Intermediaries play key role in non-member financing
Cooperation with local authorities and financial institutions is an essential component in NIB’s lending operations in non-member countries.
In 2010, NIB adopted a number of strategies for its operations in focus non-member countries. Since then, the Bank has agreed on eleven long-term loan programmes with nine intermediaries in Brazil, China, India, Russia, and some other focus countries and regions.
“Financing through intermediaries is without any doubt a key component of our strategies in non-member countries,” says Søren Mortensen, Head of Non-member Lending at NIB.
In 2010, over EUR 260 million, or more than half of the total amount of NIB’s loans agreed outside of the member countries, was provided to financial intermediaries. NIB has financed a large number of projects that benefitted both Nordic companies and the borrowing countries.
“Each sub-project in loan programmes placed with financial intermediaries is carefully scrutinised. NIB seeks to identify and finance those projects in particular that enable technology transfer and new market entrances from NIB’s member countries, so that they can be further developed to reach better mandate compliance,” Mr Mortensen explains.
In China and Vietnam, NIB operates through the national authorities of these countries. The two most recent 15-year-maturity loan programmes, one of a general purpose and an environmental one, have been agreed with the Chinese Ministry of Finance for a total amount of USD 200 million. A new general-purpose credit line totalling USD 40 million has been opened for the government of Vietnam.
“The general-purpose lending facilities are normally used for financing modernisation projects that can benefit from state-of-the-art technologies and equipment supplied by companies from NIB’s member countries,” Mr Mortensen continues.
“Typically, these are projects aimed at producing energy from renewable sources, improving energy efficiency, as well as in infrastructure development. NIB closely cooperates with governmental agencies in these countries in order to identify eligible projects.”
NIB has been active in the Chinese market for over two decades. Funds provided by the Bank have been lent on for the financing of over 300 projects throughout China relating to energy efficiency, health care service, agricultural processing, rural development, education and infrastructure. China is NIB’s largest single borrower outside the membership area.
India has become an important target for NIB’s member country companies with regard to both investment and technological cooperation. A loan programme totalling USD 35 million has been provided to India’s Infrastructure Development Finance Company Ltd for onlending to infrastructure projects, particularly within telecommunications.
Three loan facilities of general purpose earmarked for investments within energy and infrastructure have been placed with NIB’s partner banks in Latin America. A credit line totalling USD 30 million was agreed with the Central American Bank for Economic Integration (CABEI), which is a regional inter-governmental financial institution.
“With CABEI’s assistance, NIB expands the geography of its lending and reaches out even to countries where it has no agreement on financial cooperation,” says Mr Mortensen.
The other loan programmes in this region, totalling USD 60 million each, have been recently signed with the Brazilian banks, Banco Itaú BBA S.A. and Banco Nacional de Desenvolvimento Economico e Social (BNDES).
“This is already the third loan programme to BNDES. The Brazilian partners help us allocate financing to projects that are compliant with NIB’s mandate and which best serve the local economy,” Mr Mortensen continues.
A multicurrency loan programme in an amount equivalent to EUR 100 million has been provided to Russia’s state-owned bank VTB for onlending to projects within the sectors of energy efficiency, transport and logistics in Northwest Russia, a region bordering NIB’s member countries.
Another facility in the region of Central and Eastern Europe has been agreed with the Bulgarian Development Bank. The credit line, totalling EUR 20 million, is being used for onlending to projects dealing mainly with the production of renewable energy.
Two earmarked loan facilities totalling EUR 60 million have been placed with South African Nedbank Limited. Sub-projects to be financed include financing low-emission city busses, wastewater treatment projects, as well as investments in a nationwide modernisation and expansion of mobile telecom networks.
“We believe that clean technologies and well-functioning broadband services are an important pre-requisite for further economic development in South Africa, a driver for the whole continent. Another important benefit of the projects financed in cooperation with Nedbank is that they will increase energy efficiency,” concludes Mr Mortensen.
May 2011