Report Q1 218 Export Credit Norway
Q1 218 High market activity increased application inflow In the first quarter of the year, Export Credit Norway received 99 financing representing a total application volume of NOK 73.4 billion. This represents a substantial increase in the company s application inflow, in terms of both application numbers and volume, compared to previous quarters. Almost 5% of the came from small and medium-sized enterprises (s*). Marketing activity Export Credit Norway engaged in extensive marketing activities in the past quarter. In February, a joint event the Norwegian Energy Day was held in Houston in collaboration with NORWEP and GIEK. In addition, customer meetings were held in connection with the company s attendance at conferences in Amsterdam, London, Washington DC, Miami and Cape Town, among other locations. Company representatives also participated in official trade delegation visits to both Ghana and Argentina. In Norway, the company s export financing products and services were showcased at various seminars and conferences, including in Brattvåg, Bergen and Molde. A recovering Norwegian economy In March, Statistics Norway presented its annual economic prospects report. The report s main conclusion was that the Norwegian economy is recovering. Growth is forecast to continue at a steady but moderate pace. Stable oil prices above USD 6 per barrel are expected to drive higher petroleum investment, but the Norwegian krone is forecast to remain at historically low levels, albeit with some potential for appreciation going forward. According to the Federation of Norwegian Industries economic outlook report**, all indicators are positive. Growth has accelerated in the international economy, particularly among Norway s primary trade partners. Positive international conditions are driving growth in the Norwegian export sector, but there are also risk factors. Foremost among these is the threat of higher customs tariffs. Industrial companies are forecasting moderate growth in 218, primarily due to widespread, ongoing restructuring among Norwegian industrial companies, particularly those who suffered a decline in orders in response to lower oil prices. Preliminary figures from Statistics Norway show positive developments in the mainland export sector in 218, with exports rising 7.2% in Q1 218. New ship financing scheme Export Credit Norway is now accepting and processing under its new ship financing scheme. The scheme allows the company to finance vessel purchases by Norwegian buyers, also when the vessels are built at Norwegian shipyards and intended for use in Norwegian waters. The scheme is due to be approved by the Storting before the summer, and is likely to become operational from 1 July 218. Thus far, the scheme has been well-received by the market, with strong interest being shown in it. 216 Administered loans 44 Different jurisdictions in which Export Credit Norway has contractual experience * Export Credit Norway uses the EU definition of an : a business with fewer than 25 employees and less than EUR 5 million in turnover. 2 ** The Federation of Norwegian Industries prepares an annual economic outlook report. The report presents the expectations of industrial companies in Norway regarding developments in the year ahead.
Q1 218 Applications, portfolio and probability-adjusted order book Applications Export Credit Norway received 99 financing in Q1 218, representing a total application volume of NOK 73.4 billion. In terms of both application numbers and volume, the application inflow in the first quarter was significantly higher than in the same period last year, and compared to the preceding quarter. It will be interesting to see whether the positive trend observed in Q1 218 continues going forward. The increase in the first-quarter application volume is primarily due to an increase in the number of linked to passenger and trade vessels (Q1 218: NOK 18.3 billion; Q1 217: NOK 2.6 billion) and renewable energy (Q1 218: NOK.3 billion; Q1 217: NOK 1. billion). The figure on the bottom left-hand side of the page shows developments in the application volume over time. number of 215 216 217 Q1 217 Q1 218 Loan received (number) 275 278 241 65 99 Value of loan (NOK billion) 12.1 29.1 124.4 48.3 73.4 New loan agreements signed New loan agreements totalling NOK 1.1 billion were signed in the first quarter. The total for the corresponding period last year was NOK 1.9 billion. These agreements are due to be disbursed over the next few years. The value of newly signed agreements has remained fairly stable over the past three years. The new agreements signed in Q1 related to industry and renewable energy (29%) and ocean