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Theme: The Baltic Searegion

BULLETINnordic investment bank � december 2004

Letter from the President

Financial integrationin the Baltic Sea region

Financial sector developments in theBaltic Sea region during the past fewyears have made clear that bankingand financial markets in the regionhave grown out of their traditional,national frames. We are confrontednow by a completely new businesslandscape, in which the players aremany-faceted, multinational andcross-border financial enterprises.

The motive forces of the integra-tion process have comprised both

deregulation of financial activities and greatadvances in information technology. Cross-border banks operating in the Nordic area andthe Baltic countries have been formed as a resultof mergers and company acquisitions. A verylarge part of the Baltic banking sector is in factowned, directly or indirectly, by Nordic banks.The process of consolidation has resulted in theestablishment of complicated financial enter-prises operating across both territorial and sector-ial boundaries. The Nordic and Baltic bankingsector is today highly concentrated, and accord-ingly its stability depends on a handful of banks.

Two questions relating to the increasing finan-cial integration in the Baltic Sea region deserveto be highlighted.

First there is the growth aspect. Withoutquestion, the most important consequences ofthe region’s financial integration are thegrowth-promoting effects. The role of thefinancial sector in mobilising resources for prof-itable investments and enabling the general pub-lic to obtain a return on its savings is growingmore and more important. If the Baltic Searegion is to stay at the top of the growth league,it has to have a well-functioning financial servic-es sector. This is important not least to smalland medium-sized enterprises and export-oriented enterprises. The financial sector is alsocrucial for the internationalisation of theregion’s business activity, which in turn is thepath to sustainable economic growth. There canbe no doubt that the development of the finan-cial sector has hastened and facilitated cross-border investments in the region, an importantingredient in the process of growth.

The second question to be considered is thesupervisory aspect, which is somewhat moreproblematic. The Baltic Sea region, i.e. theNordic and Baltic countries, has de factoacquired a regional banking system which comesunder eight national supervisory authorities.There may be gaps here which need to be filledthrough joint action. True, the national super-visory authorities have developed their coopera-tion, but what we lack today is clear frames toindicate where ultimate responsibility for weakbanks and bank failures is located within theregional system which has evolved.

Estonian, Latvian and Lithuanian NIB mem-bership is a positive example of regional integra-tion in the financial sector. The widening ofNIB’s circle of ownership is a milestone in theunfolding history of regional, intergovernmen-tal cooperation. The enlargement of NIB is alsoan important adjunct to the integration of theNordic and Baltic commercial banks.

A European Union with 25 or more memberstates requires new models of regional partner-ship within the European framework, especiallywhere the small member states are concerned.Greater regional cooperation is needed in orderto strengthen the position of the Nordic andBaltic countries in Europe. The financial sector isan important sphere for cooperation of this kind,the effects of which could then make themselvesfelt in a wider European context. The importanceof the securities market will increase as time goeson. Integration of the Nordic and Baltic stockmarkets is already underway. To secure positiveeconomic development for the Baltic Sea regionin future, intergovernmental efforts are neededcommensurate with the profound integration ofthe region’s private sector. One important taskfor the public sector is to better integrate finan-cial supervision in the region, matching the struc-ture of the financial sector.

Jón Sigur›ssonDecember 2004

Ari

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2 bulletin � december 2004

THEME: THE BALTIC SEA REGION PP. 4–13

4 Port of Tallinn invests heavily

6 YIT’s acquisition of ABB Building Systems

9 Schibsted combines media channels

10 Baltic Sea Fund prizes for 2004

12 Ambassadors visit NIB

13 Changes in the governing bodies of NIB

14 Panorama

16 New President and CEO

17 Guest writer: Uffe Ellemann-Jensen

18 News from the Nordic Finance Group

20 News

22 NIB in brief

23 Interim report 2004

HEADQUARTERS

Fabianinkatu 34P.O. Box 249FI–00171 HelsinkiFinlandTelephone +358 9 18 001Telefax +358 9 1800 210

OTHER OFFICES

COPENHAGEN Grønningen 17DK–1270 København KDenmarkTelephone +45 33 144 242Telefax +45 33 322 676

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REYKJAVÍKKalkofnsvegur 1IS–150 ReykjavíkIceland Telephone +354 5 699 996Telefax +354 5 629 982

STOCKHOLMKungsträdgårdsgatan 10P.O. Box 1721SE–111 87 StockholmSwedenTelephone +46 8 5662 6590Telefax +46 8 5662 6591

SINGAPORERegional RepresentativeOffice78 Shenton Way # 16–03Singapore 079120Telephone +65 6227 6355Telefax +65 6227 6455

BULLETINNIB’s Bulletin is published in Danish, English, Finnish and Swedish.

EDITORSJamima Löfström, Editor-in-chiefTina Nyberg, Gunilla Nyman, Paula Roselius, Pamela Schönberg,Pelagia Wolff

Layout Lowe & Partners, HelsinkiPrinted by Nomini, Helsinki

PUBLISHERNORDIC INVESTMENT BANKFabianinkatu 34P.O. Box 249FI–00171 Helsinki, FinlandTelephone +358 9 18 001Telefax +358 9 1800 210Internet www.nib.intE-mail [email protected]

CHANGE OF ADDRESSTelefax +358 9 612 1417

Cover photoKaius Hedenström

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Theme: The Baltic Sea region

Port of Tallinn has big projects. The port company has established an ambitious investment

programme for the coming years. Despite only 600 employees the company constitutes a motor

for the Estonian economy.

Pela

gia

Wol

ff

Port of Tallinn intendsto be among the winners

STIFF COMPETITION AROUND THE BALTIC

The company plans to invest a total ofmore than 340 million euros in its har-bours during the period 2004–2008.

“To stay in the competition we need toinvest,” says Aare Tammemäe, ChiefFinancial Officer and Member of theManagement Board.

Port of Tallinn, whose main competi-tors are in the Eastern Baltic and in theGulf of Finland, has a total of four har-bours, all of them in the area aroundTallinn. In particular, the company investsin developing the Muuga harbour east ofTallinn and the Paldiski South harbourwest of the capital, with financing interalia from NIB. Muuga is the company’slargest cargo harbour and at present anindustrial park is being developed there.Port of Tallinn is concentrating on devel-oping new services, i.e. an industrial andlogistics park and on generating new cargostream within container traffic, since thepassenger traffic, which generates aboutone third of the company’s revenue, hasstabilised at a level of about six millionpassengers per year.

On the other hand, Tammemäe empha-sises that the number of passengers hasshown healthy increase in 2004, despitehaving been constant during the last fewyears. An attractive harbour area in thecentre of Tallinn, accession to theEuropean union and efforts to build newships should attract more visitors. Port ofTallinn maintains the Old City Harbourand most of the land presently owned by

Port of Tallinn wants to develop the area around the Old City Harbour in the centre ofTallinn. The idea is to have commercial real estate development in this area.

the company remains fully unexploited. Inthe long term the company wishes todevelop that area in cooperation with theCity of Tallinn and real estate developers.

