Finnvera Investor Presentation Finland s Export Credit and SME Financing Agency October 2017
Disclaimer IMPORTANT: YOU ARE ADVISED TO READ THE FOLLOWING CAREFULLY BEFORE READING, ACCESSING OR MAKING ANY OTHER USE OF THE MATERIALS THAT FOLLOW. These materials have been prepared by and are the sole responsibility of Finnvera (the Issuer ) and have not been verified, approved or endorsed by any lead manager, bookrunner or underwriter retained by the Issuer. No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained herein. These materials are provided for information purposes only and do not constitute, or form part of, any offer or invitation to underwrite, subscribe for or otherwise acquire or dispose of, or any solicitation of any offer to underwrite, subscribe for or otherwise acquire or dispose of, any debt or other securities of the Issuer ( securities ) and are not intended to provide the basis for any credit or any other third party evaluation of securities. These materials should not be considered as a recommendation that any investor should subscribe for or purchase any securities. If any such offer or invitation is made, it will be done pursuant to separate and distinct documentation in the form of a prospectus, offering circular or other equivalent document (a "prospectus") and any decision to purchase or subscribe for any securities pursuant to such offer or invitation should be made solely on the basis of such prospectus and not these materials. These materials may not be relied upon for the entering into of any transaction. In particular, investors should pay special attention to any sections of the final prospectus describing any risk factors. The merits or suitability of any securities or any transaction described in these materials to a particular person s situation should be independently determined by such person. Any such determination should involve, inter alia, an assessment of the legal, tax, accounting, regulatory, financial, credit and other related aspects of the securities or such transaction. These materials may contain projections and forward looking statements. Any such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the Issuer s actual performance or achievements to be materially different from any future performance or achievements expressed or implied by such forward-looking statements. Any such forward-looking statements will be based on numerous assumptions regarding the Issuer s present and future strategies and the environment in which the Issuer will operate in the future. 2
Disclaimer (cont.) Further, any forward-looking statements will be based upon assumptions of future events which may not prove to be accurate. Any such forward-looking statements in these materials will speak only as at the date of these materials and the Issuer assumes no obligation to update or provide any additional information in relation to such forwardlooking statements. These materials are confidential, are being made available to selected recipients only and are solely for the information of such recipients. These materials must not be reproduced, redistributed or passed on to any other person or published, in whole or in part, for any purpose without the prior written consent of the Issuer. These materials are not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. In particular, these materials are for distribution in the United Kingdom only to persons who meet the following criteria: 1. (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order ) or (ii) persons falling within Article 49(2)(a) to (d) ( high net worth companies, unincorporated associations etc ) of the Order or 2. persons to whom these materials may otherwise be directed without contravention of section 21 of the Financial Services and Markets Act 2000 (all such persons being referred to as relevant persons ). These materials must not be acted or relied on by persons who are not relevant persons. In member states of the European Economic Area, these materials are only directed at persons who are qualified investors within the meaning of Article 2(1)(e) of Directive 2003/71/EC. These materials are only being provided to persons outside the United States in connection with offshore transactions in reliance on Regulation S under the US Securities Act of 1933 (the "US Securities Act"). By accepting delivery of this presentation the recipient warrants and acknowledges that it falls within the category of persons referred to above. These materials and the information contained herein do not constitute and should not be construed as an offer to sell or solicitation of an offer to buy securities in the United States. The securities proposed to be offered have not been, and will not be, registered under the US Securities Act and may not be offered or sold within the United States, its territories or possessions. Such securities may be offered and sold outside the United States in connection with offshore transactions in reliance on Regulation S. 3
Contents Finnvera in Brief Business Review Funding Appendices Contact Details 4
Finnvera in Brief 5
