causing severe negative been introduced at four of Latvenergo’s that the company was to be financially environmental impact. The third phase of facilities and other facilities will be certifi- strengthened and its activities developed a comprehensive investment programme cated as well. first, and the question of possible privati- aims mainly at “Our biggest CHP (combined heating sation was shelved for the time being. In »Great reducing environ- and power plant),” Mara Kalnina contin- the summer of 2002, both Standard & mental impact, and ues, “fuelled mostly by gas but also with Poor’s and Moody’s assigned Eesti changes are was inaugurated in heavy fuel oil, now complies with the Energia the same credit rating as the the summer of 2002. mandatory EU Directive for the integrat- Estonian government for long-term bor- being made in Eesti Energia is in- ed pollution prevention and control. The rowing. environmental vesting in two new prospective refurbishment of our second, The Latvian government decided alre- boilers for the shale- the oldest, CHP will also give significant ady at the end of 2000 to postpone plans legislation.« fired Narva plants environmental benefit thanks to the for privatising Latvenergo, so as to and in the moderni- implementation of modern combined strengthen the company’s performance sation of other production facilities. These cycle gas turbine power production tech- capacity in preparation for the opening up investments will help to achieve a heavy nology.” of the energy market. Through this deci- reduction of sulphur and dust emissions, sion the Latvian government wanted to for example. The company’s transmission Great changes are being made to the ensure that Latvenergo’s present opera- and distribution networks are also to be environmental legislation of the Baltic tions would be internationally competitive modernised and made more efficient. The states, in preparation for their accession to when the market was opened up to free new power production units will comply the EU in the spring of 2004. In a few competition. with EU emission requirements. years’ time, all environmental legislation “Experience in the Nordic countries will have to comply with EU Directives. shows that energy operations can be State-owned Latvenergo in Latvia is In addition, Estonia and Finland have an developed efficiently under state owner- investing extensively in the transmission agreement on limitations of Estonian ship,” says Lauri Johnson, NIB’s Regional and distribution network by installing emissions. Sulphur emissions in Estonia Manager of the Baltic countries. “In the new, efficient and environmentally friend- are to be reduced by 80 per cent of their Nordic countries, production and distri- ly technology. Plans also include repower- 1980 level not later than 2005. The invest- bution have been privatised while trans- ing and extensive investments in the hydro ments in the utilities in Narva will help mission is operated by separate companies

6 bulletin february 2003 with nationwide coverage. That, presum- northwest Russia through a common grid, Lauri Johnson says that the loans grant- ably, will also be the solution adopted in supervised by a joint dispatch centre, DC ed to Latvenergo and Eesti Energia make the Baltic countries.” Baltija in Riga. Latvia imports power from NIB the Baltic energy sector’s largest indi- Russia as well as from the other two Baltic vidual external financier. NIB has also fund- In both Estonia and Latvia, energy countries. When one of the two reactors ed a large number of lesser municipal dis- prices at present are fixed by the national of the Ignalina nuclear power station in trict heating investments in that sector. energy inspectorates. The laws of both Lithuania is shut down in 2005, by agree- countries require energy tariffs to be ment with the EU, this will reduce the pitched at a level where electricity produc- Baltic region’s capacity surplus. The plan tion and long-term investments can be is for the second Ignalina reactor to be assured. The tariffs guarantee the compa- shut down in 2009. nies’ operations for the time being. These There is no power trading at present terms of operation may change eventually between the Baltic and Nordic countries. as energy markets are opened up and com- Eesti Energia and Latvenergo have been panies have to fend for themselves in open allotted an important part in the future competition, and so the energy companies power cooperation planned between the are committed to streamlining their activ- Baltic countries and the Nordic area. A ities and, for example, reducing transmis- high voltage cable linking Estonia and sion and distribution losses. Finland is to be constructed on the seabed of the Gulf of Finland. Another cable link The Baltic countries have a power pro- is planned between Lithuania and Poland. duction surplus, and power is exported by Poland and Sweden have a common high Estonia and Lithuania to Latvia and voltage cable already.