“Our intention is to convert this into anice place for the citizens of Tallinn and forthe tourists and to generate new revenue.”

Oil constitutes the most important productin cargo traffic via the harbours of Port ofTallinn. Most of it is transit traffic betweenRussia and Europe. Tammemäe says thatRussian oil production has been increasingby 30–40 million tons per year and most ofthis increase is exported. Although Russiais at present developing its own harbours,

Russian capacity will simply not be suffi-cient at least in the near term.

“We want to be the best port servingRussian transit traffic.”

Tammemäe says that by developing amanagement system according to the ISO-standards for quality- and environ-ment management Port of Tallinn hasimproved its management of security andenvironmental risks involved in oil trans-ports and in cargo handling in general.

However, in the long term Port ofTallinn wants to get away from a revenuestructure heavily dominated by oil prod-ucts and to diversify its revenues. AloKelder, Counsellor at the Ministry of

Economic Affairs and Communications,says that a more diversified business isdesirable for the state owned company. Hebelieves that increased cooperation withoperators responsible for railways, roadsand terminals may be profitable in thefuture. In his view the port company’s roleis to look for new business prospects,which are not only related to cargo andpassenger traffic, but also to value-addingactivities such as production and logistics.

It is in the interest of the Estonian Statethat the company develops in a positive way.

“From the owner’s point of view, theultimate goal for Port of Tallinn is todeliver growth in shareholder value,” saysKelder.

He points out that Port of Tallinn con-stitutes an important part of the Estoniantransport infrastructure and that a wellworking transport system is a prerequisitefor successful integration within theEuropean Union. Kelder adds that Port ofTallinn is important for passenger trafficin the Baltic.

The impact of the ports on employmentis far from insignificant. Port of Tallinncompany has only 600 employees, but ifone also takes into account all the opera-tors in the harbours the figure is muchhigher. Port of Tallinn is a so-called land-lord port which owns the land and main-tains infrastructure in the harbours.Private operators, such as shipping agentsand stevedore and transportation compa-nies are leasing the land and invest in ter-minals and warehouses for example.

“In a sense we are a small company. Butby being a gateway between Russia andWestern Europe and by providing jobopportunities and new business we arequite important,” says Aare Tammemäe. �


Port

of T

allin

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The Muuga harbour, founded in 1986, is the deepest harbour in the Baltic Sea regionand it will now be enlarged. Port of Tallinn has a total of four harbours.

The Paldiski harbour was a submarine teaching centre during the Soviet time. The harbour is small, but Port of Tallinn believes it has great potential. The emphasis isplaced on ro-ro activity, export of local goods, and transit of liquid bulk and metals.



Today the Finnish builder YIT Group provides an increasingly wide range

of building systems services. In this sector, the company is the biggest in the

Nordic countries. YIT’s acquisition of the Swedish-Swiss ABB Building Systems

in July 2003 was a sign of the coming change in direction. The Nordic

Investment Bank contributed to the financing of the acquisition.

Building Systems carries out independent business inside the YIT Group.

YIT

Cor

pora

tion

Even a house can be steered intelligentlyACQUISITION OF BUILDING SYSTEMS MADE YIT INTO A SERVICE ENTERPRISE


The deal ensured a large segment of build-ing systems business—worth over one bil-lion euros—for YIT in the Nordic coun-tries. There are also prospects for growthin the Baltic countries and in Russia, whereseparate subsidiaries have been set up.

“In line with the Group’s strategy, ourtarget for annual growth is on average5–10 per cent,” says Juhani Pitkäkoski,President of Building Systems.

Company acquisitions will also contin-ue. The splintered sector has plenty ofenterprises that will be offered for sale infuture.

“We have a large product slate—prop-erty maintenance, piping, electricity, air-conditioning and security technology. Atthis stage, not all operations are sufficient-ly strongly represented in the variouscountries. In this sense, too, we’ll keep

growing,” adds Sakari Toikkanen, Exe-cutive Vice President of Building Systems.

Small enterprises can, for instance, doall the electrical work for a single-familyhouse.

“We don’t compete in the same field assmall enterprises. We aim at large con-tracts together with YIT ConstructionServices whenever possible.”

However, Pitkäkoski stresses thatBuilding Systems is not the piping andelectricity department of YIT’s businesssegment Construction Services. BuildingSystems carries out independent businessinside the Group.

“If we didn’t master or develop our serv-ice concept, we wouldn’t be able to do thisbusiness inside the Group either.”

Sakari Toikkanen has a clear view onthe issue of building quality:

“Each time we must start from theassumption that the work is finished in onego. As far as profitability is concerned, wecouldn’t even afford to have work donethree times.”

“Acquisition of Building Systems wasmainly in keeping with two of YIT’sstrategic outlines: increasing building sys-tems business in Scandinavia, and focusingthe Group’s operations on service busi-ness,” Juhani Pitkäkoski explains.

The building systems services providedby the subsidiaries of Building Systems inthe Baltic Sea region accounted for 43 percent of the YIT Group’s total turnover of1.5 billion euros during the first sixmonths of the year 2004.

Within the sector, upkeep, maintenanceand renovation account for about 60 percent of business, while the remaining 40per cent comes from new building.

At present Building Systems has ninesubsidiaries, and the most demanding partof integration will be over by Christmas2004. Building Systems has a market share of roughly 10 per cent in the various coun-tries.

“At the mental level, integration willnaturally continue. It’s a long processwhen new people from different culturescome to work in one and the same compa-ny,” Pitkäkoski says.

It goes without saying that internalstreamlining of the enterprise will contin-

ue even when the major mergers havebeen completed.

“It should actually be part of daily opera-tions,” Sakari Toikkanen adds.

The sector employs over 12,000 peoplein the Group. This is 56 per cent of thetotal personnel strength.

“The most striking feature is that weoperate in as many as 350 locations. Onthe map it looks as if someone had beenshooting with a shotgun. Building systemsservices are produced very locally, and wecan never be very far from the customer,”Juhani Pitkäkoski analyses the nature ofthe business.

Because work is done in so many loca-tions, it is important to keep the organisa-tion structure light and the managementsystem simple. �

Sakari Toikkanen has an unconditionalopinion about the issue of building quality: work must be done well and inone go.

“We operate in 350 locations, whichmeans that we are close to the customer,”says Juhani Pitkäkoski.



Acquisition of Building Systems trig-gered a major change in the YIT Group’scorporate structure. In September 2003,the Group was divided into four businesssegments: Building Systems, ConstructionServices, Services for Industry, and DataNetwork Services.

