THE NORWEGIAN AGENCY FOR LOCAL GOVERNMENTS - DECEMBER 2019 - Kommunalbanken
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KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
DECEMBER 2019
THE NORWEGIAN
AGENCY
FOR LOCAL GOVERNMENTS
MAIN ANNEXES
KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
CONTENT
MAIN
KBN OVERVIEW
KINGDOM OF NORWAY
LENDING OPERATIONS
FUNDING OPERATIONS
ANNEXES
KBN GREEN BONDS
KINGDOM OF NORWAY UPDATE
KBN FINANCIALS AND OPERATIONS
MAIN ANNEXES
KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
KBN OVERVIEW
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 3
KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
Fundamentals
Norwegian State Agency created by Act of Parliament in KBN is guided by prudent financial and risk management policies.
1926/1999, having a public policy mandate from the central Funding transactions are hedged and KBN maintains liquidity in
government to provide low cost finance to the Norwegian local excess of policy requirements.
government sector.
KBN is the closest proxy to Norwegian sovereign risk available in
100% owned by the Kingdom of Norway (Aaa/AAA) and managed in international currencies.
accordance with the Central Government Maintenance Statement.
Owing to full state ownership, the central public policy mission, a
KBN’s sole purpose is to grant loans to local and regional strong capital base, solid financial and operating performance and
governments or inter-municipal companies, in line with KBN’s prudent financial and risk management policies, KBN is assigned
public policy mandate. Triple-A ratings by Standard & Poor’s and Moody’s.
Excellent asset quality, KBN’s focused, specialized monoline lending Staffed by 76 employees, KBN maintains headquarters in Oslo.
model has never suffered a loan loss.
KBN’s mandate for sustainable financing of the local government
sector is viewed as an important contribution for the Norwegian
government to reach its climate goals.
AAA/Aaa 100% Central Central Government 100% of local Closest proxy to
(stable/stable) Government Maintenance governments as Norwegian sovereign
owned Statement clients. No loan risk
losses ever.
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 4
KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
Norwegian State Ownership
KINGDOM OF NORWAY 100%
BOARD OF SUPERVISORY
DIRECTORS (9) BOARD (12)
The Central government through The Ministry of Local Government
and Modernisation appoints both governing bodies; Board of Directors
and Supervisory Board.
KBN’s ownership is limited to the public sector
According to Constitutional requirements in Norway, material changes
to KBN’s business model would need the consent of the Parliament
KBN is supervised by the Norwegian FSA (“Finanstilsynet”), the national
financial regulator.
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 5
KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
AAA Rating In Line With Sovereign
CREDIT RATINGS RATING THEIR COMMENTS
LONG SHORT OUTLOOK AGENCY
• Norway continues to benefit from a prosperous economy, strong fiscal and
external positions, and a stable policy environment.
• The stable outlook reflects our expectation that Norway's credit metrics will
AAA A1+ Stable remain very strong over our 2019-2022 forecast period, enabling the country to
withstand the negative effect of potential oil price shocks, possible
escalation of global trade tensions, or a severe housing market correction.
(MARCH 2019)
• Resiliant and Highly competitive economy.
• Norwegian government’s balance sheet is extremely strong, even when
compared to other Aaa-rated sovereigns.
Aaa P-1 Stable • Unparalleled fiscal strength that is likely to be sustained over the long-term.
• A Track record of exceptionally strong macro and regulatory institutions.
(JUNE 2018)
• Integral link with Norway’s central government.
• Kommunalbanken performs an important public policy function.
AAA A1+ Stable • Very strong an stable capitalization levels
• Extremely high likelihood of extraordinary support from Norwegian government.
(JUNE 2019)
• KBN benefits from operating in a wealthy and developed country with very high
economic, institutional and government financial strength, as well as low
susceptibility to event risk.
Aaa P-1 Stable • We consider the Norwegian RLG sector financially strong because of the
supportive and closely supervised system that underpins the sector
• KBN has not recorded any loss from lending during over 90 years of operations.
(JUNE 2019)
Credit ratings do not constitute investment or financial advice, and credit ratings are not recommendations to purchase, hold or sell particular securities. Credit ratings do not comment on the suitability of an investment for any particular investor.
There is no assurance that any rating will remain in effect for any given period of time or that such rating will not be revised or withdrawn entirely by a rating agency in the future if, in its judgment, circumstances so warrant.
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 6
KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
Norwegian Regional Government
Norway’s Counties and Municipalities form an integral part of the Number Share of Overall Loans
national economy.
Counties 17* 11%
Governmental responsibilities are divided between the Central
government, Counties and Municipalities. A large part of welfare Large Munis 59 32%
and infrastructure provisions in Norway are assigned to the Local Medium Munis 143 25%
governments.
Small Munis 220 13%
The majority of KBN lending is made directly to counties 11%,
municipalities 70% and road projects 10%. KBN’s county and
municipal portfolio can be broken down as follows1:
KBN also finances lending to companies and road projects, as well as to
inter-municipal companies. Loans to these entities must carry either an
explicit municipal or central government guarantee.
1 Large munis = > 20,000 inhabitants, Medium-sized munis = 20,000 ≤ 5,000
inhabitants and Small munis = < 5,000 inhabitants.
* Oslo is the only Municipality which is also a County and for these statistics has
been included as a large Muni.
1 18 422
CENTRAL COUNTIES MUNICIPALITIES
GOVERNMENT
CUSTOMERS
• Police • Secondary Education • Primary Health Care
• Universities • County Roads • Primary Education,
• Hospitals • Transport • Housing
• Highways • Social Services
• Interregional Transport • Public Utilities
• Transport
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 7
KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
Corporate Social Responsibility
Counties and municipalities have an “We want KBN to continue to
important position in Norwegian be a driving force in the
development of the market for
society, and account for a large
green financing and to increase
proportion of public sector services the proportion of its lending
production. As a government that is for green projects.”
agency, KBN recognizes its critical
role in enabling the local and
regional governments to improve MONICA MÆLAND
quality of life across the country. Minister of Local Government and Modernization
Long-term Financing for Sustainable Growth The Board of Directors has identified four of the UN’s Sustainable
KBN maintains a strong focus on environmental, ethical and social Development Goals that to the largest extent are impacted by
issues and expects its partners and suppliers to mirror these KBN’s operations.
commitments.
