Analytics, Banks, EU – Baltic States, Financial Services, Modern EU

The general rule is that the EIB is usually financing up to 50% of the investment projects; in the Danish case, it is the co-investment platform by 50/50 ratio from the EIB and Vækstfonden resources. Aiming at the cumulative effect, the co-financing is expected to attract support from private investors too, which potentially would double the total size of the platform to about € 300 mln.

The main co-financing arrangements include: the EIB’s €75 mln equity-type financing agreement with the Danish NPI Vækstfonden; the deal creates a co-investment platform to fill a market gap in Danish venture capital landscape through equity participations in local SMEs and Mid-Caps; and the agreement has been supported by the European Fund for Strategic Investments (EFSI), adopted in 2015.

The EFSI provides first loss guarantees, enabling the EIB to invest in more projects that often come with greater risks. The projects and agreements approved for financing under EFSI are currently expected to mobilise €439.4 billion in investments; the Plan is currently supporting more than one mln start-ups and SMEs in 28 EU states.

More on EFSI in: https://www.eib.org/en/efsi/index.htm; additional on the EU’s Investment Plan in: https://ec.europa.eu/commission/priorities/jobs-growth-and-investment/investment-plan-europe-juncker-plan_en

The European Investment Bank (EIB) is the EU long-term lending institution financed by the EU member states. It makes long-term finance available for sound investment in order to contribute towards EU policy goals. In 2018, the EIB made available slightly over €430 mln in loans for several Danish projects in various socio-economic sectors; besides, the Danish Vækstfonden is a longstanding partner to the EIB Group.

The agreement will allow Vækstfonden to provide a total of €150 mln (DKK 1.12 billion) for Danish businesses that are either “ready for growth” or in their second phase of growth. These refers to SMEs or Mid-Caps that need investment to further innovate and expand their service and product offering, to increase their productivity levels and manufacturing capacity, or that want to expand internationally.

Official opinion

Several EU institutions’ officials commented on the EIB’s co-financing; thus, the Commission vice-president Valdis Dombrovskis underlined that the EU’s Investment Plan had been a success story for SMEs in Europe: more than one mln SMEs were already benefitting from improved access to finance. The present agreement with the Danish NPI will make a positive impact on businesses in Denmark, he added.

Danish Minister of Industry, Business and Financial Affairs, Simon Kollerup stressed that the agreement is “a unique one, which will have a significant impact on the Danish SMEs potentials for growth. Furthermore, he added, it will be an important instrument to gear private capital and strengthen the Danish risk capital system.  

EIB Vice-President, Alexander Stubb mentioned that the SMEs and Mid-Caps are important drivers of innovation and job creation in Europe; therefore, it is very positive that the EIB can provide additional value to the financing capabilities of Danish SMEs by new equity-type cooperation with Vækstfonden. The Bank’s collaboration with national business promotional institutions is very important to the EIB, he added.

The Danish Vækstfonden chairperson, Claus Gregersen stated that the new agreement was a unique EIB-Denmark cooperative facility in the sense that it gives the Danish growing companies an ample opportunity for substantial investments thereby providing them with the capital they need to continue their growth and ensuring successful Danish entrepreneurship both in Europe and globally.

The Danish growth fund, NPI

The Danish Growth Fund (Vækstfonden) is an independent fund governed by an independent legal act and an independent board of directors. The act concerning Vækstfonden stipulates that the fund must promote growth and renewal for small and medium-sized enterprises in order to achieve a greater socio-economic return. The fund contributes to the creation of new companies by providing capital and expertise. Since 1992, Vækstfonden has co-financed growth in more than 7,900 companies with a total commitment of more than DKK 24,9 billion. Vækstfonden provides loans and guarantees in collaboration with Danish financial institutions and European partners.

In the conclusion, I would underline that the Baltic States have to be more active in using existing EU’s investment potentials for the sub-regional growth and SMEs.