As renewable energy production increases, the importance of oil decreases. The consequences for the countries in the MENA region will be felt worldwide, according to Victor Carstenius, analyst at EKN.
The trading company Elof Hansson Group dates back to 1897 and is based in Gothenburg, Sweden. It conducts international trade in a variety of sectors including forestry products and equipment to mainly the pulp and paper industry. In addition to this it also has a property division as well as a project execution organization.
The company recently teamed up with the Israeli LR Group to help source suppliers for LR Group’s new agriculture and rural development project for the government of Suriname. This visionary project will help increase yields and boost the country’s agricultural self-sufficiency through new dairy production, greenhouses, broiler and feed centre facilities.
On this project, LR Group is working as an Engineering Procurement Construction (EPC) contractor with the support of Elof Hansson International, which has helped find appropriate Swedish suppliers.
EKN, the Swedish Export Credit Agency, is facilitating the project with a guarantee for payment and financing to a major European bank that is financing the project. “One advantage with financing support from EKN is the triple-A credit rating – a rating insurance that means banks can fund with low risk,” says Björn Olausson, President of Elof Hansson International.
Sweden is one of about 10 countries in the world that has received the AAA credit rating.
In order to benefit from EKN’s export credit guarantee, about 30 per cent of the content in the Israeli-Suriname project had to be Swedish. Olausson has managed to ensure this, by finding approximately 25 potential Swedish suppliers, including TetraPak, DeLaval, Lantmännen Maskin, MAFA and even a supplier that could send pregnant Swedish cows to Suriname for the development of milking and dairy operations. None of these suppliers had operations in Suriname, yet Olausson says it wasn’t too difficult to find the right suppliers for the LR Group project.
“We have such a diversity of Swedish suppliers in the water treatment, agriculture and dairy segments,” he says. “Sweden is an export-driven country and TetraPak, DeLaval and other big companies have operations close to Suriname, such as in Panama and Argentina. It was harder getting suppliers among the SMEs who are not used to exporting.”
The Swedish content is quite low compared to what some other credit agencies are offering and this is what made the financing feasible, says LR Group’s Yehoshua (Shuki) Raz, Director, Project & Structure Finance. “This is the main reason why we have chosen EKN along with the fact that EKN was willing to take on the full project cost of EUR 60 million plus premium. Financing is the key issue and this gave us the incentive to find Swedish suppliers.”
Raz says another advantage with EKN’s guarantee is that there are no country limitations. The Swedish credit agency will support projects anywhere in the world, take on large projects and issue one guarantee to cover all costs.
Now, demand for Elof Hansson’s services as an EPC contractor is also rising as a result of EKN’s financial support. “And in addition to Elof Hansson acting as an EPC contractor we are also being approached by international banks and non-Swedish contractors to facilitate the Swedish supply chain,” says Olausson. “It is difficult for foreign companies to know who the Swedish suppliers are, and it is much easier for the Swedish suppliers, especially the SMEs, to discuss the project with us rather than with non-Swedish contractors.”
Raz acknowledges that Elof Hansson’s involvement was vital for the project. “We have worked with this approach a lot in Africa and elsewhere. It is easier for Elof Hansson to find the Swedish suppliers and then we take care of the rest,” says Raz, who highlights some benefits to working with Swedish suppliers: “The quality is excellent – from chicken houses to feed mills, and you can trust Swedish suppliers on timetables and meeting all the criteria on environmental impact assessments. But financing is the winning card in emerging markets. It really is a win-win for everybody putting this together. This is a model that can be taken to other sectors to supply similar projects to any country in the world.”