NORDIC INVESTMENT BANK DECEMBER 2006

Competitiveness and the environment

NIB MARKS ITS 30th ANNIVERSARY

ICELAND: POWER UNDER GLACIERS

WHAT MAKES YOUR SME COMPETITIVE?

ENVIRONMENTAL THINKING IN MANUFACTURING

BULLETIN NOV 06

BULLETINkansi_EN.indd 3 4.1.2007 12:59:16 LETTER FROM THE PRESIDENT LETTER FROM

NIB supports competitiveness and the environment

When the Nordic Investment Bank was international comparisons of competi- together fi nancial packages where very formed 30 years ago, the Nordic eco- tiveness, but they do not attract much different sources are involved. nomies were closed and suffered from of the global investment fl ows. The These strengths are particularly useful a shortage of capital. The project Baltic countries have benefi ted from in the fi nancing of logistics, energy and of a common Nordic market had been high investment activity early on in environmental improvements. The latter discussed in the late 1960s and early the catching-up period, but the real two are increasingly linked by techno- 1970s, since it was well understood that challenge is ahead, when these countries logical developments that are designed the Nordic countries had much to gain will have to develop activities which can both to save energy and to support the by working together. NIB was assigned carry higher costs. environment. These areas need long- the task to support cross-border activities It seems that the individual countries, term fi nance, they do not recognise any and raise capital for large investments. while praised for their competitiveness, national borders, and they are crucial Today, everything is different. are globally too small to be attractive on elements in safeguarding and supporting Financial markets are globally well a global scale. The challenge is to in- the competitiveness of the region. In integrated, there is an abundant supply crease the attractiveness of the Baltic exercising its mission, NIB will maintain of capital, and new instruments have Sea region as a whole. Higher regional its fl exibility in order to support a wide helped to develop the management of effi ciency will help support the region range of economic sectors and become risks. Six of NIB’s eight member and encourage investors to see the more proactive particularly in these areas. countries are part of the European region as a whole. Union, and those who are not are NIB is well placed to facilitate this November 2006 participating in the European Economic process; as we move into the future, our Johnny Åkerholm Area. As a result, integration has ad- mission is to support competitiveness vanced and the private fi nancial sector and the environment. has taken over many of the tasks origi- Being a highly rated international nally allocated to NIB. So, mission fi nancial institution, we can engage in completed? very long-term fi nancing and go into Not really. The Bank’s member markets in non-member countries that countries face many new challenges. As are not attractive enough to gain private a result of globalisation, international sector fi nancing. Our status as a competition has intensifi ed, including multilateral fi nancial institution is also the location of investments. The Nordic useful in cross-border activities, and we countries fare individually well in can offer our expertise in putting

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NIB_bulletin210x280_EN.indd 2 4.1.2007 14:25:04 NIB_bulletin210x280_EN.indd 3 BULLETIN DECEMBER2006 Printed by Layout Pelagia Wolff Dimitrijs Alehins,PaulaRoselius, Jamima Löfström,Editor-in-chief EDITORS English andSwedish. NIB’s Bulletinispublished in BULLETIN Lowe&Partners, Nomini, Helsinki Fax +3589651329 CHANGE OFADDRESS E-mail [email protected] www.nib.intInternet Fax +35891800210 Telephone +358918001 FI-00171 Helsinki, P.O. Box249 Fabianinkatu 34 NORDIC INVESTMENTBANK PUBLISHER . most ofthehomesin geothermal energy heats in Iceland.Pollutionfree Power Plant at Blue Lagoon pours from theSvartsengi Geothermal steam Paul A.Souders/CORBIS COVERPAGE PHOTO 5 NIBinbrief 25 From pulpmilltobiorefi 24 fi Vietnam valuesNIB 23 ofawave Wärtsiläridingonthe crest 22 Refuseisenergy 21 value Cleanenvironment adds 20 competitive? WhatmakesyourSME 17 growth potential Icelandtapspowerful 13 history OverviewoftheBank’s 12 timelineandmilestones NIB30years: 10 acrossroad region’s competitivness at ChristianKetels:BalticSea 8 competitiveness NIBcallsfordebateon 4 nancing BULLETIN DECEMBER 06 nery 4.1.2007 14:25:08 3 LETTER FROM THE PRESIDENTCONTENTS NIB_bulletin210x280_EN.indd 4 LETTER FROM30th THE ANNIVERSARY PRESIDENT 4 BULLETIN DECEMBER 06 on competitiveness NIB callsfordebate countries oftheregion. media from most ofthe business community and representatives ofthe politicians, diplomats, among themprominent 330 participants, The eventattracted held inHelsinkiJune. Baltic Seaataseminar the region around the the competitivenessof initiating adebateon 30th anniversaryby Bank markedits The Nordic Investment 4.1.2007 10:29:28 30th ANNIVERSARY 30th PHOTOS: MARJO KOIVUMÄKI

NIB’s seminar “Competitiveness in the Region” gathered 330 participants. Tarja Halonen, President of Finland, thanked NIB for the work done during the past 30 years.

GLOBALISATION SETS more intensive growth, in which the Speaking to the seminar participants, NEW PRIORITIES quality of human and technical capital Ulla-Maj Wideroos, Finland’s Coordinate NIB’s President and CEO, Johnny determines the growth potential,” said Minister for Finance, gave her vision Åkerholm, opened the seminar NIB’s President. of key elements for sustainable growth “Competitiveness in the Baltic Sea in the Baltic Sea region. Christian Ketels, Region.” He gave a short overview of the Principal Associate, Institute for Strategy changes in the global economy during the “NIB’s role is to support and Competitiveness at the Harvard last three decades, while NIB was on the global competitiveness of Business School, presented a study on market, and discussed what role NIB the state of the Baltic Sea region and his would assume in the constantly evolving the member countries.” recommendations as to what needs economies of the member countries. to be done in order to remove obstacles “Globalisation has affected the “In these circumstances it is important to better competitiveness of the region. fi nancial sector in the most pronounced to refl ect upon how our members can More detailed reports on the contributions way. The lack of investment capital continue to be successful in global made by Ms Wideroos and Mr Ketels can which was common 30 years ago has competition, and in particular how be found in subsequent articles in this been replaced by easy access to liquidity, NIB could support this process. This is issue of the Bulletin. and risk-taking which at times seems why we have arranged this seminar on The seminar hosted a panel very excessive in the global markets. the Baltic Sea region, which, for us, of experts who presented their views A number of instruments developed also includes and Iceland. We on what would increase the attractiveness in recent years make it increasingly believe NIB has a special role to play and competitiveness of the region. The easy to transform savings into the as a Baltic Sea bank in order to panel was chaired by the former First fi nancing of investments. The promote the success of this region,” Vice President of the EBRD, Noreen technological changes have led to Mr Åkerholm concluded. Doyle.

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NIB_bulletin210x280_EN.indd 5 4.1.2007 10:29:33 Ulla-Maj Wideroos: “NIB to enhance 30th ANNIVERSARY 30th advantage of the region”

Excerpts from the speech delivered by the Coordinate largely untapped markets, is a major opportunity for the Minister for Finance of Finland at NIB’s seminar region. The aim of the renewed Northern Dimension is to “Competitiveness in the Baltic Sea Region” develop a common policy for the EU, , Norway and “The last 15 years can be described as a success story Iceland.” for the entire Baltic Sea region, which has evolved into one “Knowledge and competence in the region are key of the most dynamic economic regions in Europe. The elements for sustainable growth. Innovation is the best challenges to continued growth and prosperity in the driver of economic growth, productivity, job creation and region are plentiful, including its remote location and in- rising standards of living. Therefore, attention must be given frastructure as well as remaining institutional weaknesses to improving the conditions for creating industrial clusters and an increased global competition in many skill-intensive in the region.” and innovative industries.” “Over the years NIB has demonstrated its success in “We must promote free competition and remove fulfi lling its mandate—to contribute to strengthening and remaining trade barriers which hamper an effi cient use of developing the economies of its member countries. NIB the workforce, innovation and strategic networks. Trade and plays a signifi cant role in enhancing the attractiveness of the economic integration with Northwest Russia, with its Baltic Sea Region.”