industries* (71%). Signed agreements 215 216 217 Q1 217 Q1 218 Value (NOK billion) 9.4 11.3 9.8 1.9 1.1 Probability-adjusted order book Export Credit Norway calculates a best estimate of future loan disbursements based on the loan it has received. As at 31 March 218, the company s probability-adjusted order book totalled NOK 16.3 billion, split between industry and renewable energy (6%) and ocean industries (94%). Further segment information is provided in the remainder of the report. Application volume by quarter (NOK billion) Probability-adjusted order book by quarter (NOK billion) 8 7 6 5 4 3 2 73,4 48,3 29,7 22,3 24,2 Q1 217 Q2 217 Q3 217 Q4 217 Q1 218 18 16 14 12 8 6 4 2 15,5 14,9 14,8 16,6 16,3 Q1 217 Q2 217 Q3 217 Q4 217 Q1 218 * See page five for a detailed description of the segments included in the ocean industries category. 3
New disbursements In the first quarter, Export Credit Norway disbursed NOK 322 million in new loans, 66% of which went to industry and renewable energy projects. One of the disbursed loans represented the company s first completed transaction in China. In comparison, the new-loan disbursement volume for Q1 217 was NOK 1.89 billion. Disbursements over time (NOK million) 2 1 89 15 884 5 546 97 322 Q1 217 Q2 217 Q3 217 Q4 217 Q1 218 Lending balance The lending balance amounted to NOK 65.9 billion as at 31 March 218, compared to NOK 75.8 billion at the end of the corresponding period last year. Exchange rate movements reduced the total balance by approximately NOK 2.5 billion during the quarter. The industry distribution of the lending balance, which has remained relatively stable over time, was as follows at the end of Q1: industry and renewable energy: 3%; ocean industries: 97%. Lending balance by quarter (NOK billion) 8 7 75,8 73,1 6 69,2 69,4 65,9 5 4 3 2 Q1 217 Q2 217 Q3 217 Q4 217 Q1 218 Guarantors As at 31 March 218, 73% of Export Credit Norway s lending portfolio was guaranteed by GIEK. The remaining 27% of the portfolio was guaranteed by Norwegian banks (14%) and foreign banks (13%). This distribution has remained fairly constant, including throughout 217. Guarantors as at 31 March 218 (%) 13% 14% 73% GIEK Norwegian banks Foreign banks 4
Developments, activities and the portfolio Ocean industries The ocean industries portfolio comprises transactions involving oil and gas equipment, offshore support vessels and ship equipment, passenger vessels, merchant shipping as well as fisheries and aquaculture. The new ship financing scheme* is also included in the ocean industries category. Applications In the first quarter, Export Credit Norway received 67, representing a combined application volume of NOK 55.2 billion, linked to financing for ocean industries. This represents a positive increase in both the number and the value of compared to Q1 217. The increase in the number of is primarily due to an increase in related to passenger vessels and merchant shipping, and vessels and equipment for fisheries and aquaculture. The primary driver of the application volume is linked to passenger vessels and merchant shipping. Portfolio The ocean industries category accounted for 97% of Export Credit Norway s lending portfolio at quarter-end. The diagram on the next page provides a further breakdown of the portfolio by sub-segment. Financing for offshore ships and oil and gas equipment currently makes up the majority of the lending volume. NOK 9 million in loans was disbursed to ocean industries in the first quarter. This equates to 34% of the company s first-quarter disbursement volume. 7 65 6 55 5 45 4 35 3 25 2 15 5 Application volume by industry and quarter (NOK billion) Utvikling antall søknader per bransje per kvartal Fisheries and aquaculture Passenger vessels and merchant shipping Offshore support vessels Equipment for oil & gas 6 8 2 24 9 13 12 9 8 17 18 12 2 22 5 2 Q1 217 Q2 217 Q3 217 Q4 217 Q1 218 16 Application volume by industry and quarter (NOK billion) 6 55 5 45 4 35 3 25 2 15 5 2,3 2,6 1,2 34, 1,1 4,6 4,3 18,4 2,3 7,7 4,6,7 3,2 2, 8,4 7, 2,8 18,3 1,9 32,1 Q1 217 Q2 217 Q3 217 Q4 217 Q1 218 Lending balance by segment and quarter (NOK billion) Disbursements by segment and quarter (NOK million) 8 7 6 5 4 3 2,8,8 1,8,8 1,8 1, 1,7 1, 1,8 1,7 48,3 46,8 45, 44,2 42,2 23,8 22,6 2,8 2,7 19,2 Q1 217 Q2 217 Q3 217 Q4 217 Q1 218 2 18 16 14 12 8 6 4 2 238 Fisheries and aquaculture Passenger vessels and merchant shipping Offshore support vessels 748 Equipment for oil and gas 875 524 246 31 64 69 59 14 Q1 217 Q2 217 Q3 217 Q4 217 Q1 218 5