Technical features and automation haveincreased very rapidly in building systemsservices in the last few years. Yet, newtechnologies are just at the verge of theirbreakthrough.

“Automation aims at the intelligentsteering of buildings. Among other things,this cuts energy costs and improves secu-rity. On the other hand, buildings cannotbecome too technical; the steering of dif-ferent systems must remain easy,” SakariToikkanen underlines.

He admits that it’s a difficult equationto solve.

“We don’t ourselves develop, for in-stance, new IT systems or design newpieces of piping. We put together tech-nology acquired from various sources.”

Building Systems also strives toenhance the efficiency of its operations bymeans of various technological solutions.

“For instance, service personnel canhandle more maintenance assignmentsper day when they use the steering solu-tions in their hand-held terminals.”

According to Pitkäkoski, in Finlandbuilding systems is a sector that needs torecruit workforce from abroad to meet itsfuture demand for labour. This situationis not seen as a menace but as a naturaldevelopment in circumstances whereyoung people are not very interested inworking as a plumber or as an electrician.

“On the other hand, technologicaladvancements will also enhance theattractiveness of the sector as a field ofstudy,” Juhani Pitkäkoski predicts. �

“Our experience isthat individual news-papers and magazinesreach the best resultsif they can maintainand develop theirunique character-istics,” says JanHedenstad, Schib-sted’s Vice President,Information.

He does not believethat the presence of bigplayers in the media fieldleads to uniformity andone-sidedness.

“Editorial independence,credibility and quality are the guiding princi-ples for our media in all channels.”

Schibsted runs newspapers and publishinghouses and has activities in the sectors of TV,films, multimedia and mobile telephones.The group sees that its strength lies in thiswide range of knowledge in the media field,and in its willingness to combine variouschannels and to try new things.

Schibsted has invested heavily in theInternet. Hedenstad says that the Web isparticularly well suited to be a news channel,while the printed newspapers have otherqualities. These two channels complementeach other. In Norway, Schibsted’s VerdensGang is the biggest newspaper in both print-ed form and on-line. In Sweden, Aftonbladethas the same position.

In summer 2004, NIB and Schibsted

signed a contract for a loan that was part-ly used for Schibsted’s acquisition of

the Swedish Blocket. se,which runs a Website for advertising.On previous occa-sions, too, NIB hasgranted loans for

Schibsted’s expansion.The company in-

tends to continue grow-ing. Growth will proba-bly take place both

organically and throughcompany acquisitions. Oper-ations in new countries maybecome topical. Today, the

company is active in countries around theBaltic and also publishes the free paper 20minutes in Switzerland, France and Spain.

Hedenstad says that the free paper’s goal isto attract young people who would not oth-erwise read any paper at all.

Schibsted also has experience of anothertrend in the media world: the tabloid format.Hedenstad points out that many people erro-neously believe that adoption of the tabloidformat has something to do with the qualityof the content. However, the transition frombroadsheet to tabloid means adapting theformat to the needs of modern readers wholack time and want to read their papers onthe train and on the bus.

“There has never been any contradictionbetween being serious and easily reached,”Hedenstad concludes. �


Schibsted believesin diversitySchibsted of Norway is a family enterprise that

grew into a media group quoted on the stock

exchange. The company, which operates in ten

countries, wants to combine various media

channels but underlines the importance of locally

adapted content and editorial freedom.Schibsted’s head office is located in Oslo, where the company’sshares have been quoted on the stock exchange since 1992.

OPERATIONS AROUNDTHE ENTIRE BALTICRIM• Schibsted has operations around

the entire Baltic rim and in some other countries as well. Scandi-navia is the company’s principal market.

• The company owns Scandinavia’stwo biggest daily newspapers: Verdens Gang in Norway and Aftonbladet in Sweden. Schib-sted is also behind Aftenposten in Norway and Svenska Dag-bladet in Sweden.

• Schibsted has a majority holding in Metronome Film & Television, which operates today in Norway, Denmark, Finland and Sweden.

• Picture agency Scanpix and Schibsted Mobile, which provides mobile services, operate in boththe Nordic and Baltic countries.

• Schibsted is the biggest owner of Eesti Meedia Group, Estonia’s largest media group, which pub-lishes, among other things, the newspaper Postimees.

• Schibsted also has a holding in Norway’s TV2 and in the Estonian TV channel Kanal 2.

Schi

bste

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Of the total prize sum of 22,500 euros, agrant of 10,000 euros was awarded to theKaliningrad Regional Children’s Centrefor Environmental and BiologicalEducation and Tourism. The Centre,which was founded as early as 1951,engages in environmental education forchildren and young people, as well as forteachers. Activities include courses andexcursions, and among the results achievedare campaigns about problems associatedwith oil transports in the Baltic Sea.Thousands of people are involved in theactivities every year. The prize money willbe used, among other things, to acquirenew computer equipment for the Centre.

Another organisation that was acknowl-edged for its work on the grassroots levelwas Agenda 21 in Åland, which was grant-ed a prize of 2,500 euros. The Agenda 21information office, which has been in exis-tence since 1995, strives to increase aware-ness of the environment in Åland andwants to anchor global environmentalissues in people’s everyday lives. Forinstance, the office gives information onhow waste management and selection of

transport modes affect the environment inthe Baltic Sea. In addition, the office dis-tributes brochures, and organises cam-paigns and exhibitions.

Apart from these organisations, two indi-viduals received awards of 5,000 euros each.Felix Karmazinov, General Director at St.Petersburg water utility Vodokanal, wasrecognised for his contribution to the con-struction of the southwest wastewater treat-ment plant in the city. Twenty-five yearsago all wastewater from St. Petersburg—3.5 million cubic metres per day—was

released into the river Neva untreated. Thecity’s first treatment plant began operationsin 1979, and today some 80 per cent of allwastewater is treated. Despite this, 800,000cubic metres of untreated wastewater stillflows into the water system every day. Thesouthwest wastewater treatment plant isestimated to be ready in July 2005, when itwill treat 300,000 cubic metres of waste-water per day.

Director Roustam Sagitov, who in 1995founded the non-governmental organisa-

Felix Karmazinov of the St. Petersburg water utility Vodokanal said that 2004 was thefirst year that the city of St. Petersburg had adopted a programme for the planning ofwater supply and wastewater.

Jona

s Eds

vikEnvironmental education for

children and young people, and

work for the environment in the

eastern parts of the Baltic Sea

received recognition as the

Baltic Sea Fund awarded its

environmental prizes for 2004.

The prize-winners were two

organisations that work at the

grassroots level, and two indi-

viduals who play an important

role in questions concerning

protection of the Baltic Sea.