Siim Kallas: FOR TAX HARMONISATION ACHIEVING NEW SUCCESS “If we fail to change, Siim Kallas, Vice President of the ON A SOLID BASIS European Commission, presented Lars Grönstedt, Chairman of Swedish we’ll lose our position.” an EU perspective on the investment Handelsbanken, called for appreciation opportunities in the region and of the recent history of the Baltic Sea suggested the harmonisation of tax region, which “in most respects is legislation in order for the EU to a history of great economic success.” He maintain its status as the world’s largest emphasised that economic growth in the investor and recipient of foreign direct Nordic countries in the last decade was investments. far exceeding growth in other regions “We’ll easily lose our position, of the EU-15. if we do not introduce the necessary “We also have the advantage structural changes. We need to of strong institutions, a good business harmonise a common tax base for the infrastructure, and the three Baltic EU and develop joint policies in indirect countries are paragons among the new taxation,” he said. EU members, building up strong legal Mr Kallas also criticised the and administrative routines,” he said. insuffi cient openness of the European Mr Grönstedt stressed that the capital markets guaranteed by the Nordic fi nancial sector is in a stage European Community Treaty and of rapid integration and expansion to the EEA Agreement. “The free neighbouring countries. The sector is movement of capital is considered as now also able to attract a signifi cant the most accomplished freedom. Yet amount of non-Nordic capital into the some problems still exist: for instance, Nordic economies. He underscored the in state aid and state interest in cross- importance of a stable legal environment border mergers and acquisitions,” and a comfortable place to live for the he said. region to be competitive. This is an

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NIB_bulletin210x280_EN.indd 6 4.1.2007 13:28:59 international oil companies to be drawn Tarja Halonen: to the cluster,” said Mr Hansen. Mr Hansen pointed out several key “The Nordic countries elements of the Norwegian experience are among the winners applicable to the Baltic Sea region, for example: increasing publicly in globalisation.” and privately funded research and development; focusing on improving trade, more growth and more prosperity ANNIVERSARY 30th education to secure resources for the in the region,” said Mr Dyrbye. future; developing an effective venture capital market; and creating incentives MEASURING COMPETITIVENESS for competence infl ow, which would The importance of the seminar was LETTER FROM THE PRESIDENT LETTER FROM also involve harmonising incentives underscored by the presence of Tarja with other competing countries. Halonen, President of Finland. She suggested measuring competitiveness Tomas Dyrbye emphasised the importance of BOTTLENECKS, by defi ning what the best part is of international trade. COST AND SECURITY “being a member of your society, your Tomas Dyrbye, CEO of Danish Maersk region.” important task for governments: to help Nordic and Baltic, pointed out that “The Nordic countries are among create a favourable business and physical the Baltic countries are developing as the winners in globalisation. We share environment, good education, good an important transport corridor for the same objectives on competitiveness communication, and an open society international trade. This provides a sound and growth potential. But to be winners in order to increase the attractiveness basis for prosperity. To facilitate trade, the in the global competition in the future, of the region. region has to deal with infrastructure we need to increase our investments in “None of these things is particularly bottlenecks, be it in ports, on rails or human resources, lifelong learning and diffi cult. If there are obstacles to another roads. Mr Dyrbye also suggested that the in research and development,” said successful decade in our part of the integration of different transport modes President Halonen. world, they are more in our minds, in in the region would help streamline total The President of Finland thanked preconceived ideas, rather than anything transportation costs. the Nordic Investment Bank for the that cannot be changed,” concluded Mr “These two priorities and security work done during the past 30 years and Grönstedt. of shipping are a global requirement and highlighted the important role NIB should be a focus area in the Baltic Sea as a fi nancial institution will play in NORWEGIAN EXPERIENCE region. Once these areas are dealt with, catalysing the development of the region’s OF CLUSTER BUILDING there will be more opportunities for competitiveness in the years to come. Inge K. Hansen, President and CEO of Norwegian Aker Kvaerner, chose an industrial focus on the topic of competitiveness from a perspective of a non-EU country. He pointed out that market competition should be based not only on prices, but also on innovation and technology. Mr Hansen explained that Norway built up a strong off-shore cluster created on the backbone of the marine industry, drawing on the necessary factor conditions. The authorities facilitated the build-up of a local cluster for oil and gas by demanding local content for all companies operating in the shelf area during the 1970s and 1980s. “Most of the oil and gas nations today are following exactly the same policy. The conditions for investments are now favourable enough for

Siim Kallas criticised the insuffi cient openness of the European capital markets.

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NIB_bulletin210x280_EN.indd 7 4.1.2007 13:29:00 30th ANNIVERSARY 30th

Christian Ketels: Baltic Sea region’s competitiveness at a crossroad

When NIB was created 30 years ago, few would have expected the Nordic countries to deliver such solid growth in the years to come. This success was driven by sound domestic macroeconomic policies, investments in skills and infrastructure, and a commitment to open markets. But the growth model is starting to hit its limits. Preparing for the transition is crucial, says Christian Ketels, Principal Associate, Institute for Strategy and Competitiveness at the Harvard Business School, Director of the Cluster and Competitiveness Foundation.

Mr Ketels presented fi ndings from his “State of the Region NEW OBJECTIVES FOR THE REGION Report”, an annual review of competitiveness and cooperation The Baltic Sea region is foremost a geographic region. in the Baltic Sea region, at NIB’s Anniversary Seminar. Here To become an economic region, it needs an active choice are some key elements of his remarks: by the region’s political and business leaders to work together and increase the level of linkages across the Baltic Sea. Again, IS THERE REALLY SOMETHING WRONG? the old model of motivating Baltic Sea cooperation as a way The good news is that currently the countries of the Baltic to integrate the Baltic countries no longer works—that goal Sea region all report solid economic growth, despite the huge has been achieved. The countries of the region now need heterogeneity among them in terms of prosperity levels. Three to defi ne new objectives for the region and new models that of the countries in the region are in the world’s top ten motivate people in both the Nordic and the Baltic countries economies, and six of the countries in the top twenty. The to see the value of cooperation. With the EU as a competing emerging economies of , , and Russia arena, for decision-making, the countries of the region might are on a path of brisk economic development. not need the Council of the Baltic Sea, as they meet every The Nordic model is built on sound domestic macro- week in Brussels. economic policies that have grown much stronger than they Both the Nordic and the Baltic countries need to consider were when NIB started 30 years ago. The worry concerns the whether the drivers of growth in the past will still be effective future: the region is already losing its position on world export in the future. It is important that everybody in the region markets and as a magnet for foreign investment. Levels of understands that although prosperity is at a high level, we can’t business competitiveness, and the quality of the business afford to forget about the future. It will be too late to start environment in the region, are also slowly receding. changing policies when the fi gures have dropped. As some

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NIB_bulletin210x280_EN.indd 8 4.1.2007 13:29:14 other European economies have found out, it will take much more energy to turn the curve up again. POSITION IN THE GLOBAL ECONOMY

WHAT SHOULD THE REGION FOCUS ON NOW? The Baltic Sea region needs a much more forceful voice

in Europe. The region has to be visible to policy-makers and FDI inflows as % of companies. The region has had a syndrome of being a good Gross Domestic Investment

50 ANNIVERSARY 30th neighbour whom everybody likes but no one listens to. The Baltic Sea Region region needs a strong agenda to state how we think Europe 40 should change, for its own benefi t and for the benefi t of World Central Europe a wider Europe. 30 As to our identity and brand, we are struggling to explain what the Baltic Sea region is. Is it Nordic? If we are not able 20 to communicate what this region is about, we will not be able to interest others in this region. Let’s try to defi ne what is 10 unique about this region, defi ne what value we deliver to 0 business communities in other parts of the world that we want 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 to infl uence. Source: UNCTAD (2005), Christian Ketels’ analysis. The Baltic Sea region needs to stay the course on open markets. Restrictions for people from the new EU member countries to move to the old member countries sends a wrong signal. The Nordic countries need to overcome their ideological PROSPERITY blockade on taxes. The global economy is shifting from the SELECTED REGIONS AND COUNTRIES dominance of capital-intensive companies to small innovation- and knowledge-based entrepreneurial companies. Therefore Real GDP per Capita 2004, PPP-adjusted, USD (2002) policies need to broaden the focus on entrepreneurs and 40,000 clusters of small companies rather than being preoccupied Baltic Sea Region 35,000 USA with large multinationals alone. Human skills are more Other EU countries Norway Iceland Other countries important and scarce in the modern economy than capital. 30,000 Austria Singapore In the Baltic countries, the challenge will be to move from 25,000 Japan Finland Taiwan competing based on low wages and taxes to competing in an EU-25 Baltic Sea Region increasingly better business environment based on careful 20,000 Slovenia S Korea Central Europe 15,000 Czech Rep. investments in skills and infrastructure. Hungary Estonia Slovak Rep. Lithuania Latvia Our heterogeneity is our biggest challenge and our biggest 10,000 Mexico opportunity. Northern Europe is one of the world regions Brazil Russia 5,000 China where rich, established economies and young, hungry, still not India quite as prosperous economies are very close to each other. 0 If we manage to combine this we can create an incredible 0123456789 Growth of Real GDP per Capita (PPP-adjusted), CAGR, 2000-2004, % powerhouse. Why shouldn’t we try to be the fi rst to manage this challenge? Then the new positive chapter will be just Source: EIU (2005), Christian Ketels’ calculations beginning.

