Mike Collier in Helsinki -
The Nordic Investment Bank (NIB) is ready to throw its considerable financial weight behind the construction of a new nuclear power plant at Ignalina in Lithuania - if anyone bothers to ask. "We can finance the project when there is a project. We are following the situation as closely as we can," Gunnar Okk, vice-president of the multilateral financial institution, told bne on March 17.
Okk was referring to a plan by the three Baltic states and Poland to build a new nuclear power plant on the site of where an aging Soviet one exists now, but is set to be closed down by the end of 2009 as part of Lithuania's deal when it joined the EU. However, wrangling by the four partners has set back the start and finish date of the new plant, meaning the region faces a power shortage. As such, Lithuania is desperately appealing to the EU, so far unsuccessfully, to delay the shutdown of the old unit.
At a presentation of its current strategy and investment priorities, NIB dropped a series of hints that it was ready and willing to play a key role in funding the new nuclear plant. That will come as a fillip to the politicians locked in a seemingly intractable series of wrangles over ownership and energy shares.
Not only is NIB ready to back "Ignalina II," but it may already have laid some of the groundwork for doing so. Lars Selenius, NIB's head of the region covering the Baltic states, told bne that NIB's investment in Lithuania is currently at a lower level than most NIB member countries, and identified as attractive projects involving cross-border transmission cables, power grid investment and electricity generation. Ignalina and its satellite projects would tick all of those boxes while raising NIB's investment in Lithuania markedly. "There is nothing in the project as such that would prevent us being involved," Selenius says. "If it would materialise in a form that would make sense, then of course we would be interested."
Selenius also provided a reminder that one of the first loans NIB ever issued was to help finance the huge Olkiluoto nuclear power facility in Finland. The bank's lending terms include a strong element of environmental monitoring, but it thinks of nuclear power has a positive role to play. "This is the only possibility to markedly cut CO2 emissions in cases where we can't replace those investments with other renewable technologies. It is hard to believe the world can face its future needs without nuclear power. We will finance such projects," says Gunnar Okk.
Below the radar
NIB was established as an International Financial Institution in 1976 and is owned by Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway and Sweden - the Baltic states having joined in 2005. Member countries subscribe authourised capital according to a distribution key based on their gross national income. The bank promotes sustainable growth of its member countries by providing long-term complementary financing, based on sound banking principles, to projects that strengthen competitiveness and enhance the environment.
NIB is not restricted to projects within member countries and is currently backing projects in Asia (including several in China), South America and Africa as well as its Nordic/Baltic heartland. It has provided co-financing on over 1,000 projects so far, but its constitution prevents it providing more than 50% of the capital for any individual project. Unlike other International Financial Institutions, NIB pays a dividend to its members (€25m this year) and boasts best-possible ratings from Standard & Poor's and Moody's of 'AAA'/'Aaa'. Nevertheless, its unusual supra-national status and understated Nordic character means it remains off the radar of many investors who might do well to follow its activities more closely.
NIB has just released its 2007 figures, which reveal the total amount of new loan agreements signed for the year totalled €2.2 bn. Loan disbursements in 2007 surged to an all-time high of €2.4bn, while the portfolio of loans outstanding and guarantees increased by 7% to €12.3bn. While NIB's core earnings increased €161m, profits fell to €69m due to the effect increased credit spreads and long-term interest rates had on the market.
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