Recognition for environmental workat the grassroots level


Director Vladimir Gurovand teacher NiyoleSamoshko of the Kaliningrad RegionalChildren’s Centre forEnvironmental andBiological Educationand Tourism werehappy for the recognition that theCentre’s work receivedfrom the Baltic SeaFund. CommercialCounsellor AndersWiklöf on the left.

Under Roustam Sagitov’sdirection, the BFN hasbecome an influential non-governmental organisation. It coor-dinates environmentalcooperation in the Russian Baltic region and is an active participantin international cooperationprojects.

“People in Åland live inthe middle of the Balticand know how badly the sea is faring,” saidGunda Åbonde-Wickström, projectmanager at the Agenda21 office (right), whotogether with the officecoordinators Åsa Hägg(left) and Maria Stenroos(centre) accepted theprize of 2,500 euros.

BALTIC SEA FUND 15 YEARSThe Baltic Sea Fund or, more offi-cially, the Åland Foundation for theFuture of the Baltic Sea, was found-ed on 13 March 1989 to promoteresearch and other activities benefit-ing the Baltic Sea environment.Besides distributing prizes andgrants, the Fund disseminates infor-mation about the Baltic Sea environ-ment to roughly 85 million peoplewho live around the sea. The activi-ties also include the arrangement ofseminars on the environment; thetheme of the 2004 seminar, held inStockholm, was ‘Transports in theBaltic Sea’.

The initiative to set up the Fundwas taken by Commercial Counsel-lor Anders Wiklöf, whose privatedonation of three million Finnishmarks (about 500,000 euros) madeup the base of the Fund. At present,the Fund capital stands at about700,000 euros. During its existence,the Fund has distributed approxi-mately forty prizes, altogetheralmost 445,000 euros, to nearly 50prize winners. The Fund gets contri-butions from both private individualsand enterprises.

tion Baltic Fund for Nature (BFN), wasawarded a prize for his environmentalefforts in the Russian areas of the BalticSea region. The organisation aims toenhance awareness of the environment innorthwestern Russia, for instance, bydeveloping environmental education.BFN also supports research projects thatprotect biodiversity, and promotes bothecological tourism and environment-friendly agriculture.

NIB’s President and CEO Jón Sigur›s-son, a member of the Fund’s delegation,presented the prize-winners at a ceremonyarranged in Mariehamn on 15 May.

“A saying that we have in Icelandexpresses the idea that unites all prize-winners this year: ‘The sea is half myhomeland’.” �

Matti Maasikas, Ambassador of Estonia.


Valdis Krastin,sv, Ambassador of Latvia.

Gun

illa

Nym

an

Audrius Bru-zga, Ambassador of Lithuania.

Matti Maasikas, Estonia’s Ambassador,stressed the importance of swift and com-prehensive reforms for Estonian develop-ment since the restoration of indepen-dence at the beginning of the 1990s. Thecurrency reform in 1992 paved the way fora stable currency. In connection with thatreform, a currency board system was estab-

Staff seminar on the Baltic countries


Active preparations for Baltic

membership have been

progressing in NIB throughout

the autumn. In September the

Estonian, Latvian and Lithuanian

ambassadors in Helsinki gave

presentations of their countries

to NIB personnel, centring on

reforms and the go-ahead spirit,

the EU and NATO, the historical

European roots of the three

countries and the period of

Soviet dominion.


New structures in NIB

With the membership of the Balticcountries, NIB will have an entirelynew body, the Board of Governors,which will decide upon questionsrelating to the general frameworkfor the Bank’s operations. TheBoard of Governors will essentiallyhave the powers previously vested inthe Nordic Council of Ministers.The Board of Governors will beresponsible for, among other things,matters concerning NIB’s member-ship agreement, statutes and autho-rised capital. In addition, the Boardof Governors approves the annualreport of the Board of Directors and the audited financial statementsof the Bank. Each member countrywill select a member of its respec-tive government to the Board ofGovernors and the chairmanshipwill rotate among the countries.Decisions of the Board of Governorswill be made unanimously.

The Board of Directors of theBank will have fewer members thanbefore. Each member country willappoint only one Director to theBoard, which will consequentlycomprise eight Directors instead ofthe previous ten. The Board mem-bers will each have one vote. With

the exception of matters that fallwithin the authority of the Board ofGovernors, all the powers in theBank are vested in the Board ofDirectors. The Board of Directorsappoints the President, who isresponsible for the day-to-day opera-tions of the Bank. The Board maydelegate its powers to the President.

The Control Committee, whichoversees NIB’s operations and isresponsible for the audit of theBank’s accounts, will continue tocomprise ten members, although theappointment process will be chang-ed. The Nordic Council and theparliaments of Estonia, Latvia andLithuania will appoint one memberfrom each country respectively. Inaddition, the Board of Governorswill appoint two members; theChairman and the Deputy Chair-man of the Committee.

The Baltic countries’ total shareof NIB will amount to 3.4 per cent.The authorised capital stock of NIBwill increase from 4,000 millioneuros to 4,142 million euros. Inaddition, the Baltic countries willcontribute approximately 42 millioneuros to the Bank’s reserves. �

From the beginning of 2005 NIB will have eight instead

of five members when Estonia, Latvia and Lithuania

become members of the Bank on equal terms with the

five Nordic member countries. While the expansion

involves changes in the governing bodies of NIB, the

fundamental characteristics of the Bank’s financial

structure will be preserved.

lished, fixing the exchange rate of theEstonian kroon against the German markand later against the Euro. AmbassadorMaasikas went on to say that low incometaxation, with a universal flat rate of 26 percent, has encouraged enterprise and activi-ty in Estonian society. The liberalisation offoreign trade has also impacted favourablyon the economy. The Ambassador saidthat Estonia’s pursuit of EU and NATOmembership spurred the process ofchange. All three Baltic countries becameEU and NATO members in 2004.

Latvian Ambassador Valdis Krastin,sv

described Latvia’s EU membership asmarking a return to Europe. He was alsoreferring to the “supreme achievement” ofNATO membership, which was power-fully supported by the Latvian people. Thething now, he said, is to seize the opportu-nities presented by EU funding forrestructuring the country’s industry. TheSoviet epoch left a legacy of huge factories,many of which produced goods for militarypurposes and are no longer relevant.

“We badly need more investments todevelop our industrial production,”Krastin,sv said.

According to Krastin,sv it is desirable thatNIB becomes involved in both the privateand local government sectors, where thereis heavy pressure for investment. The con-centration of Latvian business activity inand around Riga, the capital, is a challengein itself.

Lithuanian Ambassador Audrius Bru-zgasaid that Lithuania is committed to devel-oping its infrastructure with a view to stim-ulating the country’s economy. Lithuania’slocation between West and East, heobserved, today constitutes an advantage.

“The time is ripe to think about geog-raphy as a golden opportunity, not a di-saster.”

He hoped that Baltic and Nordic coop-eration would help to sustain the prosper-ity of the Baltic Sea region.