“TOP OF EUROPE” In late August, NIB hosted a pre-launch of the State for harmonising tax policies in the Baltic Sea region; of the Region Report 2006 produced by Dr Christian the future of the Northern Dimension initiative and Ketels for the Baltic Development Forum and sponsored the involvement of Russia in the regional integration by NIB and the Nordic Council of Ministers. The Forum’s process; the environmental component of the region’s Chairman, Uffe Ellemann-Jensen, also presented competitiveness; and awareness of the region in other a new brand identity for the Baltic Sea region—“Top parts of the world. of Europe.” A strong identity would promote a leading position of the region both in Europe and worldwide. The State of the Region Report 2006 was launched at the Baltic Development Forum Summit on 29-30 October At the meeting, the participants discussed issues in Helsinki. The full text is available on the forum’s such as, attractiveness of the Nordic economies for job website www.bdforum.org. seekers from the Baltic countries and Poland; the need

BULLETIN DECEMBER 06 9

NIB_bulletin210x280_EN.indd 9 4.1.2007 13:29:14 Long-term fi nancing 1976–2006

AFRICAN ENERGY PROJECT NIB’S FIRST LOAN NIB’s fi rst project investment loan ENVIRONMENT-FRIENDLY The fi rst loan application NIB received (PIL) was signed with the Botswana HYDROPOWER FOR INDIA Power Corporation. It helped to came from Icelandic Alloys (Íslenska Towards the end of the 1980s, NIB fi nance a coal-fi red power station at Járnblendifélagið). The partly state- signed an agreement with the National the Morupule coal mine near the town owned company was building a plant Hydro Power Corporation (NHPC), to of Serowe. The project, a positive with an output capacity of 50,000 help fi nance the Uri hydropower example of infrastructure investment tonnes of ferruginous quartz, used in station in Kashmir in northwest India. in a developing country, was co- steel manufacturing. The project was This type of plant does not need dam fi nanced with the European Invest- organised on a project-fi nancing construction, resulting in reduced ment Bank and the World Bank. basis. The Bank’s participation was environmental impact. Instead the crucial to the realisation of the project. water is led through an underground tunnel.

1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 19871988 1989 1990 1991

VENEZUELAN POWER PLANT CEMENT PRODUCTION In eastern Venezuela, IN NORWAY NIB fi nanced a traditional The fi rst loan to Norwegian A/S hydroelectric station with Norcem was granted in 1982 a concrete gravity dam at and helped fi nance the moderni- Caruachi. A consortium sation of a cement plant in headed by Norwegian GE Norway. The company wanted Energy (formerly Kværner to use Danish fl y ash in the A.S.) delivered the electro- production process. A new loan CROSS-BORDER TAKE-OVERS mechanical equipment for was granted in 1984, this time During the mid-1980s, NIB’s largest loan at that time went the power station. In for Norcem to purchase shares to Finnish Outokumpu Oy for the acquisition of the Swedish addition to the NIB loan, in its Swedish associate Euroc. company Gränges Metallverken. The merger resulted in a the fi nancial package also successful Finnish-Swedish joint project to manufacture included export credits. copper and copper alloy products. The project signalled an The Inter-American important structuring of Nordic enterprise in the internation- Development Bank (IDB) was al market. also one of the fi nanciers.

MILESTONES

1975 1982 1987 1993 Agreement between Denmark, NIB awarded top credit rating Authorised capital doubles, to The ECU established as NIB’s Finland, Iceland, Norway and AAA/Aaa. NIB’s fi rst Project SDR 1,600 million. accounting currency. Authorised Sweden to found NIB. Investment Loan (PIL). capital raised to ECU 2,809 Authorised capital SDR (Special 1989 million. Investments made in Drawing Rights) 400 million. 1984 Environmental investments in infrastructure. Authorised capital doubles, to the Nordic area. 1976 SDR 800 million. 1994 Operations begin. 1992 PIL facility raised to ECU 2,000 Inauguration of the Baltic million. PIL loans paid to the Investment Programme (BIP). private sector for the fi rst time.

10 BULLETIN DECEMBER 06

NIB_bulletin210x280_EN.indd 10 8.1.2007 15:02:55 NIB_bulletin210x280_EN.indd 11 1992

less than20minutes. purchasing rolling stock.Theguaranteedtraveltimeis new terminalbuildingsattheArlandaairport,and building 16kilometres oftracktoArlanda,constructing 1990s. Amongotherthings,theproject involved one ofNIB’s largest infrastructuralprojects ofthe Airport,was Central StationandArlandaInternational The ArlandaLine,adirect raillinkbetweenStockholm INFRASTRUCTURE PROJECT PHOTO: ARLANDA EXPRESS Loans (MIL). Environmental Investment New loanfacilityintroduced, 1997 investment banks. subscribes shares inBaltic The BIPisextended.NIB 1996 1993 credits fortheproject since1999. annually. NIBhasgranted twonew emissions by20,000tonnes expected toreduce sulphurdioxide . Theseinvestmentsare fi Estonia,andagasoil- eastern fi mental investmentsintwooil-shale- ration fi owned EestiEnergia powercorpo- in 1999.Theloanhelpedthestate- the environmental loanfacilityMIL NIB subscribeditsfi TO ESTONIA ENVIRONMENTAL LOANS red powerstationatIru, near red powerstationsinNarva, nance importantenviron- 1994 1995 rst loanunder 1996 to EUR4,000million. Authorised capitalraised accounting currency. established asNIB’s multilateral status.Theeuro acknowledge NIB’s headquarters agreement New agreement andnew 1999 1997 the BalticSeatransportsystem. infrastructure strengthens Lithuania’s positionsin to theportofKlaipedaforconstruction operations inthenewmembercountries.Aloan In thetransportsector, theBankcontinuesits INCREASING PORT CAPACITY 1998 plants. improves effi and distributionnetwork, litation ofthepowertransmission Latvenergo investsintherehabi- loans, theLatvianpowerutility countries. WiththehelpofNIB of theenergy sectorintheBaltic The Bankbecameakeyfi IN LATVIA POWER PRODUCTION 1999 ciency ofitspower and Baltic governments. and Balticgovernments. representatives oftheNordic new statutessignedby New agreement onNIBand 2004 Partnership, NDEP. Dimension Environmental NIB joinstheNorthern 2001 2000 nancier 2001 022004 2002 area’s ownenergy resources. projects, theNordic NIBishelpingtoharness agricultural sector. Byfi turbines and environmental investments in the onlending hasprimarilyhelpedfi NIB’s cooperationwithintermediaries.The bank inDenmarkprovide agoodexampleof enterprises. TheloanstoRingkjøbingLandbo- ies forfi NIB increases lendingtofi WIND POWERINDENMARK 2003 fi structuring oftheproject’s bank, NIBcoordinated the mental Partnership.Aslead DimensionEnviron-Northern within theframeworkof was thefi inaugurated inSeptember2005 ment PlantinSt.Petersburg Southwest Wastewater Treat- stones inNIB’s lending.The investments isoneofthecorner- Financing ofenvironmental COOPERATION INRUSSIA ENVIRONMENTAL INTERNATIONAL nancing. nancing smallandmedium-sized million. Authorised capitalEUR4,142 become NIBmembers. Estonia, LatviaandLithuania 2005 BULLETIN DECEMBER 06 rst project completed nancing windpower nancial intermediar- 2005 nance wind 2006 8.1.2007 15:02:59 11 LETTER FROM THE PRESIDENT NIB_bulletin210x280_EN.indd 12