Developments, activities and the portfolio Ocean industries cont. Market developments Order inflow Norwegian shipyards In total, Norwegian shipyards secured 17 contracts valued at NOK 4.4 billion* in the first quarter of 218. This represents a 15% increase in value on the same period last year. Order inflow varies greatly from yard to yard, and several yards still face profitability challenges. The average contract size has declined somewhat since 216, reflecting an increase in the number of ordered vessels related to fisheries, aquaculture and both car- and passenger ferries. Orders for cruise ships, on the other hand, have boosted the average contract size. Even though the first cruise ship to be constructed in Norway has not yet been delivered, the importance of this market segment has grown for Norwegian shipyards. Equipment for oil and gas Activity in the oil and gas segment was high in the first quarter. Increased oil prices are generating optimism, and the Norwegian continental shelf continues to provide profitable projects. The quarter was also marked by a rise in international activity levels. Demand for Export Credit Norway s products has traditionally been linked to production units like FPSOs and FSRUs, but now also includes field development equipment such as subsea installations and different platform/production solutions. Offshore support vessels The market for offshore support vessels and equipment remains challenging. Many vessels are currently laid up, while others are docked pending completion. Norwegian shipyards have concluded few offshore/supply-related contracts since June 215. Passenger vessels and merchant shipping Within the passenger vessel and merchant shipping market, the cruise ship segment is showing signs of increased activity. Internationally, official requirements are boosting demand for new environmental technologies (scrubbers, ballast water treatment). Export Credit Norway s probability adjusted order book linked to this segment is dominated by cruise ships, and accounted for more than half of the order book as at 31 March 218. Fisheries and aquaculture Fisheries and aquaculture are characterised by relatively robust activity levels, particularly in the fishing vessel segment. New ship financing scheme By 31 March 218, Export Credit Norway had received 12 under the new ship financing scheme. Most of the relate to fishing vessels. Applications are being processed subject to the proviso that the proposed changes in the legislation applicable to Export Credit Norway come into force as proposed during the public consultation on the scheme.** Ocean Industries lending balance by sub-segment as at 31 March 218 (%) 64, % 3, % * Source: Norwegian shipyards ** https://www.regjeringen.no/no/dokumenter/horing-eksportkredittlov-og-forskrift/id25788/ s in tables and figures may differ due to rounding 3, % Equipment oil and gas 64, % Offshore support vessels 1,9 % Offshore equipment for vessels 1,1 % Passenger vessels and merchant shipping 1,7 % Equipment for passenger vessels and merchant shipping 1,1 % Vessels for fisheries and wellboats,2 % Equipment for fisheries and wellboats,2 % Fish farming 6
Developments, activities and the portfolio Industry and renewable energy Applications In the first quarter, Export Credit Norway received 32, representing a total application volume of NOK 18.2 billion, linked to industry and renewable energy. In terms of volume, the received in the quarter represent the highest ever total for the industry and renewable energy segment. The subject matter of received varies greatly. Portfolio The industry and renewable energy segment accounted for 3% of Export Credit Norway s total lending portfolio at quarter-end. The portfolio is complex and diverse, and is dominated by small and medium-sized loans compared to the rest of the company s lending portfolio. The diagram at the bottom right of the page provides a further breakdown of the portfolio by sub-segment. Financing for equipment related to offshore wind energy, solar energy, water and sanitation and the defence industry makes up the majority of the lending volume. In the first quarter of 218, the company disbursed NOK 213 million in loans related to industry and renewable energy projects. This equates to 66% of the company s total Q1 218 disbursement volume. 4 Number of by quarter Application volume by quarter (NOK billion) 2 3 2 13 4 3 1 4 18 16 12 17 19 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 15 5,3 1, 7,1,2,1 1,1 2,9,1 7,3 7,9 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Industry Renewable energy Industry Renewable energy Disbursements by quarter (NOK million) 8 Lending balance by quarter (NOK billion) 2, 6 4 2 579 3 22 28 14 73 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 1,5 1,,5,,7,8,7,7,7,3,4,4,9 1, Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Industry Renewable energy Industry Renewable energy Market developments Lending balance by sub-segment as at 31 March 218 (%) Mainland industry segments have generally achieved moderate export growth, driven not least by an ongoing low krone exchange rate. This trend is expected to continue, albeit with some variation between the various industry segments. 5% 4% 3% Wind energy 23% Solar energy % Defence Water and sanitation Energy and power 15% 21% ICT Infrastructure 19% Other industries 7