Responsible lending is at the heart of KBN’s business model, Ensure availability Take urgent action
and sustainable to combat climate
ensuring lending activities support and encourage clients to management of change and its
manage borrowings and investments in a long-term sustainable water and impact
manner. sanitation for all
The integrity of KBN’s Green lending framework has been awarded
a “Dark Green” rating by CICERO, the highest possible rating. Make cities and Strengthen the
human settlements means and
inclusive, safe, implementation
resilient and and revitalize the
sustainable global partnership
for sustainable
development
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 8
KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
Conservative Risk Management
KBN’s follows conservative and prudent risk The first priority for KBN’s risk management
management policies for all financial professionals is to secure access to market
transactions. funding on competitive terms.
CURRENCY AND INTEREST MINIMAL LENDING STRICTLY MANAGED OFF- CONSERVATIVE LIQUIDITY
RATE RISK HEDGED CREDIT RISK BALANCE CREDIT RISK PORTFOLIO
• Proceeds from funding • Loans are only granted to local • KBN proactively manages risk via • Liquidity managed conservatively
operations are hedged for and regional governments as well derivative strategies, negotiated and in excess of policy or
currency and interest rate as inter-municipal companies and under ISDA contracts with more regulatory requirements.
exposure and swapped into other public sector enterprises than 30 financial institutions.
3-month floating rate EURs, NOKs which are municipally
• Portfolio of highly rated liquid
or USDs. guaranteed.
• Counterpart risk is minimized via assets 0%, 10% and 20% risk
two-way Credit Support Annexes weight, cover 1 year net debt
• Strict government oversight of (CSAs), cash collateral posting service.
local and regional government required with zero thresholds for
financial management, via the counterpart ratings below AA-
ROBEK list and Local Government /Aa3.
Act §55, negate potential loan
losses.
• KBN currently marks and
exchanges collateral for the
• KBN has suffered no loan losses majority of positions on a daily
in over 90 years. basis, and also uses over
collateralization and independent
amounts for some counterparts.
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 9
KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
Large and High Quality Liquidity Buffer
Managed under a conservative policy framework to ensure
liquidity is available to cover a minimum of 12 months of debt
servicing under various stress-tested models. Size approximately
USD 12 bn and managed internally across EUR, NOK and USD.
The average portfolio maturity typically ranges between 1.5–2.0 KBN also complies with LCR regulatory considerations and
years (1.0-1.5 years ex. UST). maintains cash liquidity to cover 30 days worth of debt
The majority of liquidity is invested in 0% risk-weighted assets.
redemptions.
Eligible securities include; sovereigns, provincial states, government As an extra buffer, additional buckets of liquidity are also
agencies and supranationals. Investments in covered bonds and maintained in USD and NOK and invested solely in US Treasuries
financial institutions are permissible, subject to rating restrictions. and Norwegian government papers.
PORTFOLIO BREAKDOWN
1.81 yr average maturity on liquidity portfolio (1.02 yr ex. UST) Oct 2019
Japan
Non rated (
20% RW 4% Other
Scandi/Dutch muni)
A/a 2% Canada 5%
3% UK
8% 4% Scandi
6%
32%
10% RW Benelux
AAA/Aaa 30% CHE 2%
43 % 3% GEOGRAPHY
RATING RISK WEIGHT Supra
5%
France
AA/Aa 6%
46 %
0% RW Germany
68% UST 17%
15%
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 10KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
Robust Financial Strength
Strong operating results and capital injections in 2008, 2012 and 2015 have SOLID BALANCE
substantially strengthened the capital base in recent years. SHEET
EQUITY &
Tier 1 capital has risen from 7.5 % in 2008 to 20.4% in Q3 2019.
ASSETS LIABILITIES
While KBN is not profit maximizing, it does target a central government defined 8% KBN’s balance sheet of
return on equity target. USD 52.6 bn eq. is
supported by a broad,
Dividend paid to the Kingdom as owner. If the government ascertains that KBNs capital diversified portfolio of
situation is satisfactory, up to 50% of KBN budgeted profit can be paid as a dividend. loans to the country’s
local authority sector,
KBN maintains significant capital buffers above the regulatory requirements. which cannot go
bankrupt by order of
KBN has been designated a systemically important financial institution in Norway and is Norway’s Local
thus subject to stricter regulatory oversight and is required to hold additional capital as Government Act §55
a result. Given that KBN has never experienced a loan loss and there has been no (1992).
change to KBN’s risk profile, the agency is today very strongly capitalized.
KBN maintains a LENDING BORROWINGS
short-term liquidity
portfolio to cover at Norwegian
least 12 months of local gov.
2500 30 future debt service
CAPITAL
%
USD MN
and potential loan
STRUCTURE disbursements.
25
2000
There is no separate
20 investment portfolio.
1500
15
Subordinated (USD) 1000
Additional Tier 1 (USD)
10
Sub debt
LIQUIDITY 225mn
Tier 1 capital* (USD) 500 PORTFOLIO
5 Add Tier 1 Cap
Capital Ratio 250mn
Tier 1 ratio 0 0 Equity
2011 2012 2013 2014 2015 2016 2017 2018 Q3 2019 1.5bn
* Paid-in capital and retained earnings USD/NOK 9.00
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 11KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
Sound Financial Performance
KBN has enjoyed strong net operational income results for the past KBN also operates with a low cost ratio of approximately 0,05% of
years, backed by consistent loan growth since 2008. total assets
The recent history of solid operational income reflects well on Unrealized gains and losses on the Income Statement primarily
KBN’s conservative lending mandate and solid margins during the reflect volatility in mark-to-market derivatives used for hedging
financial crisis. KBN maintains financial performance targets to under IFRS accounting, linked in part to exchange rate
balance its state instrumentality role with ensuring it remains a developments.
financially viable institution.
KBN’s total Liquidity Coverage Ratio is well within policy guidelines
and the leverage ratio of 3.5% is considerably above the prescribed
regulatory minimum level of 3%.