“The enlarged NIB,” he said, “will cer-tainly be instrumental in achieving thisgoal.” �


Panorama

The pictures on this spread and on thecover were taken by photographer KaiusHedenström, who lives and works inHelsinki, Finland, but prefers to spend hisleisure out at sea, revelling in the beauty ofthe Sea of Archipelago.

Hedenström also addresses issues relat-ing to the built environment and everydayarchitecture in the archipelago and in thecountryside.

“My job is opening people’s eyes,” hesays.

“We mustn’t go building ugly houses andwrecking the archipelago’s uniqueness.”

PEARLS IN THE ARCHIPELAGO



In September the Board of Directors ofthe Nordic Investment Bank appointedJohnny Åkerholm, Finland, the Bank’snew President and Chief ExecutiveOfficer. He takes up his position on 1 April 2005 at the Bank’s headquarters inHelsinki. Mr Åkerholm has been appoint-ed for a term of five years, as provided inthe Bank’s Statutes.

He succeeds Icelander Jón Sigur›sson,who has been NIB’s President and CEOsince April 1994.

Born in 1948, Johnny Åkerholm holds alicentiate in political science and a masterin economic sciences. He has beenSecretary-General of the European Bankfor Reconstruction and Development,EBRD, in London since 2003. Between1995 and 2003 he was Under-Secretary ofState for Economic Affairs at the FinnishMinistry of Finance. Between 1982 and1995 he held a variety of senior appoint-ments with the Bank of Finland, ending ashead of its Economics Department and,prior to that, heading its Central BankPolicy Department.

Other appointments held by JohnnyÅkerholm have included the chairmanshipof the EU Economic and Financial Com-mittee and of the Nordic-Baltic Monetaryand Financial Committee.

Referring to Johnny Åkerholm’s longexperience of international appointments,Bolli Thór Bollason, Chairman of theBoard of Directors, predicts that hisknowledge of international financial insti-tutions will help to strengthen the Bank’sfuture development, e.g. in the light of theaccession of the three Baltic countries toNIB membership. �

Johnny Åkerholm NIB’snew President and CEO

Johnny Åkerholm succeeds as President and CEO of NIB as from 1 April 2005.

NIB PRESIDENTS Bert Lindström June 1976–June 1986Jannik Lindbæk June 1986–December 1993Jan Callerström January–March 1994 (Acting President)Jón Sigur›sson April 1994–March 2005Johnny Åkerholm April 2005–

Mar

jo K

oivu

mäk

i

New President and CEO

History plays an important role in theBaltic Sea region. The region’s past sym-bolises coherence and friendship as well asdivision and downright enmity. This his-toric legacy is the foundation for coopera-tion in the Baltic Sea area today and in thefuture.

One very critical factor for the BalticSea region is the significant differencesamong the countries of the Baltic Sea.Our economic performance, performancedrivers, company practices as well as ourbusiness environments and the strength ofour democratic institutions remain ratherheterogeneous because of our history.However, in order to move ahead andcapitalise on the momentum created bythe successful enlargement of theEuropean Union, a new regional initiativeis needed.

According to the “State of the Region2004” launched at the Baltic Develop-ment Forum summit in Hamburg inSeptember, the Baltic Sea region has inrecent years outperformed severalEuropean regions on key performancemeasures such as prosperity growth,labour productivity growth, and scientificinnovation.

Over the last decade, the Baltic Searegion has outperformed the EU-15 andEU-25 in terms of real GDP growth.Nevertheless, the region’s growth has notbeen strong enough to level differencesacross the cities, sub-regions and coun-tries of the Baltic Sea area.

Moreover, the sub-regions around theBaltic Sea differ significantly in their clus-ter specialisation. Some overlap existsbetween the regions of the Baltic and theNordic countries and between the Balticcountries and Poland. However, clusterspecialisation across the entire region

exists only on a very small scale withinforest products, telecom products, oil &gas and health care.

This is not good enough. Unfortunate-ly, it could have something to do with thequality of the business environment. Ourkey strengths are our strong physical infra-structure, our skilled labour force, rela-tively low levels of corruption anddemanding regulations, a strong sciencesystem and companies competing on inno-vation and uniqueness. However, we havea hard time in reducing bureaucracy, low-ering government subsidies and cuttingtaxes that curb incentives and prevent usfrom rewarding innovation and hard work.

If we fail to mobilise coordinatedregional action on these essential short-comings, the challenges that our differ-ences pose might just be too high for any-one to solve in the future. This could forcecompanies currently located in the BalticSea area to downgrade their involvementin the region in order to gain strongerfoothold in other parts of the world.

Estonia, Latvia and Lithuania’s mem-bership of the NIB is an example of a boldand far-sighted decision that can furtherpush development and economic integra-tion in our region. In order to maintainregional cooperation and improve ourinnovative capabilities and economicgrowth, the region must continue to setnew and ambitious goals for regionalcooperation in the new era that the BalticSea region has entered.

Nevertheless, in addition to ensuringeconomic growth and pushing forreforms, we must uphold demands forfreedom and democracy.

Failure to side with the democraticforces will cast doubt on our overall com-mitment to freedom and worldwide

democracy as well as free and undistortedmarkets. These basic principles mustalways be in the back of our minds whenwe chose closeness over divide and friend-ship over animosity. They can never betaken for granted. We have learned thatthe hard way in this region.

The Baltic Sea region must continue toensure that we meet the needs of the pres-ent without compromising the prospectsof the future. However, to match thischallenge each task accomplished must befollowed by new goals and new visions.

Baltic Development Forum will in 2005prepare a joint Baltic Sea Initiative thatunlocks the benefits of regional coopera-tion and sets specific goals for whatregional cooperation aims to achieve inthe new era the Baltic Sea region hasentered. A Baltic Sea Initiative couldeventually become the basis for discus-sions and possible endorsement at BalticDevelopment Forum’s 2005 Summit inStockholm.

About the author:Uffe Ellemann-Jensen (b. 1941) was Ministerfor Foreign Affairs of Denmark 1982–1993.He was President of the European Liberals(ELDR) 1995–2000 and co-founded theCouncil of the Baltic Sea States in 1992 aswell as the international network organisationBaltic Development Forum in 1998.


The future of theBaltic Sea region

Guest writer

By Uffe Ellemann-JensenChairman of Baltic Development Forum


The Nordic Environmental DevelopmentFund, NMF, a fund for soft financing ofenvironmental projects in the neighbour-ing regions to the Nordic area, will contin-ue to operate. Its previous programmeperiod expired at the end of 2003, but inAugust 2004 the Nordic EnvironmentMinisters agreed in favour of a continua-tion. The Nordic countries are to put up atotal of 14.25 million Danish kroner (about1.9 million euros) annually for the period2005–2007. Funding will also be providedby the Nordic Council of Ministers.

