Timo Vesala: The economy will recover in 2021, but the pandemic will make the first months challenging

The outlook for 2021 is hopeful even though the winter months will see a race between vaccination programmes and the quickly spreading variants of the coronavirus.

“As more and more people are vaccinated, confidence in the economy will gradually increase. The second half of 2021 could see very rapid economic growth if households no longer hold back their spending”, Vesala predicts.

Joe Biden’s presidency in the USA is expected to restore a sense of stability and predictability in international relations. The Democratic Party’s majority in the Senate will also offer Biden more freedom to manage the pandemic’s economic effects, which, according to Vesala, should reflect positively in the global economy.

The corona crisis appears to have affected the Finnish industries less than anticipated. New factory orders are already coming in.

“For once, our industrial structure seems to be in our favour, because our most important export markets – China, the USA, Germany and Sweden – have survived the pandemic relatively well”, Vesala notes.

In Europe, the European Central Bank has implemented large-scale recovery measures to revitalise the economy. In relation to the borrowing demand of European countries, the ECB’s monetary policy is expected to push the recovery even more in 2021 than in 2020. This will have a significant effect on interest rate predictions.

“The economy is starting to grow again, which generally pushes long-term interest rates upward. Thanks to the ECB’s actions, however, the interest rates in Europe are not likely to rise much. The situation is different in the USA, where growth and inflation may cause long-term interest rates to rise much more rapidly”, Vesala observes.

COVID-19 will leave scars but perhaps also stimulate new growth

The pandemic will scar Finland’s production structure and create repair debt, which will slow down economic recovery after the initial growth spurt. It will take time until companies will fully regain their ability to make investments and get the wheels of the economy turning normally.

“The pandemic may eventually help us find new growth. Finland has survived the corona crisis fairly well, in part thanks to our level of digital technology. Although some organisations may have been forced to adopt new technology, these investments may later prove useful in bridging the sustainability gap”, Vesala concludes on an optimistic note.

Government support bolstered municipal economies temporarily

After a weak year in 2019, Finland’s municipal economy has grown stronger because the Finnish government has carried most of the pandemic’s economic burden. However, the structural imbalances in municipal economy remain very much the same, and the work in tackling these long-term issues must continue as soon as the worst of the corona crisis has been dealt with.

Timo Vesala

The writer is the Chief Economist at Municipality Finance (MuniFin).

Photo: Sami Lamberg

The most powerful wastewater treatment plant in the Nordic countries built partly on MuniFin’s green finance

Built by the Helsinki Region Environmental Services Authority HSY, the Blominmäki wastewater treatment plant will replace the current Suomenoja treatment plant from 1963, whose operational limits will soon be reached.

The Suomenoja plant processes the wastewater from Espoo, Kauniainen, Kirkkonummi, Siuntio and Western Vantaa, where population is expected to increase significantly in the coming decades. The adoption of the Blominmäki plant will reduce the nutrient load per capita on the Baltic Sea from the current load.

“Our goal is to remove more than 98% of the phosphorus and more than 90% of the nitrogen from the wastewater. The new plant will also improve wastewater treatment reliability and capacity: the Blominmäki plant will be able to process the wastewater of more than half a million people”, says Tommi Fred, director of support services and water supply at HSY.

The treatment goals set for the Blominmäki plant are clearly stricter than the EU requirements and the recommendations of the Baltic Marine Environment Protection Commission HELCOM.

Modern plant blends in with the surroundings and generates its own energy

The Blominmäki plant will be built deep inside bedrock. This solution is sensible both for the environment and the plant’s operations.

“This way, the basins and machines will be safe from pests and our trying weather conditions. The land area on top of the caves will remain mostly unchanged, allowing its continued use as a recreational area. The routes used by flying squirrels and other animals were mapped and taken into account at the initial planning stages: we wanted to keep the green corridors as wide as possible”, says Fred.

Wastewater treatment plants are notorious for their stench, but the Blominmäki plant has found a way to eliminate this problem: a chimney will lead the plant’s exhaust air so high up in the sky that the odour will not be of bother to local residents.

The treatment plant will also achieve almost full energy independence: it will generate more than half of its electricity needs and exceed its heating energy needs.

“From the perspective of circular economy, the Blominmäki plant excels at everything! We can even store excess heat energy to use when the weather gets freezing. No other wastewater treatment plant employs similar technology”, Fred says.

At the Blominmäki plant, every detail is carefully considered. Because the plant is built deep inside bedrock, the land area on top of the caves will remain almost unchanged.