FINANCIAL RESULTS
(All figures USD bn eq*) Net operational income Unrealised gain/loss
350
2015 2016 2017 2018 Q3 2019 300
250 124
Total Assets 49.9 46.5 45.9 50.9 52.6
200 38
Loan Portfolio 28.3 29.6 31.3 33.6 33.9 150
100 211 216 180
Leverage Ratio 2.58 2.65 3.68 3.60 3.50 163 129
50
Operating expenses/
total assets 0.034% 0.042% 0.047% 0.046% 0.052% 0 -18
-50 -4
-108
Return on Equity** 11.70% 12.74% 13.51% 9.8% 8.6%
-100
-150
* USD/NOK 9.00 2015 2016 2017 2018 Q3 2019
** Core earnings
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 12KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
KINGDOM OF
NORWAY
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 13KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
Overview
60%
WOMEN’S SHARE OF
GRADUATES FROM
UNIVERSITIES:
POPULATION:
5,323,000
RANK IN GENDER EQUALITY
IN THE WORLD ECONOMIC
FORUM GLOBAL GENDER
GAP REPORT:
2nd
COUNTRY SIZE:
MAJOR EXPORT SECTORS:
323 809 km2
• OIL and GAS
• FISH
FOREST SHARE OF TOTAL LAND AREA:
• MARINE TRANSPORT
37,4% • METALS
OSLO GDP PER CAPITA (USD): OSLO AWARDED EUROPEAN
GREEN CAPITAL
Ranked 4th AWARD 2019
Sources:
Statistics Norway (2018), WHR (2018), Global Gender Gap
Report 2018 EGC (2019), European Green Capital Award 2019,
StatisticsTimes
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 14KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
Strong and Diversified Norwegian Economy
GENERAL GOVERNMENT FINANCIAL BALANCES
Norway’s economic fundamentals remain robust. At USD 367 bn1
(% GDP)
eq, Norway’s GDP is broadly diversified across a range of productive
15,0
sectors. Norway is one of the world’s wealthiest countries, with a
GDP per capita of approx. USD 69,000. 10,0
Key economic indicators underline the economy’s strength2 : 5,0
Current Account Surplus: 8.1%
GDP Growth: 2.4% 0,0
Inflation: 2.2%
-5,0
Unemployment: 3.6%
-10,0
Norway’s macroeconomic environment pillar ranks first in the 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E
Source: OECD Economic
World Economic Forum’s 2017-2018 rankings. 3 Norway Euro area Outlook No. 106 Nov 2019
The government has managed a solid current account surplus for GENERAL GOVERNMENT NET FINANCIAL LIABILITES
the past decades and estimates continued surpluses going forward. (% GDP 2019)
KEY ECONOMIC INDICATORS Norway
5,0 % 4,7 % Finland
4,5 % 4,2 % Sweden
3,8 % 3,7 %
4,0 % 3,6 % 3,6 % Denmark
3,5 % Germany
3,0 % 2,7 % 2,4 % Ireland
2,5 % 2,2 %
2,0 %
Euro Area
2,0 % 2,2 % 2,2 %
1,5 % 1,1 % 1,8 %
France
1,8 %
1,0 % USA
0,5 % Spain
0,0 % UK
2014 2015 2016 2017 2018 2019E 2020E
Italy
GDP growth Inflation Unemployment
-350 -300 -250 -200 -150 -100 -50 0 50 100 150
1 NOK/USD conversion rate = 9.00
2
Source: OECD Economic Outlook No. 106 Nov 2019 / Statistics Norway
Statistics Norway Debt measures are not always comparable across countries due to different definitions
3 World Economic Forum Global Competitiveness Report, 2017
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 15KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
Strong and Diversified Norwegian Economy
The oil and gas industry (including supporting industries) constitutes approximately 20%
of Norwegian GDP.
NORWAY
The petroleum sector maintains its position as a major contributor to the overall trade GDP Taxes and subsidies
balance and current account surplus, however, Norway’s industrial base continues to products Petroleum Activities
11% and Ocean Transport
diversify with growth from other major industries: 15%
Local Government
9% Manufacturing
– fishing/aquaculture, shipping, metals and mining, timber – pulp and paper, and Mining
manufacturing and machinery, construction and chemical products Defence 1% 7%
Norway’s reliance on primary industries has decreased as Service Activities make up a Central USD 367bn Production of
Government Other goods
larger portion of GDP. This includes Transport and Communication, Financial and 8% 10%
Business Services, Telecommunication and Information Services and Tourism.
The UK is one of the largest export counterparties due to the high volume of crude oil
and natural gas exports. Considerable volumes of petroleum products are also exported
Service Activities
to Germany, the Netherlands and France. Norway’s largest trading partner in relation to 38%
Source:
goods and services import is Sweden. Imports from China have also grown in recent Norwegian Bureau of
years, and now constitute a significant part of imported goods. Statistics, Year end 2018
EU countries account for just over 80 percent of Norwegian exports of goods compared
to just under 60 percent of imported goods. NORWAY
EXPORT Investment
EXPORTS OF GOODS AND SERVICES IMPORTS OF GOODS AND SERVICES Consumption 5%
(2017) Goods
(2017) 12% Intermediate
UK Goods Services Sweden Goods Services Goods
19%
Germany Germany
Netherlands USA Construction
USD 110bn 3%
Sweden China
USA UK
Denmark Denmark Energy
62%
China Netherlands Source:
Norwegian Bureau of
USD BN - 5,00 10,00 15,00 20,00 25,00 30,00 USD BN - 2,00 4,00 6,00 8,00 10,00 12,00 Statistics, Year end 2018
Source: Statistics Norway (USD/NOK = 9)
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 16KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
Norway Sovereign Wealth Fund
– A Long-term Contributor To The Nation’s Wealth
Norway’s sovereign wealth fund (Government Pension Fund Global VALUE OF GOVERNMENT PENSION FUND GLOBAL (GPFG)
– GPFG) has current assets of USD 1.1 trillion (NOK 10.0 trillion eq). as of Jan 1. (2020 - 2023 EST.)
This ranks the GPFG as the world’s largest SWF.1 The size compares
to almost 300% of Norway GDP and 700% of the national budget. 1400
1200
The GPFG accumulates all petroleum related government revenue
surpluses and has the ability to use a portion of the fund to finance 1000
counter-cyclical fiscal policies. Thus, the GPFG is fully integrated
USD BN
800
with the State Budget.
600
The Fund’s liquidity is invested entirely in overseas markets across
equity, fixed income and real estate holdings, to avoid distorting 400
the domestic economy. 200
Fiscal rule states up to expeted average real rate of return of GPFG 0
can be used to balance budget. 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Expected average real rate of return 4% 1998 - 2017 and adjusted EXPECTED NET REAL RETURN AND ACTUAL * USD/NOK 9.00
to 3% from 2018 onwards due to lower rate environment. WITHDRAWAL FROM GPFG
From 1998 to 30. Sept. 2019, the Fund’s actual average annual net 40
real rate of return has been 4.0%.
35
The history, objectives and management of the Norwegian 3%
30 4%
sovereign wealth fund can be explored further here:
25
http://www.nbim.no/en.
USD BN
20
15
10
5
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
1 – Sovereign Wealth Fund Institute : August 2018 Budgetary Withdrawls (USD) Fiscal Rule 4% (USD) Fiscal Rule 3% (USD)
* USD/NOK 9.00
* USD/NOK 8.00
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 17KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
LENDING OPERATIONS
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 18KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
KBN Lending Across Norway
KBN oversees a diversified loan portfolio of USD 34bn*. This reflects
a market share of approx. 50% of all client borrowings. 100% of
Norway’s 18 counties and 422 municipalities are borrowing clients
of KBN.