12 LETTER FROM30th THE ANNIVERSARY PRESIDENT market orientationcangohandinhand. outside themembershipregion. TheBankhasdemonstratedthatp institution. Itoperatesbothinthemembercountriesandtoan proposal was discussedby theNordic statutes fortheBank. The working group’s work, a working group proposed draft of foundingtheBank. After four months’ decidedtorealise Ministers theidea Prime customs union. InJanuary 1975, theNordic of theNordek-plan toestablish aNordic bank was discussedforover 15years aspart Bank. ontheNordicAgreement Investment metinCopenhagentosignthe Ministers December 1975, theNordic Cooperation oftheoilcrisis.in theaftermath On4 The Nordic Investment Bankwas founded BULLETIN DECEMBER 06 Baltic cooperation.NIBisthemembercountries’commoninterna between theNordic countrieshasbeenintensifi Since thefoundationofNordic InvestmentBank30yearsago of theBank’s history Overview The idea to found a Nordic investment for thesenewpurposes.” for hadtobeinvented it wouldhave instrument,there asasuitable If theBankhadnotalreadybeen legitimate “Nordic interests”. areafor opened upagreater The falloftheironcurtain Nordism evenmoreurgent. ofcontinued a demonstration to theoutsideworldmade roadsinourrelations different had tobetaken. The choiceof somevisibleinitiative such that increasing unemploymentwas deficitsand balance ofpayment shortage, ofanenergy threat beenbetter.could nothave The in1974–75 on theagenda NIB bringing “The timingfor 1976–78: OF NIB’SBOARD IN NORWAY, CHAIRMAN HERMOD SKÅNLAND, Finally thestatuteswere ratifi Council inStockholmNovember 1975. sessionoftheNordicthe extraordinary andwasCouncil ofMinisters adoptedat approximately 11.5billion euros. loans outstandingamountto balance sheettotals17.9billion euros and guarantees isapproximately 2,500, the years loansand thenumber ofgranted Now thattheBankhasoperatedfor30 operationsincreased strongly.international andparticularly borrowing countries Over time, there were more andmore loans outstandingwas 1.1billioneuros. totalled 1.8billioneuros andthestockof the Nordic region. The balancesheet cooperation projects bothinandoutside loansfor333 the Bankgranted building upitsorganisation andoperations. time went by andtheBankcouldstart in thefi question whethersuchabankwas needed lively debateanddiverging views onthe growth. thebeginning,At there was a projects toeconomic thatcontribute for loansonbankingterms long-term countries’ interests. The Bankwas togrant projects thatserve theNordic andexports institutions, as well as to assist in investment operation between Nordic businesses and LindströmfromBert Sweden. Bank’s fi of theBank’s fi Bank ofNorway, was appointedChairman employees. that time, theBankhadonlythree twostarted monthslaterinHelsinki.At into force on1June 1976, andoperations countries’ parliaments. The statutesentered During its fi During NIB’s missionwas tointensifyco- Skånland,Mr Hermod Director ofthe rst place.rst as faded The criticism rst President andCEOwasrst Mr rst Board ofDirectors.rst The rst tenyearsrst ofoperations, ed andextendedtobecomeNordic- ed by the fi ve Finland, Iceland, Norway andSweden. fi with theoriginal oftheBank onanequalfooting members Estonia, Latvia andLithuaniabecame of2004.in thecourse On1January 2005, was ratifi new onNIB. agreement The Agreement Baltic countries’ governments signeda representatives oftheNordic andthe Bank. 2004, On11February ofthe becamefullmembers countries was enlarged, whenthethree Baltic the Bank’s history. The NIBmembership dividends toitsowners. profi well asinothercountries. The Bank’s investments inthemembercountries, as Bank hasfocusedonenvironmental and energyprojects. Sincethe1990s, the andbyinfrastructure fi public interest by strengthening has beeninvolved inseveral projects of interest andbusiness orientation. The Bank institution capable ofcombining public to grow andimprove. years, theBankhaddemonstrateditsability common resource. of20 Inthecourse havecountries attheirdisposalanexcellent Karlsson concludedthattheowner oftheBank,anniversary history MrJan O. the owners’ projects. priority Inthe20th an effective forimplementing instrument fi age, ithadalready built upastrong this ratingwithoutinterruptions. obligations. Since thentheBankhasheld i.e. AAA/Aaa, debt foritslong-term gave theBankhighestpossible rating, nancial position.nancial Ithadproved itsvalue as increasing extentalso The year pointin 2005was aturning The Nordic Investment Bankisan When theBankreached 20years of In 1982, theleadingratingagencies tability isgoodanditregularly pays , cooperation tional fi ed by all eight member countries ed by alleightmembercountries ublic interest and nancial ve members, Denmark, nancing transport transport nancing 9.1.2007 13:42:22 NIB_bulletin210x280_EN.indd 13 Iceland tapspowerful growth potential intensive industries.TheBank’s long-termloansto Icelandic hydro- andgeothermalpower producers and thealuminiumsmelterNorðurál,inphoto, the fi NIB hasbeenamongthemajorcontributorsto nancing ofinvestmentsinIceland’s power- amount to400millioneuros. BULLETIN DECEMBER 06 4.1.2007 10:38:21 13 PHOTO: NORÐURÁL LETTERSUSTAINABLE FROM THE PRESIDENT GROWTH Jón Sigurðsson, Iceland’s SUSTAINABLE GROWTH SUSTAINABLE Minister of Industry and Commerce: “For over 40 years now, it has been a continuous policy of all governments to promote the utilisation of our country’s energy resources for sustainable

PHOTO: MINISTRY OF INDUSTRY AND COMMERCE OF INDUSTRY PHOTO: MINISTRY development.” PHOTO: RAGNAR TH. SIGURÐSSON PHOTO: LANDSVIRKJUN

The Icelandic economy has taken off. renewable hydro and geothermal energy The country’s strong GDP growth by far resources for sustainable power FOREIGN DIRECT exceeds the average pace of economic development. In doing so, we are INVESTMENTS IN ICELAND growth in other West European diversifying Iceland’s industrial activity IN MILLION EUROS countries. The soaring export of and economy and improving the living aluminium is one of the principle standard of the people,” says Jón 3,500 engines behind the country’s success. Sigurðsson, Iceland’s Minister of 3,000 The total value of domestic and foreign Industry and Commerce. 2,500 direct investments in Icelandic power Aluminium plays a key role in 2,000 generation and metal production reshaping the structure of Icelandic 1,500 accounts for a quarter of Iceland’s gross export. The share of aluminium in total 1,000 domestic product. merchandise exports is expected to rise 500 0 “NIB has been an instrumental from 20 per cent in 2005 to 40 per cent 2002 2003 2004 2005 player in the diversifi cation of Icelandic in 2009. To compare: fi sh and other export-oriented industries. Contributing marine products accounted for 57 per Source: Central Bank of Iceland to the stronger competitiveness of our cent of merchandise exports in 2005, clients is at the core of our mission,” says down from as much as 82 per cent in Benedikt Árnason, Regional Manager 1991. for Iceland at NIB. Iceland’s power resources possess TAPPING HYDROPOWER ICELAND’S EXPORT unique potential. Its geographic location The leap in metal production requires STRUCTURE in the middle of the northern Atlantic stepping up the country’s power IN MILLION EUROS Ocean with large precipitation, glaciers generation capacity by 130 per cent. The 3,000 and rivers provides an abundance of national power utility Landsvirkjun has 2,500 hydropower potential. Located on the been the main actor in making it 2,000 crest of the tectonic Atlantic rift zone, possible to build the power-intensive 1,500 Iceland also has access to geothermal industry in Iceland. 1,000 energy sources. “This is our country’s major 500 0 “We have learned to harness this competitive advantage and a unique 1990 1993 1996 1999 2002 2005 enormous potential. For over 40 years opportunity for power intensive Aluminium Marine products now it has been a continuous policy of production to have guaranteed Other manufacturing products Other products all governments to promote the renewable and emission-free power utilisation of the country’s clean and resources at a competitive price on a Source: Statistics Iceland

14 BULLETIN DECEMBER 06

NIB_bulletin210x280_EN.indd 14 8.1.2007 15:03:03 NIB_bulletin210x280_EN.indd 15 Sultartangi hydropower plant geothermal powergeothermal potential. In order and Hitaveita tapIceland’s Suðurnesja The companiesOrkuveita Reykjavíkur HOT SPRINGENERGY hydropower plantandtransmissionlines. for fi 140 millioneuros inloansfrom NIB impacts. The company hasreceived to minimisenegative environmental the environmental inorder authorities implementing twenty conditionssetby andisworkingthis concern on reservoir. Landsvirkjun hasaddressed on thebanksofpower plant’s main to thefi main environmental according concern environmental impactassessment. The smelter atReyðarfjörður. the new US-owned Alcoa aluminium theneedsof this plantwillbeserving full production modeinOctober 2007, power plantinthecountry. Once in 690 MW, thelargest itwillbeby far country. With aplannedcapacityof Kárahnjúkar, ofthe part intheeastern Iceland. Oneofthemisaplantat power in stationsunderconstruction Communication atLandsvirkjun. Hilmarsson, HeadofCorporate basis,”long-term says Thorsteinn Blue Lagoon This project went through astrict There are three large-scalehydro- nancingthis1.2billioneuro ndingsispossible land erosion Svartsengi geothermalpower plant BULLETIN DECEMBER 06 4.1.2007 10:38:27 15 PHOTO: ODDGEIR KARLSSON LETTERSUSTAINABLE FROM THE PRESIDENT GROWTH NIB_bulletin210x280_EN.indd 16

