The Debt Office’s guarantees

The Debt Office has large commitments in the form of guarantees for infrastructure projects, credit institutions and pensions for employees of government agencies that have been privatised, such as the former Swedish Post Office.

A guarantee constitutes a risk, which is usually shared by the central government and the lender. For this reason, a guarantee should never cover the full amount. There are different types of guarantee commitments.

Credit guarantees

Standing surety for someone else’s loan, i.e. acting as guarantor, is the type of guarantee most commonly provided by the Debt Office. The borrower pays a fee to compensate for the risk accepted by the Debt Office.

Pension guarantees

When government agencies started being privatised in the early 1990s, their pension undertakings were transferred to the new company and are guaranteed by the Debt Office. These relate to former government agencies such as the Post Office, the National Forest Enterprise and the National Board of Public Building. The single largest undertaking is PostNord. Some of these undertakings are insured with PRI Pensionsgaranti. This means that the Debt Office has issued a supplementary guarantee, should the company or PRI be unable to pay out pensions.

On 31 December 2018, the pension guarantees amounted to approximately SEK 8 billion, of which SEK 5.5 billion was insured with PRI.

Capital guarantees

A guarantee to inject capital under certain future circumstances is a type of guarantee that is becoming increasingly uncommon. Only the Riksdag and the Government can commission the Debt Office to issue such guarantees.

  • A guarantee fund is a guarantee to inject capital in a company that is in a vulnerable position. This guarantee is valid for a limited time with a limited amount. The Debt Office has issued a guarantee fund for Svenska Skeppshypotek for SEK 350 million, which is valid until 2039.
  • A capital adequacy guarantee is similar to a guarantee fund, but has no limitation in terms of time and amount. It is an unlimited undertaking, which makes the risk difficult to assess.
  • Callable capital for international financial institutions – Sweden is a member of several multilateral financial institutions, such as the Nordic Investment Bank. The membership is based on authorised capital, provided in the form of callable capital, which means that the central government via the Debt Office is obligated to inject the capital requested by the institution. This is an unlimited credit, for which we keep a special reserve. Payments from this reserve are then subsequently deducted from the appropriations for the ministry concerned.
  • Guarantee programmes are a more standardised initiative to support a certain industry or field. These may for example relate to the shipbuilding industry or to national emergency preparedness.

 

The Debt Office's guarantees

The Debt Office manages a credit guarantee for the benefit of Eurofima, a supranational organization owned by a number of railway administrations in Europe. Eurofima finances railway equipment purchased by its shareholders.

This undertaking means that the Swedish government guarantees Eurofima's financing of railway equipment together with the other shareholders until 2056. The Swedish government owns 2 percent of the shares in Eurofima. The ownership is administrated by the Ministry of Enterprise.

The extent of the guarantee equals the owner share, up to a maximum of 52 million Swiss franc (the size of subscribed share capital). Per 31 December 2014 Eurofima had financing contracts totalling 16.7 billion Swiss franc (132 billion kronor).

The guarantee can only be invoked if a loan default exceeds Eurofima's guarantee reserve and remains unmet by the defaulting railway's government.

In 1999, the Debt Office issued a credit guarantee to the foundation Stiftelsen Gällöfsta Utbildningscentrum on the Government's commission.

The foundation, for which the Ministry of Defence has financial responsibility, conducts educational activities and conferences. The credit guarantee refers to the foundation's loan for investments in the facility. It was issued when the foundation went from being financed via appropriations to running their operations under market conditions.

To start with, the credit guarantee amounted to SEK 13.5 million. As of 30 June 2015, we guaranteed SEK 9.7 million. The loan must be repaid in 2029 when the guarantee expires.

Our largest individual guarantee undertaking is the credit guarantees for the bonds of Öresundsbro Konsortiet, a consortium owned by one Danish and one Swedish company.

The consortium financed the building of the Öresund Bridge between Sweden and Denmark by issuing government guaranteed bonds on the international credit market.

The bonds are guaranteed jointly by the Danish and Swedish governments via Danmarks Nationalbank and the Swedish National Debt Office. When the Öresund Bridge was opened for traffic on 1 July 2000, the debt amounted to the equivalent of approximately SEK 24 billion.

The consortium runs and manages the bridge and will use the profits it generates to pay off the debt incurred to finance its construction. The length of time this will take depends largely on traffic trends and the revenues brought in by the bridge. The debt is expected to be repaid by around 2035, according to a forecast made when the bridge was opened.

The Nordic Investment Bank (NIB) is jointly owned by the Nordic and Baltic countries. Its purpose is to promote sustainable growth among its member states by providing long-term financing for select projects.

The Nordic Investment Bank was founded in 1976 with the aim of strengthening and developing Nordic cooperation.

We have been commissioned by the Riksdag and the Government to issue guarantees for two of NIB's loan portfolios – the Project Investment Loan Facility and the Environmental Loan Facility.

Project Investment Loans

Back in 1982, the Debt Office granted NIB a credit guarantee for its loans related to project investments outside of the Nordic region. The purpose of this loan facility is to promote internationalisation of various sectors and industries. The projects financed via the loan facility must be of mutual interest for the member states and the receiving country.

Loans are issued directly to individual projects or via financial intermediaries primarily in the sectors of infrastructure, energy, telecom, environment and heavy industry. Today, the bank focuses on nine countries in which they wish to have a stronger presence. The countries are Brazil, India, China, Poland, Russia, South Africa, Ukraine, Vietnam and Belarus.

The portfolio's loan commitment amounts to EUR 4 billion. NIB's member states guarantee 90 per cent of the losses on each loan, up to a maximum amount of EUR 1.8 billion. The guarantee undertaking for the Swedish Government is limited to EUR 671 million.

Environmental Loans

The Debt Office issued a credit guarantee to the Environmental Loan Facility in 1995. The programme covers loans for financing important and prioritised environmental projects in the proximity of the Nordic region, in countries such as Poland, Russia, Ukraine and Belarus. The total project frame amounts to EUR 300 million, of which the Swedish Government has an undertaking of a maximum EUR 104 million.

The work on Arlandabanan started in 1995 as a collaborative project between the Government and the private industry. The purpose of the project was to finance, build and run Arlandabanan; the railway connecting Arlanda Airport to the rest of the national rail network.

The wholly state-owned company Arlandabanan Infrastructure AB, previously Arlandabanan Projekt AB, is tasked with preserving the Government's rights and obligations in accordance with the agreements made between the parties involved.

The company's equity capital is small in relation to its undertakings in the project. The Swedish Civil Aviation Administration and Swedish Rail Administration (now the Swedish Transport Administration) therefore issued a capital adequacy guarantee in 1996. The guarantee ensures that the company has sufficient funds to fulfil its obligations, primarily to the company A-Train AB, which has the right to use of the track for 40 years.

As the shares in the company were transferred to the Ministry of Enterprise, Energy and Communications, the Debt Office took over responsibility for the capital adequacy guarantee. Any payment will therefore be made by us, for which we are then compensated by the Swedish Transport Administration.