Sweden’s successful industries

Telecoms continue to dominate EKN’s exposure. There is a great need for infrastructure projects in the emerging markets, though some projects have been deferred. More guarantees have been provided in both the transport and the mechanical engineering industries.

Consolidation in the telecom sector – the market is dynamic and telecoms continue to dominate EKN’s exposure.

Telecoms dominate

In the telecoms sector, which has dominated EKN’s exposure for many years, the demand for EKN’s services has been very great. The volume of offers for telecoms transactions has increased fourfold compared to 2008.

EKN is often involved in telecoms transactions in difficult markets, but in recent years we have seen a need for EKN’s services in all markets, and even for established telecoms operators. We made offers for volumes 6 times greater for telecoms operators in OECD countries. We regard these risks on established operators in OECD countries as relatively low, but in some cases we are dealing with large individual exposures.

Even companies in places like Asia and South America, which previously financed their purchases through the local and international financial markets, have utilised the export credit system because of the difficult liquidity situation last year. Furthermore, in order to meet this broader demand, EKN has for the first time participated in Islamic financing, in which the guaranteed facility complies with sharia law.

The telecoms sector has coped relatively well with the downturn in the world economy. However, competition has got tougher in all the mature telecoms markets around the world. For some years there has been consolidation, but yet more consolidation is required. Previously, the telecoms operators in the emerging markets were relatively unaffected by international financial worries. But as the telecoms operators grow ever bigger and more international, they are being increasingly affected. During the year, some of the telecoms transactions in EKN’s exposure have been reassessed at a higher risk, leading to increased risk provisions.

Infrastructure in vestments postponed

In major infrastructure projects such as electricity generation and transmission, there is a great need for investments in several countries with growing industries and populations with greater purchasing power.

However, the recession has led to several major transactions being postponed or changed because of the difficulties of obtaining financing. Despite the large demand in the sectors, the number of guarantee applications to do with electricity transmission has therefore declined
compared to the previous year, from 77 to 63 applications.

EKN on a visit to Siemens in Finspång, a long-term customer of EKN.

Larger volumes for transport and engineering

In the transport and engineering industries, several companies have utilised EKN to a significantly greater extent than before. The volume of offers for these industries increased by 60%. The main reasons are greater risk awareness in these companies, the greater costs of carrying these risks on their own books, and the focus on managing the company’s cash flow. In order to meet this strong demand, EKN developed a risk coverage solution jointly with Atlas Copco, in which EKN undertakes to provide cover for risks in transactions to a value of SEK 700 million.

In the automotive sector, the negative trends in Eastern and Central Europe have hit particularly hard. Together with several exporters, EKN has visited these markets in order to get a better understanding of how things are developing, and to reduce the risk of losses. The objective of these visits to the exporting companies’ customers is to find solutions that avoid payments problems leading to losses, while enabling the companies to retain their customers who are buying Swedish export goods. During the year, over 90% of EKN’s exposure in the automotive sector has been reassessed at a higher risk level, which in turn has led to a large increase in risk provisions for these transactions. This year’s increase in losses therefore originates partly from transactions in these industries in Russia and Ukraine.