KBN’s clients all have equal access to KBN funding, at comparable
levels in order to deliver welfare services on behalf of the central
government.
KBN loans are used to implement a broad range of key social
projects
LOANS TO THE NORWEGIAN LOCAL Other
GOVERNMENT SECTOR 9%
Education –
Culture Schools and
KBN WITH APPROX 50% MARKET SHARE OF ALL 8% Buildings
CLIENT BORROWINGS CLOSELY MIRRORS 26%
THE SECTOR AS A WHOLE
Water Supply and
Waste Disposal
12%
BY 2018 KBN HAD COMPLETED
Administration USD 2.2 BN IN LENDING
Social Housing
3% to climate-friendly projects
11%
across a broad range of project
Health Services categories. This represents
11% 6.2% of the total lending
portfolio.
Infrastructure
20% For 2018, green loans
represented 36% of KBN’s
* USD/NOK 9.00 overall lending growth.
Source : Statistics Norway / Kostra Registry
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 19KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
The Norwegian Local Government Sector is Financially Robust
The sound financial position of the Norwegian local government sector and the strict
financial framework within which it operates make the whole sector and individual MUNICIPAL
entities highly creditworthy borrowers. REVENUES
Other
7%
Sound Revenue Foundation
Public
Government
KBN benefits from an extremely solid customer base: services
transfers
14%
39%
– Municipal authority is seen as a delegated state authority as they are not defined a
legal entity in the Norwegian Constitution.
– They receive a large proportion of revenue from central government transfers, in
order to ensure a unified service delivery throughout the country.
Close Supervision and Control
Taxes
All local government budgets are monitored and supervised by the central government. 40%
Strict limits are in place to manage financial conduct.
Under the Local Government Act, counties and municipalities are prohibited from going
bankrupt. Thus, they are subject to extensive central government oversight and regular
reporting requirements. MUNICIPAL
Counties and municipalities can not budget for an operating deficit. If facing a deficit, the EXPENDITURE
local government will be placed on a list for contingent control (ROBEK List) and the Other 13 %
central government must explicitly approve all borrowings and guarantees until the deficit Water supply
is eliminated (within maximum 3 years). and
Waste disp. Health services
Culture4 % 33 %
Borrowings may only finance primary investments. No commercial projects or guarantees 4%
for private-sector third parties are permitted. Administration
6%
KBN has more than 90 years of operating experience and strict centralized control
enhances financial discipline. Social Services
8%
KBN has never suffered a loan loss.
“Norwegian local governments are among the most regulated Education
Source: Ministry of 32 %
and supervised in Europe” - Moody’s Investors Services, June 2013 Local government and
Modernisation, 2018
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 20KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
KBN Lending – Supports the Nation’s Economic & Social Welfare
KBN offers a range of flexible financing structures to its borrowing developments based on data from the government KOSTRA
clients. KBN’s competitive advantage is in providing, at all times, Registry*. Lending decisions can thus be made quickly, due to
stable funding solutions to the local government sector. This centralized oversight of client finances and KBN’s ongoing credit
reflects KBN’s core public policy mandate as a strategic long-term review processes.
partner for the country’s framework of social services.
Loans for Green projects are all analyzed individually. KBN’s Green
Loans are only extended in NOK and KBN does not differentiate lending model follows international best practice for transparency,
between any clients on loan pricing. Local government use of proceeds analysis and impact reporting.
creditworthiness is viewed equally due to the central government
An ongoing amalgamation process of local governments is helping
oversight and support, ensuring that clients are able to offer a
unified standard of services across the country. smaller and medium-sized municipalities gain economies of scale in
administration, management, operations, resulting in efficiency and
KBN reviews local governments annual borrowing requests to cost-effectiveness. Plans are in place to reduce the number of local
ensure the underlying investment strategies are socially and governments from the current 422 to 358 and Counties from 18 to
commercially viable and fits within its balanced budget. 11 by 2020.
The Credit Risk Management (CRM) department works on a
continuous basis to track and analyze clients’ financial
THE ROBEK LIST * THE KOSTRA REGISTRY
The Register for Governmental Approval of Financial Since 1997, local and regional governments have been
Obligations (ROBEK) is a government register of required by law to register statistics on budget,
municipalities and counties experiencing an operating financial activities and public services in the KOSTRA
deficit. Local governments on this list must have any (Municipality-State-Reporting) database. This registry
new borrowing explicitly approved by the state is managed by Statistics Norway and provides key
representative Fylkesmann in order to be valid. inputs for KBN’s credit risk management models.
Entities on this list have 3 years to balance their
https://www.ssb.no/en/offentlig-
budget. This list is available publicly:
sektor/kostra
https://www.regjeringen.no/en/topics/mun
icipalities-and-regions/municipal-
economy/register-for-governmental-
approval-of-fi/id449305/
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 21KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
Project Examples
SVALBARD (2,310) NORDKAPP (3,239)
• Upgrades for powerstation • Road upgrade
• Increased habour capacity • New cemetery
• New kindergarten • Upgrading harbor facilities
• Upgrade of remote heating • New library equipment
facilities (thermal heating
plant)
FINNMARK (76,167)
• New high school
• Increased capacity of
“In essence, Norwegian local and • New dental clinic
recycling and refuse facilities
regional governments act as delegated • New harbor facilities
• Upgrading energy efficiencies
arms of the central government in the
in county buildings
provision of public services. We view
the Norwegian LRG sector's overall
credit-worthiness as robust.”
- Standard & Poor’s – July 2016
HORDALAND (505,246)
• Hardanger Bridge
• New suspension bridge across
Eidfjorden KONGSVINGER (12,078)
• Total length: 1,380 (30m longer • Kongsvinger lower secondary
than Golden Gate Bridge school
• Built in solid wood
• Financed by green lending rate
from KBN
BOKN (865)
• New multipurpose TØNSBERG (41,239)
sports halls • Greve Biogass: “The magic factory”
• New fire truck • Turning food waste and manure
into fuel
• Financed by green lending rate
from KBN
COUNTIES (residents)
MUNICIPALITIES (residents)
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 22KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS Green Lending Integral Part of Mandate On behalf of the government, KBN has been given a mandate to implement greater environmental and social awareness via Green Lending and thus offers a 10 basis point discount on green loan projects versus traditional lending to all KBN clients. The local government sector is regarded as vital to achieve Norway’s goals under the Paris Climate Agreement, which targets a reduction in greenhouse gas emissions of at least 40% by 2030, compared to 1990 levels. By 2018, KBN had completed USD 2.2 bn in lending to climate- friendly projects representing 6.2% of the total lending portfolio. For 2018, green loans represented a sizeable 36% of KBN’s overall lending growth. MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 23
KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
FUNDING OPERATIONS
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 24KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
Flexible and Diversified Investor-Driven Funding Program
KBN’s annual borrowing program is estimated at USD 12-13bn. DEBT
GBP
PORTFOLIO 5%
KBN has developed a solid international investor base, enabling it NZD
2% NOK
to access broad and well-diversified funding sources. BRL INR 2%
2% 2%
KBN expect to see healthy lending growth going forward and will
Other
remain actively engaged in capital market issuance and market 4%
developments.