16 LETTERSUSTAINABLE FROM THE PRESIDENT GROWTH million euros are settoprovide power plant. These projects totalling400 capacity ofarecently built 90MW Reykjavíkur expandingthe iscurrently capital Reykjavík, Orkuveita power plant. InclosevicinitytoIceland’s building upthecapacityofitsSvartsengi new Reykjanes power plantandis generating capacityby 100MWinthe hasrecently expandedits Suðurnesja power-intensive industry, Hitaveita meet theincreasing demand ofthe to BULLETIN DECEMBER 06 ICELAND’S ECONOMYINBRIEF merchandise exports isstillfish years. of themainstay Although in recent increased significantly The diversityofexportshas industries. investment inpower-intensive direct foreign encouraging at government’s policiesaimed theIcelandic extent thisreflects than doubledin2005. To alarge in thecountry’s more economy directinvestments stock offoreign aluminium andpowersectors. The as aresultofinvestmentsinthe in2005, data) (preliminary mainly per centin2004and7.5 7.7 grew The Icelandiceconomy hot water andelectricity. The company in theworld tocombineproduction of euros. these companiestotalling200million 1990s, nineloansto NIBhasgranted Hitaveita Suðurnesja. Sincethemid- for bothOrkuveita Reykjavíkur and Norðurál. the expansionofaluminiumsmelter additional power for capacitynecessary 2008–2009. will reach16,000GWhperyear in Iceland’sthat powerproduction power potential. Itisexpected the country’s electric estimated 20percentof comprises only harnessedcapacity The currently as muchinthemid-1990s. 10,000 GWhperyear, double geothermal sourcesnowtotals Power productionfromhydroand years. inrecent rapidly been growing pharmaceutical products—have aluminium aswellmedicaland of manufacturedproducts—mainly and othermarineproducts, exports Svartsengi wasSvartsengi thefi NIB isoneofthelargestfi rst power rst plant nanciers nanciers behind thegrowth oftheIcelandiceconomy. The soaringexportofaluminiumisonetheengines Iceland’s attraction. majortourist water poolthathasbecome geothermal plant—theBlueLagoon,the Svartsengi a thearea surrounding has alsoharnessed Ragnar Gudmundsson. about thequalityofproject,” says bankingcommunity the international the project messageto isanimportant fi the involvement ofotherinternational tiveness oftheproject andfacilitates environmentalstrict requirements. NIB-fi mental agenda, whichrequires thatall emphasises theBank’s strong environ- Gudmundsson, CFOofNorðurál, cooperation withNIB, Ragnar by 4percent. increase thevalue from ofexport Iceland expansion oftheNorðurálplantwill of 2007. Itisexpectedthattheplanned increase to260,000tonnesby theend levelto thecurrent in2006andafurther the plant’s capacityfrom 90,000tonnes programme, which enabled expansionof ongoing 400millioneuro investment is oneoftheleadingfi Iceland’s largestaluminiumsmelter. NIB output capacityof220,000tonnes, is US-owned Norðurál, withanannual PROMOTING GROWTH nanciers. The Bank’s in participation “NIB contributes tothecompeti- “NIB contributes Commenting onhiscompany’s nancedprojects complywith nanciers ofthe nanciers 4.1.2007 10:38:31 NIB_bulletin210x280_EN.indd 17 competitive? your SME What makes The Bulletinpresents fourofthem. well area. asoutsidethemembership as in theNordic andBaltic countries hundreds of smallcompanies supported provided 2billioneuros inloansthathave to localentrepreneurs. The Bankhas NIBfunds local banksthatintermediate purpose, with NIBbuilds uppartnership component inNIB’s lending. For this Financing SMEprojects isanessential for thefuture oftheirregion. their ideasandresults, andtakeresponsibility them becreative andinnovative,beproud of that involveslocalcommunitymembers,lets most casesanSMEistheclosestemployer competitiveness ofnationaleconomies.In enterprises, SMEs,refl The successofsmallandmedium-sized ects thehealthand managed by justfourpersons. The each week ingleamingnew tanks, is 6,000 litres ofunique wheat beerbrewed Indslev Bryggeri’s economy, including 2006. It’s hard tobelieve thatallof Middelfart, central Denmark, in April Bryggeri, a brewery launchedin Everything isspecialaboutIndslev MEETS HIGH-TECH OLD TRADITION now Indslev isthefi different from massbeerproduction, and producing wheatbeerbecauseitisso University inCopenhagen. at theRoyal Veterinary and Agricultural entrepreneur and stillastudent BusseRasmussen,Anders ayoung brewery isthebrainchildofitsfounder, country thatproducescountry onlywheatbeer,” “We decidedtoconcentrateon BULLETIN DECEMBER 06 rst brewery rst inthe 4.1.2007 10:38:36

17 LETTER FROMCOMPETITIVENESS THE PRESIDENT NIB_bulletin210x280_EN.indd 18

18 LETTER FROMCOMPETITIVENESS THE PRESIDENT

PHOTO: INDSLEV BRYGGERI BULLETIN DECEMBER 06 brewery switching to isalsoconsidering up Indslev’s offi from theproduction isused toheat in centralDenmark. Recycled energy savings bankandNIB’s business partner Sparekasse,from Middelfart alocal million Danishkroner (340,000euros) investments, thebrewery borrowed 2.5 as wastewater refi in water andenergysaving aswell 450 residents ofthetown. company’s stock isnow heldby about of Indslev Bryggeri, as22percentofthe pillars isoneoftheprincipal patriotism brewery backin1897. In fact, Middelfart grandfather’s brother thefamily started on theIndslev estate, where hisgreat than justslickPRjargon. Hewas born old traditions. gohandinwithIndslev’stechnologies says MrRasmussen. Headdsthatmodern to makeIndslevcompetitive. Traditions combinewithhigh-techinnovation The brewery investing iscurrently For Anders, traditionsare more ceandshowroom. The ning. For these 60 kilometres north oftheir home.60 kilometres north located recently boughtinsolvent farm the entrepreneur torevive family a income from thewindmillsishelping insurance company. chain ofreal estatebrokers, andan to areal estatedevelopment agency, a ninebranches andisaparent bank runs founded by localcraftsmen. Today, the recently marked 153years sinceitwas Sparekasse. Middelfart Brønserud,says HansErik CEOof it byand supported investing in its shares,” we extendedtheloantothisenterprise traditions,maintains localmanufacturing consideration totheenvironment and Because theIndslev project gives earnest cooperation between ourbankandNIB. It isalsoapracticaloutcomeofthe the competitiveness ofalocalcommunity. petitive micro to business thatcontributes diesel orrapeseedoil. alternative energysources, suchasbio Hensbergs’ landinØster Assels. The Five of thewindmillsare locatedon the the localpower production company. produced by thepower issoldto rigs up onitsown land. The electricity a capacityof1megawatt, andsetsthem windmills, each57metres high with breeding andbiogasenterprise. business alongsidetheir750-strong hog thewindmill runs The Hensbergfamily local savings Sparekasse. bankMorsø was fi production ofwindmills. The investment Denmark,western hasinvested inthe inØster Assels innorth- enterprise Hensberg Holding, farm afamily WINDMILLS ONTHEFARMLAND The Middelfart savings bankjust The Middelfart “This isagoodexampleofcom- The farm enterprise assembles enterprise The farm nancedby borrowing from the and Aarhus. and inthecountry’s majorcities, fi 1852 andnow operatesanetwork of Sparekasse.CEO ofMorsø of thelocaleconomy,” Balck, says Jørn forus,important sincethisisthecore borrowed from NIB—isespecially withthefunds enterprises—also development ofsmallandmedium-sized for several years. The involvement inthe likeinvestments thisone inenterprises the farm’s owner. hog breeding” says Vibeke Hensberg, our also plantoexpandandmodernise but twoafford notonlytorun farms the incomefrom thisbusiness, we can up windmillsonfarmland. Thanks to setting inourarea whostarted farmer My husband, Tommy, was thefi windmill business foreightyears. in NIB’s lending.” is anessentialcomponent “Financing SMEprojects to be a helpful partner forinstitutional to beahelpful partner the windbusiness. Therefore our ideais inthewindbusiness. experience together boast44yearsmembers of isnew,Although theenterprise theteam on developing windmillparkprojects. ofthe company.the founders Itfocuses Gustav Nielsenand Anders Amby—are three persons, two ofwhom—Karl town inDenmark, ofSkjern employs Agrowind, consultancyinthe astart-up MASTERS OFTHEWIND our farm.” we canaffordtoexpand “Thanks tothewindmills, fteen branches in its geographical area fteenbranchesinitsgeographical Morsø SparekasseMorsø was established in “Our bankhasbeenfi “We have the beenrunning “We have seenagrowing interest in nancing rst rst 8.1.2007 15:03:06 NIB_bulletin210x280_EN.indd 19 north Europeanregion. opportunities intheentire for windbusiness Agrowind islooking the calculations, and, fi permits,obtaining thenecessary making new windmillpark: choosingasite, work outtheground fora in carrying wind business, but have noexperience investors thatwishtoinvest inthe Denmark, which recently marked its Jutland ofNIBinwestern partner in Bank,backing from Skjern alocal global windindustry. company Vestas Group, aleaderinthe executive positionsintheDanish was established, bothmenwere in in thewindmillsector. Until Agrowind of founders Agrowind are active investors and even FranceandtheUK. Both countries, Poland, Germany northern region, includingtheNordic andBaltic Europeannities intheentire north is lookingforwindbusiness opportu- says MrNielsen. that theproject proceeds smoothly,” The company hasreceived fi The business development company nally, making sure nancial BIOTECH INCUBATOR of researchers and support personnel.of researchers andsupport business.expanding theirinternational a toolforthelocalcompaniestousein pigs aswell assalmonandtrout. This is species inNorway, especiallycattleand aboutvarious information biological business asitkeeps auniquebankof Gjein, ofBiohuset’s Chairman board. industry,”biotechnological says Harald put Hamarontheglobalmapof inourareaof biotechnologies and make a strong impact on the development in ourregion. We expectBiohusetto plant breeding have deepculturalroots come aboutinHamar, asanimaland Hedmark University College. in animalandplantbreeding andthe Hamar-based companieswithexpertise developed incooperationbetween between andR&D—was industry The project idea—to enhance interaction a business incubatorforbiotechnology. business joinedforces forBiohuset, The localmunicipality andprivate andanimalgenetics.in biotechnologies has become home to the latest innovations incentralNorwayThe Hamarregion network. 100th anniversary. aseven-branch Itruns The project employs a95-strong staff Biohuset makes abigdifference for “No wonder thisinitiative has Department atSparebankenDepartment Hedmark. Head ofthe &Finance Treasury and ourcustomers,” says Are Jansrud, benefi new dealswithNIBinthefuture, tothe conditions. We are lookingforward to fundingonmarket with long-term central Norway. network municipalities in 20 rural in 1835 now a31-strong runs branch college. The savings bankestablished in attheuniversityship inbiotechnologies biotechnological industry. the globalmapof Biohuset putsHamaron Biohuset’s andoneprofessor- laboratory purchase oftoolsandequipmentfor Sparebanken hasalsosponsored the to theresearch basisofBiohuset, Norway. contribution animportant As fi which isoneofNIB’s seven local savings bankSparebanken Hedmark, (5.4 millioneuros) was lentby thelocal project, 42 millionNorwegian kroner (7.4 millioneuros) invested inthe increase by another2,700square metres. size, 5,300square metres, willsoon Biohuset isconstantlydeveloping: its nancial intermediary partners in partners nancialintermediary “Partnership withNIBprovides“Partnership us Of the58millionNorwegian kroner tofSparebanken Hedmark, NIB BULLETIN DECEMBER 06 4.1.2007 10:38:44 19 LETTER FROMCOMPETITIVENESS THE PRESIDENT NIB_bulletin210x280_EN.indd 20