Environmentally friendly work attracts investors

From the environmental perspective, the Blominmäki plant has a crystal-clear main goal: protecting the Baltic Sea. 

Thanks to the plant’s ambitious treatment goals, the project was eligible for a wider-than-usual range of funding options. By acknowledging environmental considerations at all stages of the planning process, the Blominmäki plant qualified for MuniFin’s green finance and the Nordic Investment Bank’s loan.

The largest ever investment in the history of HSY has also been funded by the European Investment Bank. 

“Positive developments do not come about spontaneously; they require action. Because the Blominmäki plant processes wastewater sustainably and promotes a cleaner Baltic Sea, it is a long-term investment in a brighter future. It is not often you get to carry out a project of this scale”, says Pekka Hänninen, finance director at HSY. 

Wastewater treatment has advanced in leaps and bounds in the past thirty years. In Finland, treatment plants have already completed the most important improvements, bringing their treatment power to almost 100%. But according to Hänninen, the work is not yet complete.

“By setting an example, Finland has had a massive impact on the operations of other Baltic Sea states. We believe that Blominmäki’s innovative solutions will also be of interest to our colleagues in other countries. For example, there aren’t really any treatment plants built in bedrock outside the Nordic countries. In the end, the entire world will benefit from any effort we put in clean water. Water unites us all.”

The Blominmäki wastewater treatment plant is a state-of-the-art project that will set an example to others in the field.


Written by Sanna Puutonen
Photos by HSY

MuniFin opens funding year by issuing the largest USD Benchmark since 2013

MuniFin made a strong return to the 5-year sector issuing its largest and tightest USD benchmark since 2013. The last benchmark in that tenor was issued in March 2019 and the last USD benchmark was issued in June 2020.

The mandate announcement was released on Monday 11 January 2021 at 13:10 CET with IPTs of MS+10bps area. Despite the busy time of the year, MuniFin was able to find an open issuance window and quickly gather an impressive orderbook (USD 3.1bn) of the highest quality.

The benchmark was finally priced at MS+8bps, with central banks and official institutions taking over 40% of the final allocations. Geographically, EMEA took the bulk with 79% of the allocations, supplemented by Americas (16%) and Asia (5%).

In 2021 MuniFin forecasts to issue EUR 10-11 billion of long-term funding, making the USD 1.5 billion benchmark a great start for the year.

Issuer:Municipality Finance Plc (“MuniFin”)
Ratings:Aa1 / AA+ (both Stable) by Moody’s / S&P
Format:RegS/144A
Coupon:0,625% Fixed S/A, 30/360, long first coupon
Size:USD 1.5 billion
Pricing Date:12th January 2021
Payment Date:19th January 2021 (T+5)
Maturity Date:20th March 2026
Reoffer Spread:MS + 8bps  | CT5 + 17.78bps
Joint BookrunnersBofA / GSI / JPM / TD

Comments from the bookrunners

“A great result for MuniFin’s first benchmark of the year in a very busy market. The issuer was able to capitalise on exceptionally strong demand from investors, pricing with minimal concession to their outstanding curve. A true testament to the high esteem they are held in across the SSA investor universe.”

Adrien de Naurois, Managing Director, Head of SSA DCM & EMEA IG Syndicate, BofA Securities.

“MuniFin reacted swiftly to the receptive primary market environment and claimed its execution window ahead of a building January pipeline. They were rewarded with increased transaction size and the tightest spread versus mid-swaps as well as USTs that they have achieved for a 5-year benchmark to-date. An impressive outcome for the Finnish agency.”

Angelica-Maria Strolz, Executive Director, J. P. Morgan.

“Fantastic outcome for the issuer who was able to extend their curve at a very attractive spread with a minimal spread to their outstanding 3-year benchmark while printing the larger size.”

Dorothee Amar, Executive Director, SSA, Goldman Sachs International.

“Congratulations to the MuniFin team on the successful execution of their first USD benchmark of 2021. They once again confirmed their flawless execution capabilities in the USD market, even with a busy SSA backdrop. The orderbook in excess of USD 3.1bn clearly shows that global investors continue to savour the opportunity to buy MuniFin USD bonds.”

Laura Quinn, Managing Director, Head of Origination & Syndication, TD Securities, Dublin.

Further information

Joakim Holmströn
Executive Vice President, Capital Markets, MuniFin
Tel. +358 50 4443 638

Antti Kontio
Head of Funding and Sustainability, MuniFin
Tel. +358 500 3700285