Denmark’s Dong Energy takes bourse by storm

Danish utility and offshore wind farm operator Dong Energy made its stock exchange debut in Copenhagen on Thursday in Europe's biggest initial public offering (IPO) this year so far.

Denmark's Dong Energy takes bourse by storm
There was plenty to celebrate on Thursday morning at Dong's headquarters in Gentofte. Photo: Liselotte Sabroe/Scanpix
The world's largest operator of offshore wind farms sold 17.4 percent of its share capital at 235 kroner per share (€31.6, $36), raising 17.1 billion kroner for its owners and valuing the company at 98.2 billion kroner (€13.2 billion, $15 billion).
Shares in the government-controlled group closed 9.8 percent higher, valuing the company at 107.8 billion kroner.
“I am pleased that there has been great interest in Dong Energy among private and professional investors,” Danish Finance Minister Claus Hjort Frederiksen said in a statement.
“The state's proceeds of eight billion kroner will be used to reduce our national debt and will contribute to our being able to afford welfare in the future,” he added.
The result of a merger of six Danish utilities in 2006, Dong Energy has transformed itself from being one of Europe's most coal-intensive energy groups into a global renewable energy leader.
While more than half its income now comes from renewable sources, it still makes money from oil and gas production, mostly in Norway and Denmark.
Its offshore wind farm operation is the largest in Northern Europe, where Denmark, Britain and Germany are its biggest markets, but much of the industry relies on government subsidies.
Sydbank analyst Morten Imsgard said he thought the IPO price had been “relatively high in relation to the risks there are, after all, in relation to Dong's future business model in the offshore wind turbine industry.”
Dong's “ability to remain the leading developer of offshore wind farms” was especially important going forward, he told news agency Ritzau.
Denmark's former centre-left government nearly collapsed in 2014 when it sold an 18 percent stake in Dong to a consortium led by US investment bank Goldman Sachs, prompting the leftist Socialist People's Party to leave the government amid claims that the bank had been given unusually favourable terms.
The listing price meant Goldman Sachs doubled its eight billion kroner investment, which valued the group at 44 billion kroner.
The bank on Thursday argued that its know-how from other energy investments had been crucial for Dong's transformation, and that the price it paid reflected the company's situation at the time.
“You have to remember that there was a high risk associated with investing in Dong,” a Goldman partner who sits on the board of Dong, told Danish daily Berlingske, adding that there had been major changes in the energy sector since then.
“Dong was and is a mix of risks and possibilities,” he said.
After the company's bourse debut, in which no new shares were issued, the Danish government's stake stands at 50.4 percent, down from a previous holding of 58.8 percent, while Goldman Sachs' stake has fallen from 17.9 percent to 14.7 percent.
The Danish company made a 12.1 billion kroner loss last year, as the value of its oil and gas assets took a hit from lower oil prices.

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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