The turbines of Eesti Energia’s production facilities in Narva will be made cleaner and more efficient by the company’s wide-ranging investments.

bulletin february 2003 7 Theme: Energy in the Baltic countries

Estonian power production meets environmental requirements

Extensive investments will enable Eesti Eesti Energia is Estonia’s biggest enter- finance its extensive investments. Energia to meet the requirements of EU’s prise, with about 10,000 employees. emission directives and help Estonia to Turnover at the end of financial year The investments themselves are achieve environmental targets agreed on 2001/2002 was approximately 332 million designed to secure Eesti Energia’s ability with Finland. euros. to compete in the Baltic energy market, State-owned Eesti Energia is a limited added to which they are expected to have company which, directly or through sub- NIB has previously granted Eesti far-reaching positive environmental sidiaries, owns the country’s power trans- Energia two long-term credits totalling 28 impact. Carbon dioxide emissions from mission network, a large part of its power million euros for environmental invest- the Narva plants are expected to decrease distribution and most of its power produc- ments. During the summer of 2002, Eesti by 630,000 tonnes annually, and sulphur tion. The energy combine also includes an Energia and NIB agreed dioxide emissions by oil shale company which owns the greater on a loan of 60 million 26,000 tonnes annually. part of the country’s oil shale deposits and euros to finance two »... secure the This equals half the sul- is responsible for oil shale extraction. Two new boilers for the ability to compete phur emissions of Den- of Eesti Energia’s power plants run on oil Narva power plants and mark, Finland and Swe- shale. It is oil shale which, hitherto, has continuing remediation in the Baltic den combined. caused the biggest environmental prob- of the company’s other lems, e.g. heavy emissions of sulphur and production facilities, as energy market...« “We are determined to dust. well as modernisation continue improving our Eesti Energia’s power production is and efficiency improvements on the trans- cost efficiency and customer service, and about 7,100 GWh (gigawatt hours) annu- mission and distribution network, and intend to put a lot of effort in continuous ally, of which 5,200 GWh are sold on the investments in mining operations. Parallel reduction of the environmental impact of local market and nearly 1,000 GWh to NIB’s loan, German KfW granted Eesti our operations” says Mr Gunnar Okk, exported to Latvia and Russia. The com- Energia a long-term loan in the size of CEO and Chairman of the Management pany’s heat production totals some 2,500 NIB’s exposure. This credit package was Board of Eesti Energia. GWh. essential in order for Eesti Energia to

The investments in the Narva facil- ities will greatly reduce sulphur and particle emissions.

8 bulletin february 2003 Heavy Latvian investment in more efficient power transmission

Baiba Abelniece Latvenergo is a limited company 100 flows through Riga, the Latvian capital. per cent owned by the Latvian govern- ment. The company owns the country’s In the summer of 2002 NIB and Latve- transmission and distribution network and nergo agreed on a loan of 40 million euros nearly half its power production. Latve- intended mainly for the company’s exten- nergo has three hydro power plants—two sive investments in the transmission and CHPs and one district heating plant. distribution network. Since then the EIB Power production for 2000 was just under has awarded the company a long-term 4,000 GWh, and heat production about credit. 2,600 GWh. In addition, Latvia imports “In addition to rehabilitating the power about 1,700 MWh of electricity from network,” says Ivars Liuziniks, Deputy Estonia, Lithuania and Russia. Chairman of the Board, “we are also plan- “Between 70 and 80 per cent of the ning a number of other far-reaching electricity comes from hydro power investments for the next few years. Latvenergo is streamlining the whole plants, so a large part of our production is Existing power production is to be stream- country’s power distribution network. very environment-friendly,” says Mara lined and the existing hydro power dams Kalnina, Latvenergo’s Environmental reinforced.” Protection Manager. Latvenergo, with a turnover in 2001 of “We also have two wind generators.” some 310 million euros and about 6,800 The company’s three hydro power employees, is one of the biggest compa- plants are on the Daugava River, which nies in Latvia and the Baltic region.