EUR
KBN continuously works to gather market intelligence and expand 8%
its network of investors and products. Issuance is conducted via a
range of documentation platforms, enabling access to both USD
AUD 57%
domestic and international investors. KBN manages domestic
10%
borrowing programs in Australia, Canada, New Zealand and Norway
as well as an MTN Programme with a 144a tranche.
JPY
8%
Benchmark pricing strategy
A considerable portion of KBN’s annual borrowing program is raised
*As of Oct 2019
by issuing liquid benchmark securities.
KBN recognizes the value of maintaining a solid partnership with
investors for these offerings, and seeks to offer attractive relative
value, with excellent credit quality. KBN’S FUNDING
Principles guiding benchmark pricing include:
STRATEGY 35-50%
BENCHMARK
Regular consultation with underwriters experienced in target
markets
5-15% 2020
30-40%
Pricing and sizing issues “to clear” OTHER
PRIVATE
USD 12-13 BN INSTITUTIONAL
Performance in secondary markets PLACEMENTS
MARKETSKBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
KBN Funding 2019 YTD
Highlights
Total USD 8bn raised 41 Individual transactions
Issuance in 11 different currencies 4,55y avg maturity of new funding
Newsworthy
USD 1.25 bn 5-year February 2024 Benchmark
AUD 805 mn issuance in Kangaroo market
USD 1.50 bn 5-year June 2024 Benchmark
SEK 3.0 bn 7-year Aug 2026 Green Bond
EUR 1.0 bn 10-year Oct 2029 Benchmark
Africa
Green ME 5,4 %
Fixed Rate Japan
Bond Private 3,5 %
3,9 %
Callable Aust Norway 2,0 %
Retail Placement 2,8 % Asia ex-Japan
FRN 2,6 % 0,4 %
0,3 % 14,1 % 21,4 %
Uridashi 18,4 %
1,0 %
Institutional Synthetic
31,6 %
Markets
1,1%
Structure Geography
Zero Coupon
2019 YTD 0,2% 2019 YTD 2019 YTD Americas ex US
6,0 %
US
Europe 10,0 %
48,7 %
Benchmark Fixed Rate
49,1 % 77,6 %
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 26KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
USD Benchmark Strategy
KBN’s strategy is to issue benchmarks regularly, to: OUTSTANDING
144 A BENCHMARKS
Enhance market presence
Access a wide institutional investor base
5,0 USD BN
Provide liquidity and performance for investors
Issue products in line with market demand 4,5
Build strong long-term investor and bank relationships
4,0
Oct
2021
1.50
For 2020, KBN plans to issue 2-4 USD benchmarks in 3,5
maturities ranging from 2 to 10 years.
3,0
Sep
KBN currently has 12 USD benchmark transactions 2020
Aug
outstanding. The total notional amount is USD 14.5 2,5
1.0
2021
bn. 1.0
June
2,0 2024
Since April 2010, KBN has issued USD benchmarks 1.5
Apr
under RegS and 144a documentation, which 2020 June
provides additional settlement options via DTC. 1,5 1.25 2021
1.0
1,0
Jan Jan
2022 2023 Feb
Jan Feb 1.5 1.50 2024 Apr
0,5 2020 2021 1.25 2025
1.0 1.0 1.0
0,0
2020 2021 2022 2023 2024 2025
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 27KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
USD Benchmark Distribution – Investor Type
INVESTOR TYPE CENTRAL BANK & OFFICIAL INSTITUTION BANKS ASSET MANAGERS / PF & INS
– YEARLY AVERAGES
70%
65% 64%
61%
28%
20% 20% 20%
14% 16%
11% 10%
2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019
DISTRIBUTION ON OCT 2018 @ MS+3 JAN 2019 @ MS+15 Jun 2019 @ MS +15
LAST 3 USD USD 1.5bn 3yr Oct 2021 USD 1.25bn 5yr Feb 2024 USD 1.50bn 5yr Jun 2024
BENCHMARKS
AM / AM /
AM / PF & Ins PF & Ins
PF & Ins 8% 11%
19% Banks
17%
Banks
Banks 24%
13%
CB & Off.
CB & Off.