Finnvera s Role Finnvera promotes the exports and internationalisation of enterprises and the SME sector Finnvera supplements the financial services provided by the private sector Finnvera is: The official Export Credit Agency (ECA) of Finland The State-backed financier of Finland s SME sector Finnvera s clients are Finnish microenterprises and SMEs operating on the Finnish market or seeking growth through internationalisation. Our clients also include large Finnish corporations engaged in the export trade, their foreign customers, and domestic and foreign banks providing financing for exports. 6
Finnvera Group in Brief June 30, 2017 Specialised financing company owned 100% by the Republic of Finland Debt obligations explicitly guaranteed by the Republic of Finland Rating of debt obligations the same as Finland s Aa1 by Moody s and AA+ by Standard & Poor s Credit and Guarantee Exposure (EUR billion) Large corporates SMEs and midcaps 2.6 22.0 0,0 5,0 10,0 15,0 20,0 25,0 CLIENTS 27 800 TOTAL ASSETS EUR 10.0 billion 7
Finnish State s Commitment Debt obligations are explicitly guaranteed by the Republic of Finland Finnvera s guarantee scheme operates under the full faith and credit of the Republic of Finland No dividend payments by law The parent company is not liable to pay income tax The State compensates Finnvera for part of the credit and guarantee losses incurred in SME and midcap financing EUR 3 billion statutory back-up credit authorisation from the State 8
Accumulated buffers EUR 1.8 billion Finnvera s obligations stemming from guarantees issued are restricted to the amount carried in reserves (retained earnings) on its balance sheet The State Guarantee Fund acts as an additional buffer for Export Credit Guarantee operations The fund is administered by the Government and is not part of Finnvera The State assumes responsibility for guarantee losses exceeding the reserves on Finnvera s balance sheet and the State Guarantee Fund June 30, 2017 Large Corporates Retained earnings EUR 688 million State Guarantee Fund EUR 669 million SMEs and midcaps Retained earnings EUR 214 million Restricted equity EUR 247 million 9
Business Review 10
Large Corporates Finnvera s export credit guarantees provide Finnish exporters and financiers with solutions covering export risk Aside from State-backed export credit guarantees, ECA financing also includes "special" guarantees, e.g. ship guarantees, environmental guarantees and investment insurance Finnvera provides export credits through its subsidiary, Finnish Export Credit Ltd In 2016, Finnvera s export credit guarantees covered 4.4% of Finland s total exports Losses in export credit guarantee and special guarantee operations have been minor, 0.36% of total exposure in 2016 Exposure (EUR billion) June 30, 2017 24 20 16 12 8 4 0 Outstanding guarantees Offers for guarantees Outstanding export credits Credits and commitments 2013 2014 2015 2016 06/2017 11
Large Corporates Geographic Exposure (EUR million) June 30, 2017 Sector Exposure June 30, 2017 11 000 10 000 9 000 7% 4% 1% 8 000 7 000 6 000 5 000 4 000 Offers Outstanding 12% 21% EUR 22 billion 56% 3 000 2 000 1 000 Cruise ships, ferries and specialised vessels 0 Telecommunications Forest industry Other Energy industry Mining and metals 12
SME and Midcap Financing As part of the mandate received from the State, Finnvera promotes the Finnish SME sector Focus on start-ups and growth companies Exposure (EUR billion) June 30, 2017 3,5 3,0 Guarantees Loans and receivables Credit and guarantee losses in SME and midcap financing annually amount to about 2 4% of total exposure The State compensates part of Finnvera s losses from domestic operations so that Finnvera can take greater risks than those taken by commercial financial institutions 2,5 2,0 1,5 1,0 0,5 0,0 2013 2014 2015 2016 6/2017 13
Credit Exposure and Risk Classification Risk Category December 31, 2016 Export credit guarantees* Domestic loans and guarantees 10% 1% 15% 20% 2% 3% 3% 13% Customers are classified into eight risk categories 16% 58% 59% A1-A3 B1 B2 B3 C D Non classified The classification is based on Finnvera s scoring model using long term observation of insolvency events for each risk category * Excluding sovereign exposure 14
Funding 15
Funding Finnvera Group debt June 30, 2017 (EUR billion) 9 8 7 6 5 4 3 2 1 Other debt Loans from the State State-guaranteed debt Finnvera s balance sheet has grown significantly since 2009 when Finnvera started to provide funding for export credit transactions through its subsidiary Finnish Export Credit Ltd The amount of borrowing is mainly driven by new lending commitments 0 16
Funding State Guaranteed debt (Finnvera plc) June 30, 2017 (EUR billion) 16 14 12 10 8 6 4 2 0 State-guarantee authority EMTN program size Outstanding State-guaranteed debt Since 2012 Finnvera has obtained funding mainly by issuing debt under a Stateguaranteed EMTN program The EMTN program size increased to EUR 11 billion in April 2017 The maximum amount of Finnvera s debt obligations that may be guaranteed by the Republic of Finland is currently EUR 15 billion Debt issued under the EMTN program represents 72% of Finnvera Group debt 17