Danish power lines go underground

Heavy storms have led Danish power distributor SEAS Distribution to invest in cables below ground rather than above it.

Storms occurred more frequently in enabled us,” he continues, “to construct a power distribution, as well as reducing the Europe during the 1990s than in previous feasible financing package for the invest- risk of losses from heavy storms. And the decades. In addition to wrecking bridges ment.” landscape will look nicer as the power and buildings, they tore down power lines, The total project cost is 375 million lines disappear below ground. leaving households without electricity and Danish kroner, roughly 48 million euros. “Improving the quality of the visual heating and power companies with the environment is an increasingly important task of reinstating poles and lines. The actual business of burying the consideration where cable laying is con- To secure power supply against storms, cables in the ground was put out to tender cerned,” says Per Klaumann, NIB’s for instance, SEAS Distribution in in the EU and the contract was awarded to Regional Manager for Denmark. Southern Zealand, Denmark, is transfer- the Danish MTH contracting company, ring 2,000 km of overhead power lines which at times has had up to 150 people In January 2003 NIB signed another underground. employed on the project. In addition, loan agreement for cable laying to replace “A big investment for us,” says Lars SEAS Distribution has about 25 em- overhead power lines. This loan went to Friis, in charge of operational develop- ployees working on the project full time. NVE Net in northwest Zealand, which ment. The two-year project began in 2001 and will be laying about 3,000 km of cable. “Good cooperation with NIB and the is scheduled for completion in 2003. The long-term credit on favourable conditions investment will improve the security of

bulletin february 2003 9 Panorama

BEFORE THE WORLD’S AWAKENING The pictures on these two pages are by Estonian nature photographer Mati Kose, whose favourite themes include golden light over a landscape struck by the morn- ing’s first sunbeams. His prize-winning photographs have attracted attention both in Estonia and further afield in Europe.

10 bulletin february 2003 bulletin february 2003 11 Spearheading food industry technology

Icelandic Marel is one of the world’s biggest manufacturers of machinery and technology for food pro- duction, with more engineers and technicians on its payroll than any other Icelandic company. Its new building of nearly 16,000 square metres was inaugurated in September 2002.

Founded in 1983 as a spin-off from the the Marel Group enables processors to University of Iceland, Marel’s main pur- produce anything from consumer-ready pose at that time was to explore the possi- prawns and salmon fillets to poultry bilities of using new technology and com- breasts, rib eye steaks or shish kebabs, to puters for fish processing. In the event, name but a few examples. Marel raised the efficiency of Iceland’s fish industry, and before long its attention Marel’s rapid expansion has called for also turned to other food products. ever-larger facilities, and its new building, Over the past two decades, the Marel in the Municipality of Gar›abær near Reyk- Group has developed close ties with lead- javik, Iceland, was opened in September ing international fish, meat and poultry 2002. The new building, partly financed processors, who today often turn to the with a loan from NIB, is among the largest company for solutions to their production industrial properties in Iceland. Equipped problems. It is through such cooperation with the latest in production and research that new technology is continually being technology, the plant is designed to pro- developed and new products born. vide Marel Group employees—and Operating at the cutting edge of electron- through them the company’s customers— ic engineering and software technology, with the best facilities possible.

The new Marel building is among the largest industrial facilities in Iceland. More engineers and technicians are employed here than in any other Icelandic enterprise.

12 bulletin february 2003 bulletin february 2003 13 News from the Nordic Finance Group

NOPEF LEAVING THE BALTIC Belief in Russia

There is no mistaking the interest among Nordic companies in operating in Russia. The country tops the list of credit awards by Nopef, the Nordic Project Fund. When Nopef leaves the Baltic countries in a few years’ time, the Russian dominance will become more pronounced than ever.