Inst
Inst CB / OI 65%
68% 75%
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 28KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
USD Benchmark Distribution – Geography
INVESTOR EUROPE US ASIA AMERICAS EX US ME / AFRICA
GEOGRAPHY 36% 37%
35%
– YEARLY AVERAGES 33%
29%
27%
25% 24%
23%
21%
19% 18%
14%
13% 12%
9% 8%
6% 7%
5%
2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019
DISTRIBUTION ON OCT 2018 @ MS+3 JAN 2019 @ MS +15 JUN 2019 @ MS +15
LAST 3 USD USD 1.5bn 3yr Oct 2021 USD 1.25bn 5yr Feb 2024 USD 1.50bn 5yr Jun 2024
BENCHMARKS
ME / Africa ME / Africa
Americas 5% ME / Africa
Americas 5% ex US 11%
Europe
ex US 9%
25%
10% Americas
Europe Europe
37% ex US 36%
15%
Asia
26%
Asia
37%
US US
US
Asia 5%
34% 12%
33%
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 29KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
EUR Benchmark Strategy
Diversifying The Funding Program Via Investor-
driven Issuance
APRIL 2016 @ MS+9 MAY 2017 @ MS+4 Oct 2019 @ MS +7
Broaden the KBN investor
EUR 1.0BN 10Y APRIL 2026 EUR 1.0BN 10Y MAY 2027 EUR 1.0 BN 10Y OCT 2029
base
Expand market presence PF / I
PF / I
Raise visibility in Continental 2%
PF / I 7%
Europe 16 % CB / OI
CB/OI 25% 23 %
Provide liquidity and AM CB / OI
performance for investors 27% AM 38%
AM INVESTOR
INVESTOR 14 %
INVESTOR 31%
Issue in size of EUR 1 bn TYPE TYPE TYPE
minimum
Target maturities from 5 to
10 years Banks
Banks 46% Banks
47 % 24%
Americas Asia ME / Af
Asia Benelux Nordic
Ex US 1 % 0%
11 % 11 % Asia 6% Benelux
1% Benelux Americas 7% 7%
Other 22 % Ex US Americas
Europe 2% Ex US
30 % 9%
INVESTOR INVESTOR INVESTOR
GEOGRAPHY GEOGRAPHY GEOGRAPHY
Other Europe
38 % Germany & Other
Europe Germany &
Switzerland
Germany & 26% Switzerland
38 %
Switzerland 44%
46 %
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 30KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
Other Key Institutional Markets
KBN will continue its strategy to nurture its presence in other public markets with
strategic issues in local currencies. Focus will be on taps and new issues, 2y – 10y+, in all
markets, pricing and market conditions allowing
AUSTRALIA – KANGAROO NEW ZEALAND – KAURI
Currently AUD 7.11 bn outstanding Currently NZD 1.475 bn outstanding
11 issues: 2020, 2021, 2022, 2023, 2024, 2025, 5 issues: 2021, 2023 2024, 2025
2026, 2028, 2029, 2032 Recent Launch:
Recent launch:
- NZD 200mn FRN May 21 Tap
- AUD 50 mn Nov 29
- AUD 350 mn Apr 23 Tap
UNITED KINGDOM – EMTN NORWAY – VPS/EMTN
Currently GBP 1.7 bn outstanding Currently NOK 10.55bn outstanding
4 issues: 2020, 2021, 2022, 2023 9 issues: 2020, 2022, 2023, 2027, 2028, 2029
Recent launch: 2032, 2036
Recent launch:
- GBP 250 mn Dec 21
- GBP 100 mn Dec 23 Tap - NOK 1.0 bn Oct 29
- NOK 1.5 bn Apr 22
SWITZERLAND – DOMESTIC SWEDEN – EMTN
Currently CHF 100 mn outstanding Currently SEK 8 bn outstanding
1 issue: 2021 3 issues: 2022, 2024, 2026
Recent launch:
- SEK 2.0 bn Aug 26 Green Bond
- SEK 4.0 bn Mar 22
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 31KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
Green Bond Issuance
KBN in 2013 was one of the first European SSA issuers to launch Public Green Bond Issuance
a public USD Green Bond.
Nov. 2013 USD 500 mill. 3-year RegS/144A
KBN and the Central government have since prioritized
Feb. 2015 USD 500 mill. 10-year RegS/144A
investments in Green projects in the Local government sector and
subsequently KBN has been an active SSA issuer of Green bonds Oct. 2016 USD 500 mill. 4-year RegS /144A
in several markets.
Nov.2017 NOK 1.35 bn. 10/15-year VPS/NO
With increasing global demand for sustainable and responsible
investments and projects providing a climate benefit KBN will Aug. 2018 AUD 450 mill. 5-year Kangaroo
continue to be an active issuer in the Green Bond market. Aug. 2019 SEK 3.0bn 7-year RegS
KBN offers a 10 basis point discount on Green loans, to encourage Sep. 2019 USD 100 mill. Tap Feb 2025 144A
greater focus on ESG projects.
The USD Oct. 2020 Green Bond saw strong interest from socially
As of November 2019, KBN’s Green Lending portfolio equaled responsible investment portfolios with KBN’s traditional investor base
USD 2.2 bn. also participating in the transaction.
USD 500 mill.
4-year
Americas PF / I
Asia
Ex US 10 %
11 %
12 %
Corporate
ME / Africa 10 %
16 %
CB Off. Insti
GEOGRAPHY US Bank INVESTOR 47 %
31 % 16 %
CICERO DARK GREEN SHADING
In June 2016, KBN updated its Green Bond program and was
Europe Asset
rewarded with CICERO’s highest “DARK GREEN” rating. In 2017, 30 % Manager
KBN was elected as an Executive Committee Member for the 17 %
Green Bond Principles, an initiative managed by ICMA.
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 32KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
KBN - Norwegian State Agency – A Solid AAA Credit
100% owned and supervised by the Kingdom of Strong financial profile with liquidity well in excess of
1 6
Norway (AAA/Aaa) regulatory requirements
Monoline business model, financing core local
2 government welfare investments in Norway and no 7 Strong, well-capitalized balance sheet
cross border lending.
Norway is one of the wealthiest countries globally, and
3 Counties and municipalities – KBN’s clients - are 8
owner of the largest sovereign wealth fund (the GPFG)
prohibited by law from declaring bankruptcy
KBN is the closest proxy to Norwegian sovereign risk
4 KBN has never suffered loan losses in over 90 years 9 available in the international markets
of operations
Triple-A ratings from S&P and Moody’s since first
5 Conservative and prudent financial and risk 10 independently rated in 1999
management policies
MAIN ANNEXES
AAA THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 33KBN OVERVIEW KINGDOM OF NORWAY LENDING OPERATIONS FUNDING OPERATIONS
Contact
For annual reports, rating reports and general information, please
visit our website www.kbn.org or contact:
MS. KRISTINE FALKGÅRD MR. SIGBJØRN BIRKELAND MR. THOMAS MØLLER
President & CEO Chief Capital Markets Officer Head of Funding & IR
Tel +47 2150 2010 Tel +47 2150 2014 Tel +47 2150 2041
kfa@kbn.org sib@kbn.org thm@kbn.org
MR. MARIUS RUUD MR. EVAN R. MORGAN MS. LINN C.B LIE
Senior Vice President Senior Vice President Vice president
International Funding International Funding International Funding
Tel +47 2150 2048 Tel +47 2150 2043 Tel +47 2150 2049
mar@kbn.org erm@kbn.org lcbl@kbn.org
NOTICE
ADDITIONAL INFORMATION Statistics Norway The information and statements contained herein are
https://www.ssb.no/en general, and shall not be construed as advice on financial,
The Norwegian Government legal, tax or other matters. Further, the information and
https://www.regjeringen.no/en/id4/ KOSTRA Registry statements shall not be interpreted or construed as an offer,
Website advice or recommendation to subscribe, purchase, sell or
Norges Bank any other form of trade in securities or other financial
https://www.norges-bank.no/en/ ICMA: Green Bond Principles instruments, including financial instruments issued by
https://www.icmagroup.org/green-social-and- Kommunalbanken. Kommunalbanken shall not be liable for
Government Pension Fund Global (GPFG) sustainability-bonds/green-bond-principles-gbp/ any loss of profit, loss of revenue or any other direct, indirect
https://www.nbim.no/ or consequential loss arising out of any use of the
information provided herein.