Funding Maturity of debt, Finnvera plc September 30, 2017 (EUR million) 1 200 1 000 800 600 400 200 0 The amount expected to be borrowed is EUR 1-2 billion per year Finnvera strives to match the maturity of its liabilities with the maturity of assets, with a current preferred maturity of 10-15 years in EUR supplemented by shorter term interest in USD EUR debt eligible for the Eurosystem s Public Sector Purchase Programme (PSPP) Other debt Debt issued under MTN program 18
Funding Guaranteed debt by currency Finnvera plc September 30, 2017 USD 31 % SEK 8 % EUR 6.8 billion EUR 61 % Recent State Guaranteed debt issued by Finnvera plc Issue date Ccy Amount outstanding Maturity Dealers Sep 2017 USD 1 000 000 000 Oct 2020 CACIB, Citi, HSBC, Nordea May 2017, June & Aug 2017 tap Dec 2016, Jan 2017 tap EUR 1 000 000 000 May 2032 Citi, CACIB, DB, GS SEK 3 500 000 000 Dec 2028 Danske, Nordea Apr 2016 EUR 1 000 000 000 Apr 2026 Citi, CACIB, Danske, HSBC Sep 2015 EUR 1 000 000 000 Sep 2022 CACIB, Danske, DB, Nordea Debt swapped into floating rate EUR or USD to match the currency and interest rate basis of assets May 2015 USD 500 000 000 June 2025 Citi, DB, HSBC 19
Appendices 20
Finland An Export Oriented Economy A Nordic country rated Aa1 (stable outlook) by Moody s, AA+ (stable outlook) by Standard & Poor s and AA+ (stable outlook) by Fitch Ratings Almost 40 percent of Finland s economy is based on foreign trade Exports by Regions Jan Mar 2017 Finland - Main Economic Indicators Finland 8% 6% Euro zone 39% Other EU countries 12% Asia Rest of Europe 15% North America Other countries 21% GDP at market prices, change in volume, % General government net lending, % of GDP General government gross debt, % of GDP 2016 2017 F 2018 F 2019 F 1.9 2.9 2.1 1.8-1.8-1.2-1.4-1.0 63.1 62.5 61.9 61.1 Source: Finnish Customs Source: Ministry of Finance: Economic Survey, Autumn 2017 21
Finnvera - Key Figures H1/2017 2016 2015 2014 2013 Finnvera Group Net interest income and net fee and commission income, EUR million 89.6 194.2 197.3 188.8 189.8 Profit for the period, EUR million 56.9 70.2 111.2 99.9 74.5 Total assets, EUR million 9,986 9,498 8,418 6,619 4,604 Tier 1 capital ratio, domestic operations, % 23.1 22.4 19.2 17.7 15.7 Expense-income ratio, % 25.4 27.0 28.3 25.9 27.0 Shareholders equity, EUR million 1,264 1,207 1,121 1,009 849 - of which non-restricted reserves, EUR million 1,012 955 871 756 595 Personnel at the end of period 403 381 396 394 399 SMEs and midcaps Loans, guarantees and export credit guarantees offered, EUR billion 0.6 1.0 1.1 1.0 0.8 Outstanding exposure, EUR billion 2.6 2.6 2.7 2.8 3.0 - Loans and receivables, EUR billion 1.1 1.2 1.3 1.4 1.6 - Guarantees, EUR billion 1.5 1.4 1.5 1.4 1.4 Large Corporates Export credit guarantees and special guarantees offered, EUR billion 6.2 4.2 6.6 5.0 3.3 Outstanding exposure, EUR billion 22.0 18.1 17.0 12.2 10.7 - of which funded by Finnish Export Credit Ltd, EUR billion 9.2 8.5 8.8 5.9 4.3 Finnvera plc, clients 27,800 27,700 28,400 28,800 29,700 22
Environmental and Social Responsibility In export financing, the environmental and social impacts of projects to be guaranteed are considered as part of the overall risk assessment Finnvera s policy for reviewing the environmental and social impacts of projects is based on the OECD Common Approaches recommendation for environmental and social due diligence Finnvera is focusing increasingly on promoting environmental protection, climate change mitigation and green energy transactions 23
Organisational Structure Finnvera falls under the administrative purview of the Ministry of Economic Affairs and Employment The purpose and activities of Finnvera are defined in the Act on the State-Owned Specialised Financing Company (443/1998) The Supervisory Board of Finnvera consists of Members of Parliament (10 members) and stakeholder representatives (8 members) The Board of Directors consists of seven non-executive board professionals 24
Organization Credit & Analysis Deputy CEO Topi Vesteri Venture Capital Investments Managing Director Leo Houtsonen Supervisory Board Board of Directors Chairman Pentti Hakkarainen CEO Pauli Heikkilä Risk and Quality Management Chief Risk Officer Merja Välimäki Legal Affairs and Administration Senior Vice President Risto Huopaniemi Finance and IT Senior Vice President, CFO Ulla Hagman Communications and HR Senior Vice President Tarja Svartström SMEs Executive Vice President Katja Keitaanniemi Large Corporates Executive Vice President Jussi Haarasilta Regional network Finnish Export Credit Ltd 25
Contact Details Senior Management Contacts Mr. Pauli Heikkilä Chief Executive Officer Tel +358 29 460 2400 Ms. Ulla Hagman Senior Vice President / CFO Tel. +358 29 460 2458 Funding Contacts Mr. Mikael Nordgren Vice President, Head of Treasury Tel +358 29 460 2467 Mr. Jari Kautto Senior Manager, Treasury Tel +358 29 460 2697 Please visit www.finnvera.fi/eng for Annual and Interim Reports and news. 26
Thank you! Finnvera and its subsidiary Finnish Export Credit are the official ECAs of Finland. We offer export financing solutions and export credit guarantees backed by the full faith and credit of the Republic of Finland in a flexible yet responsible manner. For more information please see www.finnvera.fi.