“It’s a huge market,” says Nopef and Lithuania will end in 2005 at the lat- Managing Director Per-Olof Dahllöf. est. Instead he expects Nopef to increase Many of the companies Nopef cooperates its exposure above all in Russia and with are committed, not only to produc- Ukraine, but also in other countries of the tion in the east but also to getting a neighbouring region. He adds that sup- foothold in the market. One-fifth of the port for activities in Kaliningrad has been projects approved by Nopef in 2002 went indicated as politically desirable, consider- to Russia. Nopef grants credits and sup- ing that before much longer the Russian port to Nordic enterprises for feasibility enclave will be located in the midst of the studies connected with project exports and EU. foreign company establishments. Among enterprises in the Nordic countries, for Nopef celebrated its twentieth anniver- geographic reasons it is above all the sary in 2002. The original initiative lead- Finnish ones that are looking to Russia. ing to the Fund’s creation came from the Dahllöf says that companies starting up in Nordic Investment Bank, the reason being the east must be prepared for rapid that an agency was needed to identify changes. He stresses the need for perse- good projects which the Bank could verance, and also the importance of per- finance later on. Nopef is a sister organi- sonal relations—knowing the right peo- sation of NIB and a member of the Nordic ple. Finance Group. “Unlike the other mem- bers of the group,” says Dahllöf, “we have Nopef only supports projects outside no authorised capital.” Nopef, in other the EU and EFTA. EU enlargement, words, is dependent on funding alloca- accordingly, will exclude the Baltics, tions. Its activities are financed by the which until now have accounted for a big Nordic Council of Ministers and the five share of the projects. Dahllöf says that all Nordic countries. Nopef project funding in Estonia, Latvia www.nopef.com

14 bulletin february 2003 2,500 SQUARE METRES FACTORY SPACE OUTSIDE Fifty years of Nordic MOSCOW cooperation

The Nordic Council celebrated its Advakom has been active since 2001 in the fifty years jubilee in Helsinki in town of Dubna, just over 100 km north of October 2002, with the 54th session

Moscow. It manufactures IT and telecom attended by heads of state and gov- Matias Uusikylä components and is one of the Nordic enter- ernment from all the Nordic coun- prises whose feasibility studies Nopef has sup- tries. ported. The Nordic Council is a unique “This is a small Swedish entrepreneur proj- international body, serving as a joint ect,” says Advakom’s Swedish Managing forum in which ministers and MPs Director Per Strandqvist. The Dubna factory from different countries and political produces data network cable based on copper parties get together to discuss current and various plastics. Advakom also makes issues and lay down guidelines of metal cabinets for data installations, as well as Nordic cooperation. NIB’s traditional reception during the assembling cables and connectors. The Nordic Council’s Rules of session of the Nordic Council took “We can very well go in for other produc- Procedure were approved 50 years place at the Kiasma Museum of tion in future. As a subcontractor we can adapt ago, in 1952, by the parliaments of Contemporary Art, Helsinki. Our pic- our output to current demand.” Sweden, Norway, Denmark and Ice- ture shows NIB President Jón About 90 per cent of sales go to the Russian land. The first topic for discussion Sigur›sson chatting to President market, and about 10 per cent to Sweden. was the Nordic passport union, which Ólafur Ragnar Grímsson of Iceland. entered into force that very same The first autumn in Russia was bureaucrat- year. Membership of the Council ic, but in December 2001 Advakom was able became complete in 1955 with the in the 1950s, in connection with the to bring equipment into the country. The accession of Finland. bid to form a Nordic customs union. choice of Dubna as location was due to a com- During its 50 years of activity, the The oil crisis at the beginning of the bination of several factors. Advakom did not Council has taken many important 1970s brought a resurgence of the want to be based in Moscow but wanted to be decisions. The idea of a Nordic in- idea, and NIB began operating in near the capital, which is where the customers vestment bank was already launched Helsinki in 1976. are. “A small firm in Moscow has neither value, strength nor power,” says Strandqvist, added to which he points out that Moscow has a highly mobile workforce. Lehtikuva The start was slower than expected. “It’s all down to inexperience, over-opti- mistic planning and Russia being Russia, not Sweden or Denmark,” Strandqvist explains. On the other hand, the time lag is Advakom’s only big problem at present. The company has developed about twenty new products and built up a customer platform equal to its sales plan.