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 34KBN GREEN BONDS KINGDOM OF NORWAY UPDATE KBN FINANCIALS AND OPERATIONS
ANNEXES
KBN GREEN BONDS
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 35KBN GREEN BONDS KINGDOM OF NORWAY UPDATE KBN FINANCIALS AND OPERATIONS
The Evolution of KBN’S Green Issuance Strategy
STATUS
• USD 2.2 bn
• (NOK 20.2 bn)
• 201 projects
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 36KBN GREEN BONDS KINGDOM OF NORWAY UPDATE KBN FINANCIALS AND OPERATIONS
KBN Green Lending Project Categories
Following KBN Green Bond Framework, Green Loans may be
granted to eight different categories of projects:
NEW GREEN BUILDINGS WASTE MANAGEMENT
The buildings we finance help to reduce energy Investment in waste management facilities that help to
consumption and support the use of more sustainable improve the rate of recycling and facilitate more
building materials. climate-friendly management of waste resources.
RENEWABLE ENERGY WATER AND WASTEWATER MANAGEMENT
Green lending finances investments such as biogas The projects we finance help to ensure the availability
facilities and renewable heating sources for buildings of safe drinking water and reduce pollution from
that help to replace fossil fuels. wastewater.
ENERGY EFFICIENCY SUSTAINABLE LAND USE
Energy efficiency measures that help to reduce We finance land-use projects that help to facilitate
greenhouse gas emissions and release energy for the safe, inclusive and sustainable places and promote
electrification of other sectors. healthy ecosystems.
LOW-CARBON TRANSPORTATION CLIMATE CHANGE ADAPTATION
Green lending finances projects that support the Investment in climate change adaptation helps to
electrification of public transport and goods transport equip local societies to cope with extreme weather
both on land and water, as well as providing facilities and other consequences of climate change.
for pedestrians and cyclists.
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 37KBN GREEN BONDS KINGDOM OF NORWAY UPDATE KBN FINANCIALS AND OPERATIONS
Green Lending Portfolio - Nov 2019
GREEN LOANS OUTSTANDING 0,7 %
USD 2.2BN*
EXCHANGE RATE 1 USD= 9 NOK 3,1 %
2,4 % 0,5 %
3,7 %
New Green Buildings 59.3%
Low Carbon Transport 15.1%
Water and Wastewater Management 15.3% 15,3 %
Waste Management 3.7%
Energy Efficiency 2.4%
Renewable Energy 3.0%
Sustainable Land Use 0.7%
59,3 %
Climate Change Adaptation 0.5%
15,1 %
“KBN wish to promote climate friendly
investments and therefore we offer a
10bp discount to such projects”
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 38KBN GREEN BONDS KINGDOM OF NORWAY UPDATE KBN FINANCIALS AND OPERATIONS
Fossil-free Green Lending Portfolio
KBN's discounted Green Loans are aimed at COP21 2050
compatible investments.
Thus, KBN does not allow any use of fossil fuels or other non-
renewable energy sources in projects funded by our Green Bonds
issued in line with our updated Green Bond Framework:
All transportation projects shall be strictly fossil-free.
Sustainably produced bio fuels such as biogas from waste
decomposition is allowed.
All energy production shall be based on renewable
sources
For buildings, no oil-based or other fossil-based heating
is allowed
District heating systems may have fossil-based peak loads
only as a fallback solution
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 39KBN GREEN BONDS KINGDOM OF NORWAY UPDATE KBN FINANCIALS AND OPERATIONS
Cicero Dark Green Shading Green Issuance
Nov. 2013 USD 500mn. 3-year RegS/144A
Feb. 2015 USD 500mn. 10-year RegS/144A
Oct. 2016 USD 500mn. 4-year RegS / 144A
Nov. 2017 NOK 750mn. 10-year VPS/NO
Nov. 2017 NOK 600mn. 15-year VPS/NO
Aug. 2018 AUD 450mn. 5-year Kangaroo
Aug. 2019 SEK 2.0 bn. 7-year RegS
SHADES OF GREEN
Sep. 2019 USD 100 mill. Tap Feb 2025 144A
Projects and solutions that correspond to
DARK the long-term vision of a low carbon and
GREEN climate resilient future. The 4y order book saw strong interest from environmentally
responsible investment portfolios, with KBN’s traditional investor base
Projects and solutions that represent step also participating in the transaction.
MEDIUM towards the long-term vision, but are not
GREEN quite there yet. OCTOBER 16 @ MS +27BPS
USD 500 MM 4Y OCTOBER 2020
Projects and solutions that are environ-
LIGHT mentally friendly, but do not by represent Americas
GREEN or contribute to the long-term vision. Asia
Ex US
PF / I
11 % 10 %
12 %
Corporate
Projects that are in opposition to the long- ME / Africa 10 %
BROWN term vision of a low carbon and climate 16 %
CB Off. Insti
resilient future. GEOGRAPHY US Bank INVESTOR 47 %
31 % 16 %
Europe Asset
30 % Manager
17 %
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 40KBN GREEN BONDS KINGDOM OF NORWAY UPDATE KBN FINANCIALS AND OPERATIONS
General Criteria
All projects that qualify for KBN’s green interest rate must:
Promote the transition to a low-carbon society that is resilient to
climate change.
Lead to verifiable reductions in greenhouse gas emissions
(accumulated impact where possible) or energy consumption, or to
adaptations required due to climate change or adaptations that are
in some other way related to Norway’s national energy, climate and
environment targets.
Form part of the municipality or county authority’s systematic work
on climate change and the
environment, and have relevant plans and strategies as their
foundation.
Projects awarded funds by Enova or the Norwegian Environment
Agency’s “Klimasats” scheme qualify.
In addition to the category-specific documentation, all
applications must provide information on:
The estimated total cost of the project.
The date on which construction work is expected to start.
RESOURCE CENTER
The expected completion date.
The expected lifetime of the investment. Enova
Norwegian Environment Agency
ICMA: Green bond principles
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 41KBN GREEN BONDS KINGDOM OF NORWAY UPDATE KBN FINANCIALS AND OPERATIONS
Selection and Proceeds Management
A project’s eligibility is assessed by the Lending Department and
approved by two Climate controllers*.
An amount equal to the net proceeds of the issue of the Notes will
be credited to a ring fenced budget account that will support KBN
lending for Eligible Projects, according to section 3 in the GBP.
KBN has appointed an advisory board, “The Green Committee”,
whose mandate will be to provide advice and guidance in matters
related to the Bank’s Green Bond Framework. The committee will
primarily draw on external expertise in related fields, but will also
include members of the KBN staff.
RESOURCE CENTER
KBN Green Bond Framework
KBN Green Bonds: Supplementary guidelines for
project selection, documentation and reporting
*Climate Controller : An internal KBN employee with a special competence / formal education in
climate and sustainability.