With the greater part of NMF’s capitalalready used, the decision was necessary inorder for its activities to continue.

“Only a small part of the fund’s activitieshas comprised lending and thus theresources are gradually consumed,” says

Harro Pitkänen, Managing Director ofNordic Environment Finance Corporation,NEFCO.

NMF, established in 1996, is managedby NEFCO, with NIB participating in theevaluation of projects for which finance hasbeen requested. NMF is intended forfinancing on soft conditions, i.e. morefavourable terms than those of the market,and the fund grants various kinds of sup-port and advantageous loans for environ-mental projects. In the years ahead, theannual contributions of the Nordic coun-tries to the fund will be halved in relationto their annual contributions between 2001and 2003, partly with reference to newgeographic constraints. Under the newoperating NMF guidelines approved bythe Environment Ministers in connection

with the decision concerning the fund’sfuture, finance will be available for projectsin Russia, Ukraine and Belarus, whereasprojects in the Baltic countries will nolonger qualify. The new guidelines alsomean changed conditions for the grantingof financing. For example, the greater partof NMF’s inputs in future will be based onrevolving financing mechanisms.

NEFCO’s Managing Director HarroPitkänen is pleased to see NMF continu-ing. The fund, as he sees it, broadensNEFCO’s activities by making possibleproject finance of a kind which could notbe considered within the scope ofNEFCO’s core operation.

“This is a valuable dimension toNEFCO’s activities.” �

Nordic EnvironmentalDevelopment Fund continues

News from the Nordic Finance Group

Joachim Claesson

Joachim Claesson (SE) has been appoint-ed Deputy Regional Manager for regionAfrica and Middle East, and region LatinAmerica. He has previously worked atNorddeutche Landesbank in Stockholm andat SEB and Swedbank.

Morten Vagnø Jensen (DK) has beenappointed Deputy Regional Manager forregion Denmark. Prior to joining NIB he

worked for Jyske Bank where he was res-ponsible for corporate customers. He worksat NIB’s office in Copenhagen.

Anna Kiiskinen (FI) has been temporarilyemployed as a lawyer in the GeneralCounsel’s Office.

Sirpa Korhonen (FI) has been appointedFinancial Analyst in NIB’s Treasury depart-ment. Korhonen joins NIB from Nordea Bankwhere she worked with corporate analysis.

Torben Nielsen (DK) has been appointedChief Financial Officer and Treasurer. Hisareas of responsibility are funding, liquidityand portfolio management. Nielsen has alsobeen appointed a member of NIB’sManagement Committee.

Nordic Finance Group

Anders Holmén (FI) has been given a permanent position as Investment Officer atNEFCO.

Anna Kiiskinen Torben Nielsen Anders Holmén Sirpa Korhonen Morten VagnøJensen

NEW APPOINTMENTS

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The recent history of Cambodia andRwanda has been one of war, genocide andconflicts. Maintenance of peace and stabil-ity, therefore, is at the heart of theirnational strategies for sustainable develop-ment. As recently as the 1970s, Kenya wasbeing compared with South Korea interms of socio-economic development.Following a change of regime in 2002,after almost two decades of misrule underthe Moi regime, with corruption, viola-tions of human rights, deepening povertyand plundering of its natural resources,Kenya has regained the confidence of thedonor community and with it a chance ofrecovery.

NDF has identified the first cooperationprojects in the three countries’ energy,transport and water sectors. Initially, NDFfinancing is expected to total 43 millioneuros. Reliable energy supplies, as well asgood transport and water supply infra-structure, are major prerequisites of eco-nomic growth and social development,new income-generating activities and,accordingly, the reduction of poverty.

In Cambodia, NDF and the AsianDevelopment Bank will participate in thefinancing of a power transmission linefrom Vietnam to Phnom Penh, theCambodian capital. Most of Cambodia’senergy infrastructure was destroyed underthe Khmer Rouge era, and the need forinvestments is obvious. The NDF-fundedproject is designed to improve power sup-

ply by importing power from Vietnam andby extending the distribution network tothe poorest groups of the population.

In Kenya too, NDF will be financing anenergy project, but this time in associationwith the World Bank. The NDF fundingwill serve to upgrade the power distribu-tion network, above all in parts of Nairobiwhere the power distribution system issubstandard or non-existent. NDF is alsoto join the World Bank in financingimprovements to a 35-kilometre stretch ofroad, as part of the Northern CorridorTransport Improvement project. Theproject aims at improving the infrastruc-ture of the transport route running from

the port town Mombasa via Nairobi to theUgandan border. The project is alsoexpected to benefit adjacent countriesdependent on transit through Kenya.

In Rwanda NDF and the World Bankare planning to finance two projects incooperation: one in the energy sector andone in the urban water sector. Both sectorsare in desperate need of extensive supportafter decades of neglect and underinvest-ment and following the devastation whichaccompanied the 1994 genocide. �

New partner countries for NDFDuring 2004 Nordic Development

Fund has signed cooperation

agreements with Cambodia,

Kenya and Rwanda. These are

three of the world’s poorest

countries, with per capita gross

national incomes of 210, 290

and 185 euros respectively.

Cambodia is one of NDF’s new partner countries.

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NIB has granted a loan of 30 million USdollars to Alumina do Norte do Brasil.Work is in progress on the addition of twomore production lines to Alunorte’s plantin northern Brazil. This enlargement willraise the company’s annual output capac-ity by 1.8 million tonnes to 4.2 million. Theproject, scheduled for completion in mid-2006, will make Alunorte the world’s

biggest supplier of the raw material calledalumina.

Alumina is extracted from bauxite, ofwhich northern Brazil has rich deposits.Alumina is a white crystalline powder andthe raw material for aluminium, a metalused, for example, in the construction andmotor industries and for consumer goods.

Alunorte’s principal owners are theBrazilian mining and metallurgy companyCompanhia Vale do Rio Doce (CVRD) andNorsk Hydro. Norsk Hydro is one ofNorway’s biggest companies, specialisingin oil and energy and in aluminium pro-duction.

Harald Martinsen, Norsk Hydro’s BrazilManaging Director, comments:

“We are very pleased to have both NIBand DnB NOR financing this project.Alunorte is a very important strategicinvestment for Hydro. The factory today isthe main supplier of alumina to our exten-sive aluminium business in Norway,Germany and other countries.”

NIB is financing the Alunorte factoryenlargement together with KfW, DnB NORBank, ING BHF-BANK and West LB. �

The Alunorte alumina refinery is enlargingits facility in the north of Brazil, raising thenumber of production lines from three tofive.