The Swedish management and private investors own 62 per cent of the company, while the European Bank for Reconstruction and Development (EBRD) controls 38 per cent. Swedfund International has granted Advakom a five-year credit. The jubilee session was attended by all the Nordic Prime Ministers.

bulletin february 2003 15 News Pamela Schönberg

Senior funding offi- cer Samu Slotte, Head of funding Kari Kukka and Head of financial legal matters Sten Holmberg (seated) are proud of NIB’s first global bench- mark bond issue.

ACTIVE BORROWING NIB’s biggest issue ever

In December NIB floated, in the USA, its of the Bank’s American MTN programme, the Icelandic capital market. Previously biggest bond issue ever, for 1 billion US- established already in 1993. The borrow- NIB had issued ISK bonds addressed to dollars. The transaction was registered ing ceiling was raised from USD 600 mil- Central European investors. with the Securities and Exchange Com- lion to USD 3 billion, and the programme Two issues in Norwegian kroner came mission in the USA. This bond runs for documentation altered to facilitate global at the end of the year. Addressed mainly just over 3 years, maturing in January benchmark bond issues. Under this pro- to private persons in Central Europe, they 2006, and is NIB’s first global benchmark gramme the Bank can issue bonds in a totalled NOK 900 million, roughly 120 mil- bond issue. As such, the bonds could variety of currencies. lion euros. also be sold and registered with clearing In addition to the issue in the USA the The main borrowing currencies, apart systems both within and outside the USA. year 2002 was busy for NIB, with many from the US dollar, were Japanese yen, They are listed on the Luxembourg stock new issues. They included a bond loan of Taiwan dollars, Hong Kong dollars and exchange. The size and global format of 3 billion Icelandic kronur, equalling about euros. the transaction attracted many investors 35 million euros. This loan, with a maturi- who had not invested in NIB bonds ty of 15 years, is listed on the Reykjavik before. stock exchange, making NIB the first The issue was preceded by an update supranational to have floated a loan on

16 bulletin february 2003 Investor seminar in New York

Current economic issues in the Nordic The Scandinavian House cultural cen- opened in Manhattan in October 2000 area, the EU and the USA were discuss- tre offers a manifold programme for the and has so far attracted more than ed at an economics seminar on Trans- general public, including exhibitions, 100,000 visitors. atlantic economic cooperation, arranged concerts and lectures. The new centre by NIB in November. The seminar, which took place at Scandinavia House in New York, attracted a large number of American investors and heads of corpo- rations. Lecturers were American and Tina Buckman Nordic economic experts. The seminar was arranged in associa- tion with the American-Scandinavian Foundation, which received a jubilee donation as part of the Bank’s 25 year celebrations. Scandinavia House serves as the leading centre of Nordic culture in the USA and is maintained by the American- Scandinavian Foundation, which pro- motes cooperation between the five Nordic countries and the USA. Every Panel members at the Scandinavia House seminar. From left: NIB President Jón year the Foundation awards grants to Sigur›sson, Björn Wahlroos, CEO and Managing Director of Finnish Sampo, Professor researchers and artists, for the encour- Benjamin M. Friedman, Harvard, William J. McDonough, President of the Federal agement of interchange between the Reserve, New York, and Svein Gjedrem, Governor of the Norwegian Central Bank. Far Nordic countries and the USA. right: Edward P. Gallagher, President of the American-Scandinavian Foundation.