KBN CICERO 2nd opinion
Project must be approved by two Climate controllers
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 42KBN GREEN BONDS KINGDOM OF NORWAY UPDATE KBN FINANCIALS AND OPERATIONS
KBN Impact Reporting
The central principles of our environmental impact reporting are: Energy produced, saved or avoided is converted to greenhouse gas
emissions reductions by applying an emission factor for electricity
Reports include information at the project level, category level and
production in mainland EU and Norway (380g of CO2/kWh).
portfolio level.
In addition to key indicators such as CO2 reduced or avoided and
Reported impact relates to the proportion of the project we
electricity generated, the reporting includes category-specific
financed. environmental indicators.
We base our calculations on projected (ex-ante) values.
From 2018, our reporting also indicates to which of the UN’s
Reporting is centred around the net benefit of each project relative Sustainable Development Goals the various project categories make
either to the situation prior to the project’s completion or to a a contribution.
reference scenario, as appropriate. As reference scenarios we use
the relevant regulatory requirements.
Our reporting is limited to emissions and emissions reductions that
* Defined by the Greenhouse Gas Protocol as direct emissions from projects (Scope 1) and indirect
fall under Scopes 1 and 2* emissions from the production of electricity and/or district heating used in projects (Scope 2).
KBN contributed to KBN Norway’s
“Nordic Public Sector impact reporting is
Issuers: Position Paper conducted
on Green Bonds according to the
Impact Reporting”, principles and
which KBN uses as the methodology
basis for its presented in the
environmental impact Position Paper on
reporting. Green Bonds Impact
Reporting
https://www.kommunalbanken.no/media/54557 https://www.kommunalbanken.no/media/545
9/npsi_position_paper_2019_final.pdf 623/kbn-impact-report-2018.pdf
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 43KBN
KBN
GREEN
GREEN
BONDS
BONDS KINGDOM OF NORWAY UPDATE KBN FINANCIALS AND OPERATIONS
Estimated Environmental Impact
From KBN’s Green Loans
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 44KBN GREEN BONDS KINGDOM OF NORWAY UPDATE KBN FINANCIALS AND OPERATIONS
CASE
Finnmark’s First Care
Centre in Mass Timber
When Alta municipality decided to build a new
care centre in the middle of town, it chose to
use environmentally friendly mass timber. The
care centre consists of 60 sheltered housing
units and 108 nursing home places spread across
a total of five buildings. It is calculated that a
total of 4,000m3 of mass timber will be
required.
The use of mass timber will help reduce
greenhouse gas emissions, and mass timber is
manufactured in a more energy-efficient way
and is a renewable material. It is also cheap to
manufacture! The building will benefit from
modern energy solutions, including energy wells
that will meet 50% of the building’s total energy
requirements.
ALTA CARE CENTRE, ALTA
MUNICIPALITY
898 Total cost,
million NOK
37% 333 Outstanding green
loan, million NOK
Share financed with
outstanding green loan
ESTIMATED IMPACT
(share financed with green loan)
Energy use avoided, kWh/year 282 944
Energy produced, kWh/year 535 457
GHG emissions avoided,
tonnes CO2e 311
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 45KBN GREEN BONDS KINGDOM OF NORWAY UPDATE KBN FINANCIALS AND OPERATIONS
CASE
Fossil-free
Building Site
When Bærum decided to build the municipality’s
largest elementary school, which will have a
total floor area of 10,000m2, it set a
requirement in the tender process for the
building site to be fossil-fuel-free. This means
that traditional diesel-driven machines will have
as far as possible to be replaced by electric
machines and machines that run on biofuels,
and that heaters and dehumidifiers will have to
run on district heating, electricity, hydrogen or
bio energy. This is enabling the municipality to
deliver a building site that is 90-95% fossil-fuel-
free and has cut the greenhouse gas emissions
from the construction process by an estimated
83 tonnes of CO2.
BEKKESTUA ELEMENTARY
SCHOOL,
BÆRUM MUNICIPALITYY
350 Total cost,
million NOK
63% 220 Outstanding green
loan, million NOK
Share financed with
outstanding green loan
ESTIMATED IMPACT
(share financed with green loan)
Energy use avoided, kWh/year 157 955
GHG emissions avoided,
tonnes CO2e 60
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 46KBN GREEN BONDS KINGDOM OF NORWAY UPDATE KBN FINANCIALS AND OPERATIONS
CASE
Food Waste and Manure
Being Turned Into Fuel
“The magic factory” in Vestfold is at the cutting
edge of bio energy production in Norway. The
facility conjures up biogas equivalent to 6.5
million litres of diesel from 60 000 tonnes of
food waste and 65 000 tonnes of manure, while
also producing 110 000 tonnes of bio-fertilizer.
This has helped cut synthetic fertilizer sales in
Vestfold by 2 500 tonnes a year.
The facility has made it possible for the area’s
refuse trucks and buses to run on food waste
and manure. Greve biogas is helping to reduce
greenhouse gas emissions and air pollution.
Value is being created by using waste as a
resource, and the factory is a good step in the
global shift towards renewable energy.
GREVE BIOGAS:
“THE MAGIC FACTORY”,
TØNSBERG MUNICIPALITY
240 Total cost,
million NOK
71% 170 Outstanding green
loan, million NOK
Share financed with
outstanding green loan
ESTIMATED IMPACT
(share financed with green loan)
Energy produced, kWh/year 46 041 667
GHG emissions avoided,
tonnes CO2e 17 496
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 47KBN GREEN BONDS KINGDOM OF NORWAY UPDATE KBN FINANCIALS AND OPERATIONS
CASE
The Energy Solutions of
Tomorrow for an Old
City Hall
When Gjøvik Rådhus AS realised the City Hall’s
indoor climate and design needed improving, it
decided on a comprehensive technical
renovation of the building. It set ambitious
targets with regard to quality, energy
consumption and recycling. The new solution
replaces oil and electric boilers with district
heating. Central operating technology will help
improve air quality and temperatures and will
reduce energy consumption. The City Hall will
meet the requirements of tomorrow in terms of
functionality, efficiency and adaptations, and is
an example of how a building can be renovated
in an environmentally beneficial manner..
RENOVATION OF GJØVIK
CITY HALL,
GJØVIK RÅDHUS AS
225 Total cost,
million NOK
78% 175 Outstanding green
loan, million NOK
Share financed with
outstanding green loan
ESTIMATED IMPACT
(share financed with green loan)
Energy use avoided, kWh/year 2 485 216
GHG emissions avoided,
tonnes CO2e 944
MAIN ANNEXES THE NORWEGIAN STATE AGENCY, FOR LOCAL GOVERNMENT FUNDING 48You can also read