Loan to Brazil

During NIB President Jón Sigur›s-son’s visit to Hanoi in September, heand Vietnam’s Deputy Minister ofFinance, Dr Le Thi Bang Tam, signedan agreement for a general loan pro-gramme of 30 million US dollars.Sigur›sson also met Deputy PrimeMinister Vu Khoan to discuss poten-tial future NIB financing in sectorswhere Nordic technology may be ofinterest. Sectors such as energy,infrastructure, telecommunications,food industry and shipbuilding werediscussed.

During the summer of 2004 NIBand the Ministry of Finance inVietnam agreed a 15 million US dol-lar loan for the Vietnam National CoalCorporation, Vinacoal. The companyneeds financing to modernise itscoalmining and boost its outputcapacity. Equipment from Nordicsuppliers will be used in connectionwith the company’s investments.

Earlier in 2004 NIB and theMinistry of Finance agreed loans forthe energy sector and a cement fac-tory in Vietnam. A loan programmefor small and medium-sized enter-prises was also agreed upon. �

New loanprogrammefor Vietnam

NIB’s Copenhagen office moved intonew premises on 1 December. Thenew address is Grønningen 17, 1270København K, Denmark. The phonenumber remains +45 33 144 242. �

Copenhagenrelocation

NIB has disbursed two loans to theAustrian listed steel group Böhler-Udde-holm AG for the financing of an investmentaimed at expanding production capacity in Sweden. A loan of 10 million euros wasgranted for the group’s subsidiary Böhler-Uddeholm Precision Strip AB in Munkfors,and a loan of 15 million euros for Udde-holm Tooling AB in Hagfors.

Since 2003, the group has been imple-menting a comprehensive investmentprogramme at its Swedish plants. A newcold rolling mill will be installed at Munk-fors. The new rolling facility will enable

the company to roll extremely thin andfine strip products for razor blades, etc. In Hagfors, the production equipment willbe upgraded and modified in order toboost efficiency and prepare the facilityfor an increase in production.

Böhler-Uddeholm is a world-leadingproducer of toll steel, which is its mostimportant product. The company alsoproduces band steel, welded consum-ables and forged products.

The Böhler-Uddeholm AG group, withheadquarters in Vienna, was establishedin 1991 through a merger of AustrianBöhler and Uddeholm. The latter is one of the oldest Swedish companies and hasproduced steel in the Värmland provincefor more than 300 years. The group has11,500 employees. �

Steel manufacturergets loan


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A new wastewater pre-treatment planthas been completed in Kadiköy, a part ofIstanbul. An outfall pipeline more than twokilometres long and with a diameter ofabout two metres carries the processedwater to the sea. The plant processeswastewater from a large area on the Asianside of the Bosphorus.

“Previously the water went untreatedinto the Bosphorus,” says Jorgen Ilsoe,NIB’s Vice President and RegionalManager for Africa and the Middle East.

In 1999 NIB granted a loan of 7.7 millioneuros for the project, which the IstanbulWater and Sewerage Administration, ISKI,was in charge of. Nordic equipment wasused for the construction works.

The aim has been to create a facilitywhich will blend with its surroundings.This, Ilsoe maintains, has been amplyachieved. The plan is for the facility to

process wastewater from about 2.2 mil-lion people in the first stage up to 2010,but then to be able to receive wastewaterfrom 3 million inhabitants, allowing forpopulation growth in the area.

Ilsoe describes Turkey as an importantNIB customer. Since the first Turkish loanwas agreed in the mid-1980s, NIB hasfinanced about 20 projects in the country.

NIB loans to Turkey go primarily to thestate, for on-lending to individual projects.

Ilsoe says that more Turkish publicinfrastructure projects are in preparationwith a view to possible NIB finance.

“We see very good prospects of furtherNIB financing in Turkey,” he says. �

The pre-treatment plantis right on the coast,where the Bosphorusenters the Sea ofMarmora. Under construction in this picture, it was completed in 2004.

Wastewater processing in Turkey

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“NIB has the highest possible credit rat-ing thanks to the good quality of its loanportfolio, coupled with high solvency andliquidity,” says Torben Nielsen.

He took over as Chief Financial Officerand Treasurer this autumn, at the sametime becoming a member of the NIBManagement Committee.

Nielsen succeeds Bo Heide-Ottosen,who left NIB at the end of September to

take up a position as Executive Commit-tee Member with the Depfa Group, head-quartered in Dublin. Heide-Ottosen is incharge of the Treasury department atDepfa, which is a company that providesfinancial services to public sector cus-tomers the world over.

Nielsen, who joined NIB in 1997, saysthat the main task of NIB’s Treasurydepartment is to provide the necessaryfunding for the Bank’s lending to differentprojects.

As a new feature in its funding strategy,NIB has carried out a global issue in theamount of 1 billion US dollars during eachof the past three years.

Will NIB continue with these globaltransactions?“NIB cannot guarantee that large and liq-uid transactions will be carried out every

year, but they are interesting as long asthere is investor demand for them andthey fit in with NIB’s funding needs. Withthis kind of global transactions NIB canreach more investors in different regions.NIB also achieves a price reference toother multilateral financial institutions.”

NIB’s debt instruments have sold well inAsia. Why?“Asian, and particularly Japanese, invest-ors have been the Bank’s most importantinvestor group over the years. They haveappreciated NIB’s combination of a highcreditworthiness and a funding strategyproviding investors with different types ofinstruments.” �

Torben Nielsen new CFO and Treasurer

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NIB in brief

This is NIBThe Nordic Investment Bank (NIB)finances private and public projects thathave high priority with the Bank’s membercountries and the borrowers. NIB financesprojects both within and outside the mem-ber countries.

NIB offers its clients long-term loansand guarantees on competitive marketterms. NIB acquires the funds to financeits lending by borrowing on the interna-tional capital markets. NIB’s bonds enjoy

the highest possible credit rating,AAA/Aaa, with the leading rating agenciesStandard & Poor’s and Moody’s.

NIB is a multilateral financial institu-tion owned by eight member countries:Denmark, Estonia, Finland, Iceland, Lat-via, Lithuania, Norway and Sweden. TheBank operates in accordance with com-mercially sound banking principles. Themember countries appoint representativesto the Board of Governors, Board of

Directors and Control Committee. TheBank’s operations are controlled by anagreement between the member countries,as well as the statutes connected with thisagreement.

NIB has its headquarters in Helsinkiand offices in Copenhagen, Oslo, Reyk-javik, Stockholm and Singapore. As of 31August 2004, the Bank had 152 employ-ees. �

NIB’S FINANCING POSSIBILITIESNIB finances investment projects andproject export, which are of mutual inter-est for the member countries and for theborrower. High priority is given to invest-ments that improve economic cooperationbetween the member countries. Loans andguarantees are granted to finance invest-ments that secure energy supplies,improve infrastructure or support researchand development. High priority is alsogiven to projects that improve the envi-ronment in the member countries andtheir neighbouring areas.