Small and medium-sized enterprises (s) Higher demand for sales support Most of the exporters who ask Export Credit Norway for sales support in their export-focused customer initiatives are s. More than 99% of all Norwegian businesses and more than 9% of Norwegian exporters are s. Helping these businesses to expand abroad will remain a priority going forward. Applications In the first quarter of 218, some 47% of the 99 financing received by the company came from s. s accounted for 16% of the first-quarter application volume. Portfolio The customer segments in the category are fragmented, and developmental trends are therefore less clear. Unfortunately, the services currently on offer (long-term financing of capital goods and services to end customers) are not optimally matched with the needs of enough businesses in each customer segment. This is largely due to Norway s industrial structure, as most exporters act as sub-suppliers of components and services in national and international value chains. The portfolio is diverse, and includes suppliers operating in the ICT, maritime and aquaculture industries, as well other equipment suppliers. s accounted for 2% of the total lending portfolio as at 31 March 218. share (number) of by quarter Ocean industries Industry and renewable energy 99 8 6 4 2 65 22 43 27 16 11 62 19 43 25 16 9 45 13 32 25 15 69 21 48 28 12 16 32 67 Q1 217 Q2 217 Q3 217 Q4 217 Q1 218 47 28 19 SMB share of application volume by quarter (NOK billion) 8 7 6 5 4 3 2 Oceans industry 48,3 8,2 4,1 6,4 5,8,6 Industry and renewable energy 29,7 1,2 28,4 1,5 1,1,5 22,3 3,1 19,2 4,6 2,7 1,8 24,2 7,4 16,8 3,8 3,2,5 73,4 18,3 55,2 Q1 217 Q2 217 Q3 217 Q4 217 Q1 218 11,4 9,2 2,2 8
Environmental technology Strong order inflow in the environmental technology segment Applications In the first quarter, Export Credit Norway received 2 financing linked to environmental technology and renewable energy, accounting for 14% of the total first-quarter application volume. In terms of both application numbers and value, this represents an improvement on previous quarters. The increase in the number of is primarily attributable to an increase in related to hydropower and solar energy projects. The main driver of the volume increase is related to wind energy. Applications related to environmental technology and renewable energy by quarter (NOK million/number) MILL NOK 11 9 8 7 6 5 4 3 2 1 32 2 12 7 5 5 1 518 1 45 76 199 144 224 257 119 118 151 37 Q1 217 Q2 217 Q3 217 Q4 217 Q1 218 Number 22 2 18 16 14 12 8 6 4 2 Clean technologies within the martime industries Other clean techologies Renewable energy Number of Segment distribution Environmental technology for the maritime sector Environmental technology for the oil and gas industry Environmental technology for offshore-related ships Environmental technology for passenger and trade vessels Environmental technology for fishing and wellboats Renewable energy Hydropower Wind energy Solar energy Other renewable energy 9
Q1 218 Export destinations From Norway According to a survey conducted by Menon*, although Norway s exporters are spread across the entire country, three of Norway s five largest exporting counties are found in western Norway. Exports from counties on Norway s west coast also make up a significant proportion of Export Credit Norway s portfolio (62% as at 31 March 218). Møre og Romsdal and Vest-Agder are the two largest exporting counties in the portfolio, accounting for some 83% of the company s portfolio as at the end of Q1 218. Exports financed by Export Credit Norway by county (NOK) To the world Although Export Credit Norway s portfolio includes loans linked to projects in numerous countries, the majority of transactions involve exports to Europe. As at 31 March 218, 85% of the lending balance related to exports to OECD countries, and the remaining 15% exports to non-oecd countries. The picture is very similar for the SMB part of the portfolio, although the proportion of exports to non-oecd countries is somewhat higher. Distribution of project countries in the lending balance as at 31 March 218 (%) 15% OECD countries Non-OECD countries 85% Exports by region, project countries* as at 31 March 218 (%) Distribution of SMB project countries in the lending balance as at 31 March 218 (%) 2 % 11 % 3 % 3 % Asia Europe 23 % North-America South and Central America OECD coutries Non-OECD countries Afrika 81 % 77 % * Menon publication no. 9/215: Exports from Norwegian regions
