Norwegian government wants to secure loans in Svalbard

When the Norwegian Ministry of Trade, Industry and Fisheries took over all building properties previously owned by Store Norske Spitsbergen Coal Company, new rules were put in place for renting ground premises on Svalbard. The new rules were no success and are now in process of being changed.

Now the government wants to get a grip and change the standard agreements for renting premises for housing or business purposes on Svalbard.

Too uncertain for the bank

It was the banks (read: Sparebank1 Nord-Norge) that said the new agreements were too uncertain for loans to be granted. The bank considered the security for loans to buildings/businesses on state premises on Svalbard too poor, given that the State itself has the capacity to interfere and halt a transfer of property ownership.

High North News wrote about this last fall.

The new land lease agreements did not sufficiently consider banks and other loan providers’ need for having security in buildings on state-owned land. As a consequence, several business projects in Svalbard have been put on hold.

The State becomes guarantor

The change in the standard agreement consist of creating a loan security arrangement, according to a press statement from the Ministry of Trade, Industry and Fisheries.

- With this change the government better facilitates developing new business activities on Svalbard, and we maintain a sustainable community in Longyearbyen. Through that we safeguard important Svalbard-political targets, says Minister Monica Mæland.

- Easier financing

- This change will secure continued complete control over state-owned land in Svalbard. At the same time it will also provide a larger degree of security for banks and other loan providers and their investments. This might make it easier to secure financing of new projects, Mæland says.

The new arrangement means that the state on certain conditions will commit to repaying loans with registered mortgages in buildings on state land in Svalbard, should the State for various reasons deny transfer.

Interesting and pleasing

Terje Aunevik, Chairman of Svalbard Business Association, says it is both interesting and pleasing that the Minister of Trade, Industry and Fisheries has seized the matter and followed up with concrete actions. – Being in a restructuring process where we see a lot of initiative waiting to be released in  Longyearbyen it is crucial that this development initiative is not hampered by reluctance from the banks, based on unfortunate phrasing of the state’s property agreements.

I shall admit to not completely understand all nuances of the phrase “The new arrangement means that the state on certain conditions will commit to repaying loans with registered mortgages in buildings on state land in Svalbard, should the State for various reasons deny transfer”, however, all in all this is very positive, Aunevik says to High North News.

Not likely to be used

The loan security arrangement is thus only evoked when specific actions from the state occur. The government believes it is not likely to be put into use much, yet the arrangement provides loan providers with considerably higher security for their investments. Thus, new projects with a high degree of loan financing are more likely to be feasible under the new arrangement.

The arrangement will be proposed and decided on in the Norwegian parliament during the state budget revision negotiations.