20 LETTER FROM THEENVIRONMENT PRESIDENT BULLETIN DECEMBER 06 for NIB. will continuetobeapriority environmental component better competitiveness.The technologies translateinto environmentallife. Modern equals abetterqualityof A cleanenvironment adds value Clean environment Dimension Environmental Partnership actively involved intheNorthern Sea andBarents regions. The Bankis still needingimprovement intheBaltic improvements andhelp toidentifyareas of theongoingenvironmental Pitkänen said. and environmental performance,” Mr improvements bothinproductivity provide with win-winopportunities individuals. Cleanerproduction solutions states, municipalities, and enterprises investmentssubstantial further by levelsload tonon-critical willrequire pace. iscontinuing atanalarming degradation of somepositive trends, environmental PitkänenstressedHarro thatinspite investments intheBalticSeaarea, NIB’s environmental thinking. Manager Johan Ljungbergpresented PitkänenandEnvironmentalHarro of NIB. The Bank’s Senior PresidentVice Johnny Åkerholm, President andCEO Stavanger, Norway, was addressed by Assessment (IAIA)heldinMay in International Association forImpact The Annual Conference ofthe NIB iswillingtoshare itsknowledge “The reduction oftheenvironmental In hisanalysisofenvironmental Johan Ljungberg, Environmental Manager, andHarro Pitkänen, Sen of environmental loans. lending toNorthwest Russiaconsists and Poland andover 60percentof of NIBlendingtotheBalticcountries and Denmark. Approximately onethird Europe,by Central andEastern Norway account forthelargestshares, followed outstanding, Sweden andFinland Of theBank’s totalenvironmental loans areasthe geographical where itisactive. environmental loansoutstanding inall ofsubsidies.include any form NIBhas onmarket terms,priced anddonot environmental loansare competitive, fi which NIBexaminesforpossible the processing ofevery singleproject environmental of aspectsisavitalpart and theevaluation ofthese environmental andresponsibilities, risks lending. investmentAll projects involve environmental oftheBank’s principles problems inNorthwest Russia. organisations toremedy environmental national governments andinternational of multilateral fi theefforts thatconcert forums (NDEP). Itisoneofthemostimportant nancing. Like alltheBank’s loans, Johan Ljungbergpresented the nanceinstitutions, ior Vice President 4.1.2007 10:38:50 NIB_bulletin210x280_EN.indd 21 PHOTO: ØSTFOLD ENERGI Refuse isenergy was fi partly now beeninoperationforayear. Energi, whichowns theplantthathas Utne, FinancialManagerofØstfold heat produced from oil,” says Øivind Several ofthecompaniespreviously used andalargelaundry. industry engineering operationsaswellagriculture-related as a number ofcompanieswith municipalities andhas agricultural energy forlocalbusinesses. converts localwasteinto to-energy plantinthearea from refuse. Thewaste- companies gettheirenergy Norway, anumberof Rakkestad, southern In theindustrialarea of “Rakkestad isoneofNorway’s largest The waste-to-energy plant, which nancedwithaNIBloan, has 2009, Norway willprohibit thedumping the Rakkestad waste-to-energy plant. In and companieshave shown aninterest in through incineration. and demandforenergyproduced andthearea hasasupply of wasteshort energy production. The distances are favourable environment for thistypeof emphasisesthatRakkestad isa Energi employees islocatedinRakkestad. Norway’s with160 largestlaundry andfoodproducers inthearea.laundry ofsteam,form whichisdelivered toa energyperyear inthe 25 GWhthermal to localindustry. The plantcanproduce which isthendelivered asprocess steam The incinerationprocess produces steam, suitable forincineration.is particularly wasteresidual householdandindustrial of waste peryear. According toMrUtne, the capacitytoreceive 12,000tonnes Mr Utnesays thatbothmunicipalities The local aspect is important. Østfold Norway, utilisesresidual householdandindustrialwaste. Østfold Energi’s waste-to-energy plantinRakkestad, Rakkestad. near to-energy plantinSarpsborg alsoownsØstfold Energi alargerwaste- of recyclable waste. Publicly owned substances are combusted. which meansthatnearlyallharmful temperatures inacontrolled manner, outathigh incineration iscarried Environmental unit, says thattoday to the surrounding environment.”to thesurrounding substances are captured andnotemitted andresiduesresidual ofharmful particles technology hasdeveloped sothat option. Johan Ljungberg, HeadofNIB’s become anenvironmentally sustainable technology,modern incinerationhas resulting inpollution, but thanksto considered anineffi Waste incinerationhaslongbeen NEW TECHNOLOGY “At thesametime, fl BULLETIN DECEMBER 06 cientmethod gascleaning ue 8.1.2007 15:03:11 21 LETTER FROM THEENVIRONMENT PRESIDENT MANUFACTURING

Wärtsilä riding on the crest of a wave PHOTO: WÄRTSILÄ

The Finnish company Wärtsilä has built up a global service network for its marine engines.

It’s full steam ahead for Wärtsilä’s operations, which include “This applies right through from the the Finnish engineering not only marine engines but also design and supply of new products and equipment for power stations, are solutions to service, spare parts and group Wärtsilä. Profi ts divided into three business areas: Ship guaranteed operational support are record-high, and the Power, Power Plants and the ever more whenever and wherever in the world orders are fl ooding in. So prominent Services. they are needed.” what are the keys to its Wärtsilä has built up an extensive global network and now has more than success? 130 units with 13,000 employees in FROM LOCAL SAWMILL more than 70 countries. The company’s TO GLOBAL PLAYER head offi ce is in Helsinki in Finland, Wärtsilä has its origins in a As a supplier of engines and other and it has factories in Finland, Italy, sawmill founded in 1834 in technical equipment for ships, Wärtsilä the Netherlands, the United Kingdom, Värtsilä in Karelia, now part is benefi ting greatly from the buoyant India, China and Norway. NIB has of Russia. In the 1930s there state of the world market. World trade granted Wärtsilä loans for the inter- began a process of growth and is growing, which means that transport nationalisation process. diversification through mergers is also growing, and this has led to a “We have fi nanced Wärtsilä’s inter- and acquisitions which lasted shipbuilding boom. The shipbuilding nationalisation and growth, which are until the 1980s. New owners industry is now mainly concentrated in boosting the company’s competitive- were then gradually found for Asia, where 80 per cent of the world’s ness,” says Asko Heilala, NIB’s regional various parts of the industrial vessels are built. In 2004 Wärtsilä opened manager for Finland. conglomerate, and the business its fi rst factory in Asia, in Shanghai. A global presence is vital for was streamlined. The group “Our customers in the marine Services, which account for more than gained its current form in 2000 sector include both shipyards and a third of Wärtsilä’s sales. Mr Eskola says when the listed parent company shipowners,” says Group Vice President that the company’s goal is to support Metra changed its name to Jaakko Eskola, who heads up the Ship customers’ operations throughout the Wärtsilä. Power business area. lifecycle of Wärtsilä’s products:

22 BULLETIN DECEMBER 06

NIB_bulletin210x280_EN.indd 22 4.1.2007 12:22:46 Another goal is to offer maintenance tomers products with the best lifetime As part of its work on more effi cient of other suppliers’ machinery on board effi ciency and reliability in the market,” products, Wärtsilä has developed multi- customers’ ships. Wärtsilä expects the says Mr Eskola. fuel engines which can run on either number of large-scale maintenance Fuel-effi cient marine engines give light fuel oil or natural gas. The switch contracts for ships and entire fl eets to the customer a fi nancial advantage and between fuels can easily be done while grow in the future. reduce the impact on the environment. the engine is running. This gives cus-

In the battle for customers, “Environmental issues have long tomers more fl exibility, and means that MANUFACTURING Wärtsilä is focusing not only on ser- played a central role in the company’s the engine can run on the fuel which vice but also on the importance business environment,” says Mr Eskola. makes most sense fi nancially and of product quality. “The results of Wärtsilä’s systematic environmentally at any given time. “We want to maintain our leading approach to environmental issues can be position in the Ship Power business and seen in both the improved effi ciency and LETTER FROM THE PRESIDENT LETTER FROM to grow further by providing our cus- the lower emissions of our products.”

