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PR(98)24: Efta Surveillance Authority approves new capital venture fund in Iceland


Under the EEA rules on State aid, the EFTA Surveillance Authority has assessed and approved Icelandic legislation on the foundation of the New Business Venture Fund ('Nýsköpunarsjóður atvinnulífsins').

The establishment of the New Business Venture Fund (NBVF) is linked to comprehensive structural changes in the Icelandic financial market.  These changes include the merger of four state-owned investment credit funds into two new entities, the Icelandic Investment Bank Ltd. (‘Fjárfestingabanki atvinnulífsins hf.’) and the New Business Venture Fund.  The combined equity capital of the “old” investment credit funds was split between the two new entities.  The foundation capital of the NBVF was set at IKR 4 billion (approx. ECU 48,8 million).  In addition, the NBVF will receive ISK 1 billion (approx. ECU 12,2 million) from the proceeds of the Treasury's sale of its share capital in the Icelandic Investment Bank Ltd. as well as approx. ISK 700 million (ECU 8,5 million) for its Product Development and Marketing Department. 

The objective of the NBVF is to promote development and growth in all sectors of the Icelandic economy through participation in innovation-oriented investment projects and support for development and marketing projects.  The Fund's participation in investment projects will be predominantly in the form of share capital, but exceptionally in the form of loans or credit guarantees.  Support for development projects will be in the form of grants. 

The Authority concluded that the venture capital equity financing, loans and guarantees by the NBVF will be provided on commercial terms and will not involve State aid.  This conclusion is based on the fact that the legislation includes a number of detailed restrictions intended to limit the Fund's risk exposure and secure that returns on investments are commensurate with the risks involved.  The NBVF is designed as a self-financed, revolving fund, without any regular or further budget allocations from the Treasury.  The management of the Fund is obliged to perform risk assessment and make provisions for losses for each investment.  It is not authorised to take investment decisions which would imply that the Fund's foundation capital is diminished.  The NBVF is not authorised to provide financing for the rescuing or restructuring firms in financial difficulty nor to firms in sensitive sectors subject to specific State aid rules, without prior notification and approval by the EFTA Surveillance Authority.

Grants from the NBVF are as a main rule subject to the limits of de minimis aid, i.e. must not exceed the equivalent of ECU 100.000 to any one firm over a period of three years.  The Authority does not object to such aid.  Exceptionally, the NBVF may offer development grants in excess of the de minimis limits.  In such cases the legislation obliges the NBVF to respect the provisions of the Authority's State Aid Guidelines on aid to small and medium-sized enterprises, aid for research and development or other types of aid, as applicable in the individual instances. 

The NBVF operates an Export Credit Guarantee Department.  However, the Authority's decision does not cover this Department.  It will be examined at a later stage on the basis of new State aid rules concerning short-term export-credit insurance.

For further information please contact Mr. Amund Utne (tel. 286.18.50) or Mr. Guðlaugur Stefánsson (tel. 286.18.52) (Competition and State Aid Directorate).

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