A boom in the cruise ship building industry that is providing lots of work to the shipbuilding cluster in Finland is driving the demand for export credit, according to the country’s export credit agency Finnvera.
The Finnish parliament raised Finnvera’a authorisation to issue export credit guarantees to €38 billion last year from a previous ceiling of €27 billion and export credits to €33 billion from €22 billion.
“The fact that our authorisation to grant export credit guarantees was raised to €38 billion was a very significant development. This figure is extremely high, and it results from the exceptional wave of investments in cruise shipping. The order book extends a long way into the future, and to ensure the completion of these orders together with Finnish shipyards and to serve also other sectors and SMEs at the same time, we need these authorisations,” Finnvera’s CEO Pauli Heikkilä said in a statement.
The wave of investments in cruise shipping could be seen in Finnvera’s export financing In 2019, export financing increased year on year, and Finnvera granted the following financing for large corporates’ export transactions: €5.2 billion (up from €3.0 billion in the previous year) in export credit guarantees and special guarantees and €2.5 billion (€2.2 billion) in export credits.
“The realisation and timing of individual major export transactions have an impact on the amount of financing granted. As a result, the annual variation is typically large. As in the previous years, financing focused especially on cruise shipping, telecommunications, and pulp and paper, and demand for new export credit guarantees and export credits remained high,” Finnvera said.
Demand for buyer credit guarantees reflects the structure of Finnish exports and the fact that the financing of capital goods exports requires long payment periods and long-term credits to the export company’s foreign buyer. The international wave of investments in cruise shipping could be seen in projects guaranteed by Finnvera.
In December 2019, Finnvera signed one of the largest financing agreements in its history, more than EUR 1.2 billion, with Royal Caribbean Cruises. The agreement is associated with a cruise ship to be delivered in 2025.
Finnvera’s exposure related to export credit guarantees and special guarantees granted to large corporates for export transactions was €25.2 billion at the end of 2019 (€23.3 billion). Drawn guarantees accounted for approximately €11.1 billion (€10.0 billion) of the exposure.
“In other words, more than half of the exposure was related to binding financing offers or agreements that are related to future deliveries by export companies, and thus they do not yet create any credit risks for Finnvera,” the organisation concluded.