The signing ceremony. Sitting from the left: Dr Nguyen Thanh Do, Director General, Department of External Finance, Vietnam’s Ministry of Finance; Mirja Koskimäki, Senior Legal Counsel at NIB; Søren Kjær Mortensen, NIB Vice President for Asia. Vietnam values NIB fi nancing

NIB and Vietnam’s Ministry of Finance have signed a new “We also appreciate NIB’s effi cient and speedy way of general loan programme in the amount of 30 million US processing projects of mutual interest to our Nordic partners dollars and a loan programme for the Vietnam National Coal- and ourselves,” he adds. Mineral Industries Group, VINACOMIN, in the amount “Indeed, the process of approving loan programmes of 50 million US dollars. at NIB normally takes just two or three weeks upon receipt of The new general loan programme is already the third all relevant information,” says Søren Kjær Mortensen, NIB Vice of its kind in Vietnam. The two former ones have been President for Asia. “The conditions under which we provide utilised for projects in the energy sector, water supply and our foreign currency loans in Vietnam are softer, and the loans construction. VINACOMIN is also receiving its third loan often have longer tenors compared to those quoted by local from NIB. The earlier loans were used for the fi nancing commercial banks.” of drilling equipment, dump trucks and excavators. Vietnam is a fast growth economy and one of NIB’s “We are interested in the transfer of technologies from largest borrowers outside the member countries. NIB’s total NIB’s member countries as these technologies have proved capital committed to Vietnam now amounts to 350 million competitive and much in demand in Vietnam. NIB’s loan US dollars. Since 1996, the Bank has been granting long- programmes give us access not only to fi nancial resources term credits with a maturity of 15–17 years and up to a but also to long-term and benefi cial relationships with the fi ve-year grace period for a number of industrial projects, Nordic equipment manufacturers,” says Dr Nguyen Thanh Do, such as the Song Hinh hydro-electricity plant, the Bai Bang Director General, Department of External Finance, Vietnam’s Paper Factory, and the cement plants Tam Diep and Ha Ministry of Finance. Long.

BULLETIN DECEMBER 06 23

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24 24 LETTER FROMMANUFACTURING THE PRESIDENT BULLETIN DECEMBER 06 to biorefi From pulpmill development forus.” are crucial products. Soresearch and and high-added-value niche must competeonquality, fl compete oncapacity. Insteadwe We are asmallmillwhichcannot forourdevelopment.important research atahighlevel, whichis Research. associated company MoRe close collaborationwiththe technology isbeingdeveloped in Hildingsson. Headdsthatthis directorsays Ola managing products,”more complementary technology sothatwe candevelop and we have alsoinvested innew bottlenecks ontherecovery side, 10 percent, by removing primarily our outputofspecialcelluloseby complete biorefi a traditionalpulpmillinto from DomsjöFabriker to transform of 2006. The programme alsoaims around 10millioneuros by theend to increase operatingprofi effi euros from NIB, ofan part forms through aloanofabout10 million This investment, fi developed intocommercial products. biorefi investment inthemill’s recent history. Theaimistocreate a Sweden,thebigg has beeninvestedinthepulpmillnorthern Domsjö Fabrikerisabuzzwithactivity. Closeto25millioneur cellulose products, themainone ciencyprogramme whichaims “MoRe Research conducts “This investment hasincreased The millproduces special nery where allcomponentsofthetimberare madeuseofand nery. nanced partly nancedpartly tby exibility abatement agent onroads.” among others, andasa dust of feedpelletsandceramicproducts, industry, itis used intheproduction Hildingsson. “Besides theconcrete market forlignosulphonate,” says Mr develop andmarket it. Specialities hasbeensetupto calledDomsjö and asubsidiary that hasbeen “rediscovered”, in thetimber, isanoldproduct which isproduced from thelignin lignosulphonate. The lastofthese, ethanol, carbon dioxide and production.” due totheuseoftoxins in growingwhich isfacing problems interesting substituteforcotton, Hildingsson. “Above all, itisan cellulose isgrowing,” says Mr their heatshields. NASA’s spaceshuttleshave itin unique properties alsomeanthat toaddconsistency.industry Its binding agent, andinthefood asa industry pharmaceutical the production ofviscose, inthe in is usedinthetextileindustry many applications. For example, it pure cellulosewith a particularly being dissolvingcellulose. This is “We are alsoseeingagrowing alsoproducesDomsjö Fabriker “The market fordissolving nery

PHOTO: PER ÅGREN MEDIA-BILD complete os est 8.1.2007 15:03:19 DOMSJÖ FABRIKER AB • Pulp mill founded in 1903 in Domsjö, just IN BRIEF outside Örnsköldsvik in northern Sweden. • The mill was threatened with closure in 1996, but was taken over by a consortium of six private investors at the end of 1999.

• Currently has around 340 employees. THON GRUPPEN PHOTO: OLAV • Annual turnover: around 100 million euros. • Annual timber consumption is 1.3 million cubic metres of softwood. A third is imported

from the Baltic Sea region through the Latvian THE PRESIDENT LETTER FROM subsidiary Domse Latvia and the newly opened subsidiary in Lithuania, Domse Miskas. The remainder comes mainly from the forests of northern Sweden. Chairman Olav Thon and His Majesty King Carl • Annual production of cellulose is 220,000 tons. Gustaf of Sweden open Töcksfors Shoppingcenter. A third of this is sold to the Scandinavian market, a third elsewhere in Europe, and the remainder to the growing textile market in Project creates Asia. • Domsjö Fabriker also produces ethanol, 400 new jobs carbon dioxide and lignosulphonate. NIB has disbursed a loan of 21.5 million euros for the fi nancing of Thon’s shopping centre in Sweden. Töcksfors Shoppingcenter was opened by His Majesty King Carl Gustaf of Sweden and Olav Thon, Chairman of the Board of Olav Thon Gruppen, which owns the new shopping centre. This new 28,000 square metre shopping centre with 41 different shops is situated only seven kilometres from the Norwegian border on the main road between Oslo and and has already generated increased traffi c and trade. By creating 400 new jobs, the shopping centre will be an important addition to the Töcksfors community, which has 1,500 inhabitants.

NIB sponsors energy conference in Tallinn NIB sponsored the World Energy Council (WEC) Executive Assembly 2006 that took place in Tallinn in September. The event gathered energy sector executives from around the world. Mr Gerald Doucet, the Secretary General of the WEC (in the picture), commended NIB for its contribution to developing the infrastructure of power production and distribution in the Baltic Sea region.

