Danish finance ministry halts Ørsted's sale of Radius

The Danish finance ministry has notified Ørsted that it no longer has political support for its sale of Radius. The announcement is a surprise to the Danish energy group, while Danish finance minister Kristian Jensen calls the development grotesque.
Photo: Ritzau Scanpix/Mads Claus Rasmussen
Photo: Ritzau Scanpix/Mads Claus Rasmussen

The ministry of finance has informed Ørsted that it no longer has "political support" for its sale of radius, the company reports in a stock exchange press release.

Since summer 2018, Ørsted, formerly Dong Energy, has been working on the sale of electricity distribution company Radius, which has more than one million customers in the Danish region of Zealand.

"To Ørsted's surprise, the Finance Ministry has now announced that there is no longer political support to continue the structured sales process."

"Ørsted's management maintains its evaluation that it is in the interest of the shareholders, company and customers that the electricity distribution business, private customer business for electricity and gas and the outdoor lighting business shift to a new ownership."

"Ørsted's management will now evaluate the situation and discuss the next step."

Far into the sales process

In the press release, Ørsted states that it is so far into the sales process that it has limited the field of potential buyers to a "smaller number." According to the press release, this includes pension funds and insurance companies from Denmark and western OECD countries.

The sale of Radius, which will mark the privatization of the electricity grid for Ørsted's existing customers, has met with tough criticism recently. The concern is that a buyer will increase the prices in order to raise returns on the investment.

Danish political parties The Social Democrats, SF (Socialist People's Party) and the and Dansk Folkeparti (Danish People's Party) have announced that they cannot support a sale.

The state currently owns over 50 percent of Ørsted, a share it retained when the company – then known as Dong Energy – was sold in 2013 and listed in 2016.

One of the major buyers was US investment bank Goldman Sachs, while both the sales process and the price have subsequently been heavily criticized.

This played into the current sales process for Radius, which Ørsted had expected to sell in the first half of 2019.

Kristian Jensen: Ørsted needs capital

The social democrats have become scared of their own shadow after the sale of Dong, says Danish finance minister Kristian Jensen (Liberal Party) in a comment.

"And this means that Ørsted cannot sell Radius and raise capital for their green energy developments. One must admit that two of the parties in the parliamentary group [Social Democrats and Socialist People's Party, -ed]. In a system such the Danish requires political support, which means that the sale cannot be completed."

"I would have liked to have seen Radius be sold. Ørsted is in the process of developing green energy and needs capital. Whether it is Ørsted or another that owns Radius is unimportant, because conditions affecting consumers are regulated," Jensen says.

The sale of Dong hangs as a heavy shadow over Radius sale. The Dong sale – where shares were sold to buyers including Goldman Sachs – attracted harsh criticism of the former government coalition led the by the Social Democrats.

Jensen sees this a contributing factor.

"I think the social democrats have become afraid of their own shadow in the this case. The fact of the matter is that Radius is already a for-profit, commercial operation. That will not change with other owners."

"And it is grotesque that we have nothing against Danish pension funds owning energy infrastructure internationally. Apparently, however, the social democrats now think that foreign pension funds must not do the same here in Denmark," says Jensen.

Ørsted writes in a notice to the stock exchange that it will now "assess the situation".  Although, according to the finance minster, there is not must left to assess.

The bottom line is that we now we can't sell Radius. Now Ørsted will have to hold onto Radius and go out a borrow money for its green energy developments. Thus, the transition to green energy is being impeded by the social democrats," says Jensen, adding that he is fatigued by the development:

"Yes, indeed I am. And I am also quite tired the dialog and confidentiality in the parliamentary group has not not mattered very much, and that the social democrats decision, going against stock exchange regulations etc., is announced on a Sunday.

The decision, on the other hand, brings great joy to Pelle Dragsted, financial spokesperson from left-wing party Enhedslisten (Red-Green Alliance). Dragsted has long opposed the sale and has entered as a candidate in the election for Radius' board of directors.

"This is happy outcome. This means that we will, at least for the time being, have saved electricity customers on Zealand from falling into the hands of foreign private equity."

"It is pleasant to see that such massive pressure from a great many people throughout recent months has worked, and a parliamentary majority is now opposed [to the sale,-ed.]," Dragsted says.

English Edit: Lena Rutkowski & Daniel Frank Christensen

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