Flexible financing solutions increasingly important in export trade

International recognition to Finnvera for financing the world’s largest biomass-fired power plant

The arrangement of financing plays an increasingly important role in export trade negotiations, and this trend has gained strength in recent years. The more difficult and the more international the market an enterprise strives to enter, the more probable it is that the buyer sees financing as an edge in competition. The financing solution tailored for the world’s largest biomass-fired power plant, to be constructed in England, brought Finnvera the international Deal of the Year award. Flexible and innovative financing models were also commended by an international team of consultants that assessed Finnvera’s export financing.

According to the assessment commissioned by the Ministry of Economic Affairs and Employment, the export financing system implemented by Finnvera in Finland is of a high standard. The international team of consultants considered that Finnvera’s management of risks and responsibilities is at an excellent level in international comparison. Finnvera manages risks both through careful analysis when granting credits and by constantly monitoring the exposure situation. Finnvera has acted in an innovative manner and, in response to demand, has introduced new products and service processes to the market.

The assessment report published in March points out that, owing to the structure of Finnish industry, exports are strongly concentrated in a few sectors. This underlines the importance of Finnvera’s risk management system. Moreover, individual export transactions, such as orders for cruise vessels, may be very large.

The key task is to support the Finnish exporter’s competitiveness

A good example of a flexible financing solution tailored to local conditions is the project where Finnvera provided buyer credit financing for the design and delivery of a boiler plant by the Finnish company Amec Foster Wheeler Energia Oy for the world’s largest biomass-fired power plant in Middlesbrough, England.

Construction of the power plant is in progress, and the plant is scheduled to begin commercial operation at the start of 2020. The 299 MW power plant will be fuelled by wood pellets and chips. Construction of the power plant is estimated to cost approximately GBP 650 million (about EUR 750 million). Finnvera’s share of the financing is roughly GBP 100 million (about EUR 115 million).

The financing of biomass-fired power plants is challenging in England. One reason for this is the new type of business model. In this model, the proceeds from the plant are based on the CfD feed-in tariff used for renewable energy in the UK. The supply of fuel rests on long-term agreements. Long credit periods are another challenge for financing. The special needs associated with the project were taken into account in the financing solution of the MGT Teesside project, and the export credit agency played a pivotal role in the provision of supplementary financing.

- The export credit is financed by Pension Insurance Corporation of the UK, and the credit risk associated with the power plant company is guaranteed by Finnvera. This is not a typical arrangement in a situation where an export credit agency is involved, but thanks to the solution, agreement on the power plant project was reached. We are very proud that this financing project brought Finnvera the Deal of the Year award at the international Trade Finance Awards event. It is especially important for us to support the success and competitiveness of Finnish exporters on international markets, says Executive Vice President Jussi Haarasilta of Finnvera.

For more information: Finnvera to provide financing for a large biomass plant in the UK

An international assessment report gives Finnvera a good grade

• Late in 2016, the Ministry of Economic Affairs and Employment commissioned a study on the responsibilities, risks and impacts involved in export financing.  The assessment was made by an international team of consultants that has solid experience of export financing. Represented on the team were two consulting firms – Antitrust&TradeRx GmbH (ATRx) and International Financial Consulting Ltd. (IFCL) – and Northumbria University.