Christer Laurent Börje Eva Roger Linda Charlotta Holmström Jorelle Lundvall Sandström Haaparinne Sundberg Tallqvist

dish Ericsson and as a self-employed Linda Sundberg (FIN) has joined the NEW APPOINTMENTS management consultant. Personnel and Office Department as HR Secretary. Her last appointment was with Christer Holmström (FIN) has been Eva Sandström (FIN) has been appoint- Rederi AB Eckerö Linjen. appointed systems specialist in the IT ed Assistant Regional Manager in the Department. Private Sector unit of the International Charlotta Tallqvist (FIN) has taken up Department. While on maternity leave, an appointment with the International Laurent Jorelle (FRA) has joined the until the autumn of 2003, she will be Department, Central and Eastern Europe IT Department as IT specialist. He worked covered for by Roger Haaparinne (FIN) Region. She comes from the IT enter- previously with Domasoft in Helsinki. who has been recruited as Senior Hand- prise Quartal Oy. Previously she worked Börje Lundvall (S) has joined the App- ling Officer. His most recent appointment among other things on project finance raisal Department as Senior Project Ana- was with Sampo Bank plc in Singapore. with Deutsche Bank in Frankfurt and lyst. He has worked previously for Swe- London.

bulletin february 2003 17 NIB in brief

This is NIB

The Nordic Investment Bank (NIB) The member countries appoint represen- its lending by borrowing on the interna- finances private and public projects, which tatives to the Bank’s Board of Directors tional capital markets. NIB’s bonds enjoy have high priority with the Nordic coun- and to its Control Committee. the highest possible credit rating, tries and the borrowers. NIB finances The Bank’s operations are controlled by AAA/Aaa, with the leading rating agencies projects both within and outside the an agreement between the Nordic coun- Standard & Poor’s and Moody’s. Nordic countries. tries as well as the Statutes connected with NIB has its headquarters in Helsinki and NIB is a multilateral financial institu- this agreement. offices in Copenhagen, Oslo, Reykjavik, tion owned by the five Nordic countries. NIB offers its clients long-term loans Stockholm and Singapore. The Bank has The Bank operates in accordance with and guarantees on competitive market approximately 140 employees, recruited commercially sound banking principles. terms. NIB acquires the funds to finance from all the five Nordic countries.

NIB’S FINANCING POSSIBILITIES project’s total cost. lised to finance all types of project costs, NIB finances projects in: including local costs. The loans are grant- NIB finances investment projects and • the manufacturing sector, including ed at market-based interest rates in a cur- project export which are of mutual interest investments in facilities and machinery, rency preferred by the customer. Project for the Nordic countries, and for the bor- • infrastructure, including transportation, investment loans have been granted for rower. High priority is given to invest- telecommunications, energy, water sup- projects in more than 40 countries. NIB ments which improve the economic coop- ply, sewerage and waste management, can also provide loans to Nordic compa- eration in the Nordic countries. Loans and • environmental improvement, both in nies’ investments, including joint ventures guarantees are granted to finance invest- the private and the public sector, and corporate acquisitions, within the ments that assure energy supply, improve • research and development, OECD area and in the Baltic countries. infrastructure or support research and • cross-border investments, such as mer- development. High priority is also given gers and corporate acquisitions, to projects which improve the environ- • foreign investments in the Nordic ment in the Nordic countries and their THE NEIGHBOURING AREAS countries. neighbouring areas. NIB participates in NIB gives priority to the financing of pub- the financing of foreign investments which lic and private infrastructure and industri- Regional loans provide employment in the Nordic coun- al investments in the neighbouring areas Regional loans are granted to national, tries. NIB finances various international to the Nordic region. Further, NIB partici- regional credit institutions for the further projects in emerging markets as well as pates in the financing of projects in the development of business in priority within the OECD area. The Bank grants Baltic countries through investment loans regions. loans to projects that support economic to companies which are investing in the development in the Nordic countries’ Baltic countries. neighbouring areas as well as to invest- NIB is authorised to grant special envi- ments of mutual interest for the Nordic INTERNATIONAL LOANS ronmental investment loans to public and countries and the borrowing country in The core of NIB’s international lending private sector environmental projects in various parts of the world. operations consists of project investment the neighbouring areas to the Nordic In addition to loans, NIB also issues loans. These are long-term loans—up to region, i.e. to Poland, the Kaliningrad guarantees for projects that meet the 20 years—for projects in emerging mar- area, Estonia, Latvia, Lithuania and north- Bank’s conditions. kets in Asia, the Middle East, Central and west Russia (St. Petersburg, the Leningrad Eastern Europe, Latin America as well as area, the Karelian Republic and the Africa. Barents region). The projects are to help NORDIC LOANS Project investment loans are usually in reducing environmental degradation, Investment loans granted on a sovereign basis but may also and thereby also in reducing cross-border NIB offers medium- and long-term be granted without a government guaran- pollution. The environmental investment investment loans with maturities of 5 to 15 tee, particularly to private sector infra- loans are granted on the basis of commer- years. The loans are granted in various structure investments. The loans are cial banking terms to governments, gov- currencies at fixed or floating market- granted for up to half of the project’s total ernmental authorities, institutions and based interest rates, for up to half of the cost. Project investment loans can be uti- companies.

