At the exhibition EuroTier, the barn building company Graakjaer held a seminar on financing of agricultural projects in Central & Eastern Europe.
Participants came from Romania, Germany, Estonia, Holland and Denmark to learn about theory and practice within the theme, and they covered a broad spectrum of the industry - farmers, bank clerks and professionals.
Business economist Kristian Sejersbøl, Graakjaer, spoke about the steps which a well-consolidated project must go through before the actual construction can be started. Once the vision is in place the strategic planning starts, which includes the defining of the desired output from the plant and requirements for the financial capacity that must be supplied. During this phase the market conditions for the desired output, which requires knowledge of the pricing of labour, energy and feed of the country concerned, as well as outlets for agricultural products, must be explored and analysed.
When these conditions are well known, a financial plan is to be presented and profitability of the project is to be calculated. A key element in the counselling of Graakjaer is to estimate the payback period of the investment. After the environmental approval and financing have fallen into place, the design of the project itself is started and also the construction of production facilities.
In order to bring this process to success, a robust management process is required, in which experts in all fields work in close cooperation.
Starting from his own case the project developer Christian Nors described the work with the establishment of nine pork plants in Slovakia. At these facilities he produces today 160,000 finishers in the full-line, which represents 25% of the total Slovakian production run of 600,000 pigs a year.
In 2001 Nors searched for a country with a good investment climate for future food production and the choice fell on Slovakia. Here he also saw the possibility of transferring Danish know-how and animal welfare into a large-scale project.
From the beginning he set clear objectives in a business plan for development of production of 300,000 pigs. This plan is completed now with the implementation of stage 2, in which are established additional 60,000 places for pigs. To support the synergy between the company's Danish and Slovak branches, the future production will be supplemented by piglets from Denmark that are transported in our own trucks to Slovakia.
The fact that the realization of the project is done through a turnkey project supplied by the Danish Graakjaer makes it possible to use credit guarantee from the EKF. The cooperation between Mr Christian Nors, Graakjaer and EKF catalyses the financing process and ensures the realisation of the project.
From the EKF - Eksport Kredit Fonden (Danish Export Credit Agency) the warranty manager Lars Molte spoke about long-term credit guarantees which are to promote Danish export and thereby generate work places through the sale of Danish products, services and know-how.
The issued guarantee must over a period of eight to 14 years, reduce the risk of the bank on the project in question. This means that if the project can not service the debt and there shall be encashed loss for the bank, the EKF covers from 50% up to 80% of the known loss.
Prior to the credit EKF analysis on the same key of project factors like Graakjaer does. It is important that there is a business plan with depth description of the market, production assumptions, ownership and management organization, financing model and the environmental conditions in the country. We pay a particular attention to the fact, that risk assessment demonstrates that the project is sustainable.
"We are seeing increasing demand for us to be an active player when the financing package should be composed. In recognition of this fact, we have strengthened our capabilities in this area and we are looking forward to working with EKF," said export director Martin Rindom, Graakjaer. "Therefore we are obviously pleased by the level of interest in this seminar."
The seminar was rounded off with great inquisitiveness and the participants expressed having received substantial information that will be included in their upcoming project considerations.