Since 2002, the Government has been authorised by the Riksdag to commission the Debt Office to enter agreements with two companies on co-financing of civil aviation industry projects.
The companies are Saab AB and GKN, which participate in various development projects in the civil aviation industry.
The Debt Office has provided three so-called royalty loans to GKN Aerospace Sweden AB, previously Volvo Aero Corporation. The loans co-financed the research and development of components for the aircraft engines Trent 900, Trent XWB and GEnx. The Trent engines are built by Rolls Royce and fitted in the Airbus A380 and A350 XWB respectively. GEnx is built by General Electric and is fitted in the Boeing 747 and 787.
A previous royalty loan to Saab AB co-financed the company's development of wing spars for the Airbus A380.
Revenue-based repayment
The royalty loans entail that GKN pays a royalty (a percentage) to the Debt Office on their revenues from the sale of the aircraft engines. They pay no fixed interest or amortisation.
The royalty is intended to repay the Debt Office's co-financing of the research and development project. It should also cover borrowing and administration costs and compensate for the risk.
The Government has chosen to subsidise the royalty rate that the Debt Office has offered GKN. Part of the cost of the loan is thus funded from the central government budget.
The Debt Office has paid out a total SEK 766 million in royalty loans. The loans are expected to generate income for the Debt Office over the next 20 to 40 years.
The above-mentioned loan to Saab AB has been repaid and will no longer generate any royalties, since manufacture by Airbus of the A380 has been discontinued and hence no new wing spars will be sold.