18 bulletin february 2003 Interim report, January – August 2002

Environment and energy investment financing

The Nordic Investment Bank posts good investments in the energy sector in, for Northern Dimension Environmental results for the first eight months of 2002. example, biofuelled power plants in Partnership. NIB held the Partnership’s Net interest income came to EUR 100 Finland, in wind power in Denmark, and chairmanship during the first year of its million at period-end, compared with in expansion of power transmission net- operations, up until July 2002. EUR 98 million for the same time period works in Denmark, Norway and Iceland. The credit quality of NIB’s loan portfo- last year. NIB posted EUR 97 million in NIB’s international lending operations lio and its financial counterparties con- profits for the period (corresponding peri- were dominated by loans to infrastructure tinues to be maintained at a high and od in 2001: EUR 83 million). Total assets investments, most noteworthy in trans- stable level. During the first eight months came to EUR 14.9 billion, compared with portation and communication as well as of 2002, NIB posted EUR 1.2 million in EUR 15 billion at year-end 2001. Net liq- the energy sector. NIB has been at the identified loan loss provisions in respect of uidity was EUR 2,287 million at the end forefront in supporting significant invest- two separate transactions. of the period, compared with EUR 2,641 ments of the Baltic power companies for NIB expects the favourable results for million at year-end 2001. wide-ranging modernisation of power 2002’s first eight months to continue for NIB made new borrowings in the inter- production, transmission, and distribu- the remainder of the year. national capital markets corresponding to tion. NIB signed loans with the state- EUR 1,679 million in the first eight owned Estonian and Latvian energy com- months of 2002, as against EUR 1,889 panies, and has thus become the largest million the same time last year. The individual external financier for the Baltic Japanese yen, the US dollar, the new energy sector. Taiwanese dollar, the Hong Kong dollar, and the euro have been the period’s most Environmental loans constitute one of important borrowing currencies. the cornerstones in NIB’s lending opera- tions. In June, the Nordic Council of Manufacturing is the largest sector in Ministers passed a resolution raising the NIB’s Nordic lending operations. In the lending ceiling for the Bank’s special pulp and paper industry, NIB has during Environmental Investment Loan facility the first eight months of the year partici- for the neighbouring regions from EUR pated in the financing of environmental 100 million to EUR 300 million. This investments and cross-border corporate increase is vital for enabling NIB to be an acquisitions. NIB has financed several active participant in the NDEP, the

EUR million Loans outstanding EUR million Total assets EUR million Net interest income

12 000 18 000 160

16 000 140 10 000 14 000 120 8 000 12 000 100 10 000 6 000 80 8 000 60 4 000 6 000 40 4 000 2 000 2 000 20

1998 1999 2000 8/2001 8/2002 1998 1999 2000 8/2001 8/2002 1998 1999 2000 2001 9/2001– 8/2002 Nordic International

bulletin february 2003 19