BULLETIN DECEMBER 06 25

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26 26 LETTER FROM THE PRESIDENTIN BRIEF

PHOTO: ANDERS MARTINSEN BULLETIN DECEMBER 06 upgrade inChina Loan forrural CEO ofNIB. People’s RepublicofChina;Johnny Åkerholm, President and The signingceremony. LiYong, Vice MinisterofFinancethe Sweden. Link connectingcontinentalEuropeandDenmarktoNorway corridorN part oftheE39roadandregionaltransportation Flekkefjord insouthernNorway, hasbeenopened. The newsectio The road,Allfarveg anew20kilometrestretchbetweenLyngdal Allfarveg roadnowinoperation the newroadNorway. sectioninsouthern The spectacularnewbridgeoverFedafjorden ispartof the PRC, whichbeganover20years ago. in Chinaandrefl ects theBank’s commitment tothecooperation loan isanimportantcontributiontothe upgradingofruralpro technologies inthisarea. Nordic suppliersareexpectedtocontribute withcompetitive which isanimportantpriorityinthe country’s economicpolici productioninChina’s ofagricultural for themodernisation rur on a20millionUSdollarruralloanprogramme. The loanwillb The People’s RepublicofChina(PRC) andNIBhassignedanagre The totalcostsoftheprojectamountto150millioneuros. fi nancing oftheprojectwithalong-termloan37millioneu project inNorwegianroadconstruction. in NIBisparticipating The sectionincludes sevennewtunnelsandeightbridges. labourmar as acompetitiveresidentialareawithanintegrated Allfarveg isalsocontributingtothedevelopmentofregion Allfarveg Li Yong, Vice MinisterofFinance ofthePRC, N underlinedthat PartnerThe sectionhasbeenbuiltasthesecondPublicPrivate the ros. al areas, duction es. ordic e used ket. ement with and ship n is

IB’s Regional Manager for Latin forLatin Regional Manager America. industries andinfrastructure,” saysLars-ÅkeOlsson, NIB’s Sen and wearelookingforwardtofi nancing moreprojectsinBrazil market for attractive companies in is NIB’sa very member count euros. exceeds340millio inthiscountry total amountofloansagreed telephony, TV andinternetconnections. transmissi indata the Brazilianmarketandoffersitsservices suppliers. Parts ofequipmentusedintheprojectareprovidedbyNordic be usedfortheexpansionandupgradingofcompany’s networ Embratel. company the Braziliantelecommunications The loanwi of50millionUSdollars NIB hasenteredintoaloanagreement Loan toBraziliantelecom sterling. New Zealanddollar, Turkish lira, Hong Kong dollarandpound countries andItaly. theretailmarkets,deal wastargetedat especially intheBene krónur (33millioneuros)transaction withone-yearmaturity. T The issuewasmainlyplacedwithlocal pensionfunds. in theMexicancurrency, totalling1billionpesos(76million markets. The issuesmetwithvividinterestinthe Australian andthe As NIB’s fi ma rst transactionscarriedoutontheKangaroocapital (180 millioneuros)each, withthree-andfi ve-year maturities, representing theNordicandBalticregion. select institutionsand,AAA supranational indeed, theonlyone markets forinvestorstomakeplacementsinoneoftheworld’s 2002. NIB’s globalissuancerepresentsarareopportunity onpu was thefi fth globalbenchmarkissuecarriedoutbytheBanksi corresponding to840millioneuros. This fi bon ve-year maturity currencies. included issuestotallingnearly2billioneurosinninediffer During thefi rst eightmonthsof2006, theNIBfundingprogramm in ninecurrencies Funding transactions “Our activities in Brazil have beendevelopingpositively.“Our activitiesinBrazilhave Braz NIB hasbeenlendingtocustomersinBrazilsince1999. The solutionstothewholeof providestelecommunication Embratel NIB also carried out bond transactions in the Japanese yen,NIB alsocarriedoutbondtransactions intheJapanese After afour-year break, NIBcarriedouta3billionIcelandic A fi bond was alsoissuedforthefive-year maturity rst time Two bondissuestotalling 300million Australian dollars The largestofthemwastheannual1billionUSdollarissue, ent euros). on, were ian lux he rket.

ior ian d with n nce blic ries, e il ll k. 8.1.2007 15:03:22 New head Organisational of lending changes IN BRIEF Nils E. Emilsson from Sweden was appointed within NIB Executive Vice President and Head of Lending at NIB in spring 2006. Mr Emilsson is NIB’s activities have been responsible for NIB’s lending operations both reorganised, in order to further in and outside the Bank’s member countries. enhance effectiveness and further “The objective of NIB’s lending is to develop the credit process. NIB now pursue the recently revised strategy of NIB, has one lending department, namely to improve competitiveness of our separated from credit and analysis. member countries and work for a positive In addition, different support environmental impact. We will do this by services have been gathered within continuing to maintain our unique position a department for planning and as a provider of long-term fi nancing in the administration. member countries as well as internationally,” The development process is says NIB’s new Head of Lending. still ongoing and the Bank is Mr Emilsson has thirty years of carrying out job rotation and there experience in the fi nancial area. He spent have been recruitments for newly the fi rst ten years of his career in the established positions. NIB had 158 industrial sector, with the Swedish employees at end-August corporations Alfa Laval and Gambro. compared with 150 in the end of Thereafter he spent twenty years in banking, the year 2005. initially with Svenska Handelsbanken and most recently as General Manager of HSH Nordbank’s Stockholm branch.

New managing directors in the Nordic Finance Group

HELGE SEMB According to Mr Semb, the NDF now faces three team leader for Stockholm Water, implementing JOINS THE challenges: securing suffi cient and motivated institutional strengthening of the water company staff for the fund’s remaining tasks, ensuring that Vodokanal. In the years 1993–1998 he worked NDF ongoing projects are successfully completed, and with developing infrastructure projects mainly in Helge Semb from deciding on how to utilise the NDF’s capital. Russia and the Baltic countries. Norway has been “I hope that my experience of development appointed Managing aid, banking and leadership will help ensure that Director of the the winding up of the NDF takes place as IB SØNNERSTAD smoothly as possible.” Nordic Development IN CHARGE AT NOPEF Fund (NDF) as of 1 November 2006. Mr Semb has previously worked at the Inter-American MAGNUS The Nordic Council Development Bank (IDB), the Norwegian Ministry RYSTEDT of Ministers in of Foreign Affairs and the United Nations NEW MD AT Copenhagen has appointed Development Programme (UNDP). NEFCO “Since the fund was established in 1989, Ib Sønnerstad the NDF has made valuable contributions to The Board of Managing Director social and economic development in poor Directors of the of the Nordic countries,” says Mr Semb. Nordic Environment Project Fund The NDF, which is NIB’s sister orga- Finance Corporation (Nopef). Mr nisation, grants very long-term credit on soft (NEFCO) has appointed Magnus Rystedt from Sønnerstad, who is terms for public sector projects in developing Sweden as the new Managing Director of NEFCO. a Danish citizen, has been employed as countries. The NDF’s activities are financed by He has been responsible for NEFCO’s activities in Regional Manager at Nopef since October 2002. the Nordic countries’ development cooperation Russia since August 2000. Mr Rystedt has Previously Mr Sønnerstad was Operational budgets. In the autumn of 2005 the Nordic extensive experience in project fi nancing within Director at the staffi ng company Manpower in countries decided to wind up the fund’s the environmental fi eld. From 1998 to 2000 Mr Finland. activities. Rystedt served in St. Petersburg as Swedish

BULLETIN DECEMBER 06 27

NIB_bulletin210x280_EN.indd 27 4.1.2007 12:42:32 THIS IS NIB

The Nordic Investment Bank (NIB) offers its clients Outside the membership area, NIB grants long-term loans and guarantees on competitive long-term loans—with maturities of up to 20 market terms. NIB fi nances private and public years—for projects of mutual interest to both projects that strengthen competitiveness and the country of the borrower and the member enhance the environment. countries. Currently, NIB has loans outstanding NIB is a multilateral fi nancial institution in approximately 30 emerging markets in Africa that operates on commercially sound banking and the Middle East, Asia, Central and Eastern principles. The Bank was founded in the mid- Europe, and Latin America. 1970s by the fi ve Nordic countries: Denmark, NIB gives high priority to projects that improve Finland, Iceland, Norway and Sweden. In January the environment in the member countries and 2005, Estonia, Latvia and Lithuania became the areas adjacent to them. All projects considered members of the Bank. for fi nancing are analysed with regard to their In the member countries, NIB fi nances: sustainability and environmental consequences. • projects in the manufacturing industry, including NIB acquires the funds for its lending by investments in industrial facilities; borrowing on the international capital markets. • infrastructure investments within the energy, NIB’s bonds enjoy the highest possible credit transport, telecommunications, water supply rating, AAA/Aaa, with the leading rating agencies and waste management sectors; Standard & Poor’s and Moody’s. • environmental investments; • cross-border mergers and corporate acquisitions; • research and development; • foreign investments in the member countries; • projects that improve the economic conditions for small and medium-sized enterprises.

NORDIC INVESTMENT BANK

HEADQUARTERS OTHER OFFICES

Fabianinkatu 34 Copenhagen Reykjavík Singapore P.O. Box 249 Grønningen 17 Kalkofnsvegur 1 Regional Representative Offi ce FI-00171 Helsinki DK-1270 København K (in the building of Seðlabanki 78 Shenton Way # 16-03 Finland Denmark Íslands) Singapore 079120 Telephone +358 9 18001 Telephone +45 3314 4242 IS-150 Reykjavík Telephone +65 6227 6355 Fax +358 9 180 0210 Fax +45 3332 2676 Iceland Fax +65 6227 6455 Telephone +354 569 9996 Oslo Fax +354 562 9982 Dronning Mauds gate 15 Internet (at Eksportfi nans) Stockholm http://www.nib.int NO-0119 Oslo Kungsträdgårdsgatan 10 http://annual.nib.int Norway (in the building of Jernkontoret) Telephone +47 2201 2201 P.O. Box 1721 Fax +47 2201 2202 SE-111 87 Stockholm Sweden Telephone +46 8 5662 6590 Fax +46 8 5662 6591

BULLETIN NOV 06

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