Denmark lost billions on Goldman Sachs deal

The partial sale of Dong Energy to Goldman Sachs did not include a massive deal that both parties knew was imminent, shortchanging the company's value by as much as 20 billion kroner.

Denmark lost billions on Goldman Sachs deal
Dong was sold to Goldman Sachs just before landing a massive deal. Photo: Henning Bagger/Scanpix
Denmark lost out on billions of kroner when it sold partial ownership of Dong Energy to American investment firm Goldman Sachs in January 2014, Politiken reported Wednesday
When the Danish government sold an 18 percent stake of Dong to Goldman Sachs, the Finance Ministry calculated the company’s value at 31.5 billion kroner ($4.6 billion). 
But just three months later, Dong was granted the rights to instal a massive offshore wind park supported by the United Kingdom. According to Politiken, that deal shot Dong’s value up to over 50 billion kroner but was not calculated into the Goldman Sachs sale despite both Dong and the investment firm being fully aware of it. 
Politiken also reports that the looming deal was common knowledge throughout the wind industry. 
An advisor with Danish acquisitions firm Audon told the newspaper that the UK wind farm deal should have been calculated into the sale. 
“If a company is looking at an essential new order immediately after a sale, one would typically wait to do the sale until the deal is done. If that’s not possible, then a price regulation mechanism should be used so that the buyer pays more if the company rises in value after the sale,” Frederik Aakard. 
A Dong spokesman confirmed that the UK wind farms did not “play a special role” in the sale to Goldman Sachs, but would not comment on Politiken’s calculations that the government missed out dearly on the deal.
Finance Minister Bjarne Corydon told the paper that he “flatly rejects that the sale of Dong shares was too cheap”.
“The price included expectations on future earnings weighed against the risk of future projects not coming through,” he said. 
The partial sale of state-owned Dong was deeply controversial and faced massive popular and political resistance. 
The decision to sale caused the Socialist People’s Party to withdraw from the government coalition and an online petition against the sale gathered just shy of 200,000 signatures. 
There were also reports that Danish pension fund had offered a higher bid for Dong, valuing the company at 46 billion kroner to Dong’s 31.5 billion. 
A video from Financial Times discussing the deal can be viewed below. 

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Denmark’s Dong Energy profits soften as wind drops

Denmark's leading wind energy group Dong Energy said Thursday earnings fell in the first quarter, partly because winds were not up to snuff at the start of the year.

Denmark's Dong Energy profits soften as wind drops
Photo: Erik Refner/Scanpix

Net profit fell by 47 percent to 3.19 billion kroner (429 million euros), and turnover by one percent to 17.42 billion.

A month of January “with weak winds” caused a lull in production, although February and March were “close to a normal wind year”, it said.

READ ALSO: Dong gets nod for 'world's biggest offshore wind farm'

Dong said earnings also suffered by comparison to a particularly strong year-earlier quarter when the renegotiation of gas purchase contracts and the sale of its gas distribution boosted income.

Dong shares swiftly ran into headwinds on the Copenhagen stock exchange in reaction Thursday, falling 1.9 percent in morning business.

The results for offshore wind, which the group considers its core business, deteriorated with a 19 percent decline in turnover and a 26 percent drop in gross operating income (EBITDA).

But Dong boosted its wind power production by 24 percent to 2.1 terawatt hours thanks to a rise in its capacity in mainly Germany and Britain.

READ ALSO: Denmark's Dong Energy to ditch coal by 2023

We are seeing significant momentum in the offshore wind industry, with innovation and notably reduced costs creating new market opportunities and an ever-stronger value chain. Competitive intensity is escalating,” CEO Henrik Poulsen said in a statement.

The group welcomed the strong contribution of an activity it wants to spinoff, oil and gas, thanks to a “high and stable production” and a 70 percent cut in investments.

Poulsen reiterated the company still aims to sell this business this year, without giving any indication of a possible buyer. 

READ ALSO: New probe of Denmark's Dong sale to Goldman Sachs