NIB participates in the financing of for-eign direct investments that provideemployment in the member countries.

NIB finances various international pro-jects in emerging markets, as well as with-in the OECD area. The Bank grants loansto projects that support economic devel-opment in the member countries’ neigh-bouring areas, as well as to investments ofmutual interest for the member countriesand the borrowing country in various partsof the world. In addition to loans, NIBprovides guarantees for projects that meetthe Bank’s conditions.

Projects evaluated by the Bank for possi-ble financing are subject to analyses of eco-nomic sustainability and environmentalconsequences. Further, increasing empha-sis is attached to social consequences.

ORDINARY LOANS NIB offers medium- and long-terminvestment loans with maturities of 5 to 15

years. The loans are granted in variouscurrencies at fixed or floating market-based interest rates, for up to half of theproject’s total cost.

NIB finances projects in: • the manufacturing sector, including

investments in facilities and machinery, • infrastructure, including transportation,

telecommunications, energy, water sup-ply, sewerage and waste management,

• environmental improvement, in both the private and public sectors,

• research and development, • cross-border investments, such as cor-

porate acquisitions, • foreign direct investments in the mem-

ber countries.

Regional loans are granted to nationalcredit institutions for the further develop-ment of business in priority regions.

SPECIAL LOAN FACILITIESFor lending outside the member countries,the Bank maintains a set of special loanfacilities. The core of NIB’s lending ope-rations outside the member countries con-sists of project investment loans. These arelong-term loans—up to 20 years—forprojects in emerging markets in Asia, theMiddle East, Central and Eastern Europe,Latin America, and Africa. Project invest-ment loans are usually granted to govern-ments or with a government guarantee.Loans are also granted to the private sec-tor without a government guarantee, par-

ticularly to infrastructure investments.The loans are granted for up to half of theproject’s total cost. Project investmentloans can be utilised to finance all types ofproject costs, including local costs. Theloans are granted at market-based interestrates in a currency preferred by the cus-tomer. Project investment loans have beengranted for projects in about 40 countries.

In the member countries’ neighbouringareas, NIB grants loans to projects thatsupport economic development and toinvestments that improve the environ-ment. The Bank has a special loan facilityfor environment-related projects in themember countries’ neighbouring areas.Projects should promote the reduction ofenvironmental hazards and thus also cross-border pollution. The environmentalinvestment loans are granted on bankingterms to governments, governmentalauthorities, institutions and companies.

NIB can also provide investment loansto projects and companies’ investments,including joint ventures and corporateacquisitions, within the OECD area. �


Interim Report, January–August 2004

Increased profitsNIB shows good results for the first eightmonths of the year. Profits for the periodrose to EUR 111 million, which was an11% increase compared with the corre-sponding period last year. Net interestincome rose to EUR 109 million (corre-sponding period in 2003: EUR 102 million).

NIB’s total assets amounted to EUR16.9 billion, compared with EUR 16.7 bil-lion at year-end 2003. During the periodunder review, the Bank paid its owners,the Nordic countries, EUR 41.3 million individends out of profits for year 2003.

The energy sector was the largest recip-ient of Nordic loans during the periodunder review. Among other investments,NIB financed investments in hydro- andgeothermal power stations in Iceland, in abio-fuelled power station in Austria, aswell as investments in environment-friendly energy production in Norway andSweden. In Finland and Denmark, theBank financed improvements of the elec-trical transmission networks.

International lending continues to bedominated by loans for infrastructureinvestments, particularly within the ener-gy, transportation, and telecommunica-

tions sectors. Among its loans, NIB hasfinanced investments for the expansion ofTunisia’s mobile telephone network, aswell as for improvement in Rumania’sstate-owned power network.

New loan agreements entered into bythe Bank during the period amounted toEUR 1,031 million (1,029), while loansdisbursed amounted to EUR 779 million(910). NIB’s clients made considerableprepayments during the period underreview. This was the case for NIB’s lend-ing both within and outside the Nordiccountries.

The Bank’s Project Investment Loanfacility (PIL) was increased from EUR3,300 million to EUR 4,000 million on 1 July 2004. The increase provides greaterpossibilities for the Bank to grant loans tocountries that are not members of NIB.

NIB places a great deal of importance onfinancing of environmental projects.During the period, the Bank granted ninenew environmental loans, totalling EUR145 million. Of total loans disbursed dur-ing the period, almost 15% were environ-mental loans. One of the Bank’s loans wasgranted for investments that will result inreduced emissions of pollutants into waterand air at a Swedish pulp factory. NIB also

granted a loan for investments in a newsewerage system in Reykjavik. Within theframework of the so-called Ladoga pro-gramme, loans were granted to severalprojects, e.g. projects within the pulp andpaper industry. NIB launched the pro-gramme at the end of the year 2003 withinthe Northern Dimension EnvironmentalPartnership (NDEP). In July, NIBassumed the chairmanship of the SteeringGroup for NDEP.

During the period, NIB carried out 13borrowing transactions in 6 different cur-rencies, in an amount corresponding toEUR 1,545 million (2,759). Call optionson a total of EUR 630 million previouslyissued bonds were not exercised, thusbringing the total borrowing during theperiod to EUR 2,175 million.

The quality of the Bank’s loan portfoliosand of its financial counterparties remainsat a high level. Reversals of previouslymade provisions for possible loan losseswere larger than new provisions made dur-ing the period. The net effect was a posi-tive contribution to the Bank’s profit ofEUR 3.3 million. �

Key figures (in EUR million)Jan.–Aug. 2004 Jan.–Aug. 2003 Jan.–Dec. 2003

Net interest income 109 102 155Profit 111 100 151Loans disbursed 779 910 1,841New loan agreements 1,031 1,029 1,859New debt issues 1,545 2,759 3,258Profit/average equity (%) 9.9 9.5 9.5

31 Aug. 2004 31 Aug. 2003 31 Dec. 2003Loans outstanding 10,472 10,323 10,522Total assets 16,908 17,303 16,666Net liquidity 3,189 3,802 2,744

Number of employees 152 147 147

Fabianinkatu 34, P.O. Box 249, FI–00171 Helsinki, Finland. Telephone +358 9 18 001, [email protected], www.nib.int

The Nordic Investment Bank (NIB) offers long-term loans and guarantees on competitive

market terms for both private and public sector projects.

Lending covers a wide spectrum, including infrastructure investments, research and development,

and cross-border company acquisitions and start-ups. Loans are provided for projects in

manufacturing industry, energy and metal extraction, construction, trade and services, transport

and communication.

NIB was originally formed by the five Nordic countries and in 2005 will acquire three new

owners with the accession of Estonia, Latvia and Lithuania. NIB has clients both in and outside

the member countries. The Bank now has operations in about 40 countries.

FINANCING SUCCESS

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