KEY PORTFOLIO FIGURES 215 216 217 Q1 217 Q1 218 Lending balance* (NOK million) 76,499 76,55 69,359 75,811 65,919 CIRR 45,264 46,749 43,53 46,862 41,386 Market loans 31,234 29,756 25,856 28,949 24,532 Disbursements (new loans, NOK million) 18,1,76 3,418 1,891 322 CIRR 9,111 6,138 2,677 326 137 Market loans 8,891 3,938 741 1,564 185 Probability-adjusted order book (NOK million) 21,254 17,198 16,674 15,54 16,271 Ocean industries 2,114 15,126 3,214 13,49 15,244 Industry and reneable energy 1,14 2,72 1,455 2,14 1,27 Gross interest income (NOK million) 1,557 1,711 1,744 364 368 Instalments (NOK million) 8,498 8,922 7,174 2,23 1,236 Early loan redemptions (NOK million) 2,389 1,981 1,174 44 13.3 Administrative costs*.13%.14%.15%.4%.4% Applications Number (total and by segment) 275 278 241 65 99 Oil and gas equipment 48 8 42 18 22 Offshore ships 53 22 27 9 Passenger and trade vessels 23 4 47 9 2 Fisheries and aquaculture 53 36 5 6 16 Industry and renewable energy 98 75 22 32 Volume (total and by segment, NOK million) 12,88 29,143 124,418 48,287 73,48 Oil and gas equipment 5,7 159,951 67,78 33,999 32,139 Offshore ships 22,383 4,529 8,3 1,154 1,96 Passenger and trade vessels 11,296 25,98 18,24 2,637 18,341 Fisheries and aquaculture 7,25 4,74,445 2,345 2,767 Industry and renewable energy 28,684 14,825 19,886 8,152 18,255 New contracts (NOK billion) 9.4 11.3 9.8 1.9 1.1 Guarantors (% of portfolio) GIEK 74% 74% 73% 74% 73% Norwegian banks 14% 13% 14% 14% 14% Foreign banks 13% 12% 13% 13% 13% * Balance at quarter-end. s in tables and figures may vary due to rounding. All figures in NOK are based on the exchange rate at the close of business at month-end/year-end, subject to two exceptions: interest income is stated according to the actual exchange rate and instalments are stated according to the historical exchange rate. 11
KEY PORTFOLIO FIGURES Q1 218 Q1 217 217 216 215 Lending balance* (NOK million) 65,919 75,811 69,359 76,55 76,499 CIRR 41,386 46,862 43,53 46,749 45,264 Market loans 24,532 28,949 25,856 29,756 31,234 Disbursements (new loans, NOK million) 322 1,891 3,418,76 18,1 CIRR 137 326 2,677 6,138 9,111 Market loans 185 1,564 741 3,938 8,891 Probability-adjusted order book (NOK million) 16,271 15,54 16,674 17,198 21,254 Ocean industries 15,244 13,49 3,214 15,126 2,114 Industry and renewable energy 1,27 2,14 1,455 2,72 1,14 Gross interest income (NOK million) 368 364 1,744 1,711 1,557 Instalments (NOK million) 1,236 2,23 7,174 8,922 8,498 Early loan redemptions (NOK million) 13.3 44 1,174 1,981 2,389 Administrative costs*.4%.4%.15%.14%.13% Applications Number (total and by segment) 99 65 241 278 275 Oil and gas equipment 22 18 42 8 48 Offshore ships 9 27 22 53 Passenger and trade vessels 2 9 47 4 23 Fisheries and aquaculture 16 6 5 36 53 Industry and renewable energy 32 22 75 98 Volume (total and by segment, NOK million) 73,48 48,287 124,418 29,143 12 88 Oil and gas equipment 32,139 33,999 67,78 159,951 5,7 Offshore ships 1,96 1,154 8,3 4,529 22,383 Passenger and trade vessels 18,341 2,637 18,24 25,98 11,296 Fisheries and aquaculturepdrett 2,767 2,345,445 4,74 7,25 Industry and renewable energy 18,255 8,152 19,886 14,825 28,684 New contracts (NOK billion) 1.1 1.9 9.8 11.3 9.4 Guarantors (% of portfolio) GIEK 73% 74% 73% 74% 74% Norwegian banks 14% 14% 14% 13% 14% Foreign banks 13% 13% 13% 12% 13% * Balance at quarter-end. s in tables and figures may vary due to rounding. All figures in NOK are based on the exchange rate at the close of business at month-end/year-end, subject to two exceptions: interest income is stated according to the actual exchange rate and instalments are stated according to the historical exchange rate. 12
Export Credit Norway restructured the industry and segment distribution of its lending portfolio in the first quarter of 218. As of Q1 218, the following primary distribution is used in reporting related to the company s portfolio: 1. Aggregated portfolio figures 2. Two-part industry categorisation: Industry and renewable energy Ocean industries 3. Two-part industry categorisation with sub-segments: Industry and renewable energy Industry Renewable energy Ocean industries Oil and gas equipment Offshore ships Passenger and trade vessels Fisheries and aquaculture The 217 and Q1 218 figures in the report reflect the above structure. Earlier reports are not directly comparable with the 217/218 figures. Please contact us with any questions. 13
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