Tue, Feb 07, 2017 - Page 10 News List

Goldman sale reignites conspiracy theories

CAPITAL INJECTION:An investigation into whether Dong was sold at too low a price in 2014 is still ongoing amid political tensions and questions from the public

Bloomberg

A car drives in front of Dong Energy’s power station in Kalundborg, Denmark, on Nov. 20, 2015.

Photo: Reuters

When Goldman Sachs bought part of Denmark’s biggest energy utility three years ago, it triggered a political crisis that split the ruling coalition. Now, as the Wall Street bank sells roughly half that stake, some members of the Danish parliament are again crying foul.

Goldman, through a Luxembourg-based vehicle, sold the equivalent of more than 6 percent of Dong Energy for 6.5 billion kroner (US$940 million) on Friday. Back in 2014, Goldman paid 8 billion kroner for 18 percent. A stake that size would now fetch about 18.5 billion kroner. (Goldman still owns 7 percent of Dong.)

In an angry statement, Pelle Dragsted, a spokesman for the opposition Left-Green Alliance, described the whole transaction as “hopeless” and the initial sale to Goldman as “scandalous.”

Meanwhile, an investigation into Goldman’s investment in Dong by Denmark’s National Audit Office is still under way. The purpose of that probe is to find out whether Dong was sold at too low a price in 2014.

The political attention Goldman’s share sale is attracting shows Danes are still wondering whether they were short-changed three years ago.

Former Social Democratic Danish prime minister Poul Nyrup Rasmussen has led the camp of critics who say the nation was cheated.

Then-Danish minister of finance Bjarne Corydon said Dong was losing so much money that other investors were not willing to inject funds into the company on terms that were acceptable to the government. He brought in Denmark’s two biggest pension funds, ATP and PFA, as joint owners and the government kept more than half the shares.

Dong has since stopped hemorrhaging money and on Thursday last week the company reported 2016 operating profit that almost doubled, with the shares gaining about 7 percent since the company’s initial public offering in June last year.

Danish Minister of Finance Kristian Jensen said the company “was strengthened by the capital injection” it got from Goldman.

Goldman managing director Michael Bruun said in an e-mailed response to a request for comment that Goldman Sachs “is proud to have contributed to Dong Energy’s growth.”

The Wall Street firm decided to sell part of its stake “following the company’s strong financial results,” he said.

Rene Christensen, who sits on the parliament’s finance committee as a representative for the Danish People’s Party (the biggest group in the ruling bloc of Danish Prime Minister Lars Lokke Rasmussen), said it is impossible to know whether Dong would have recovered so well without Goldman.

The Danish People’s Party backed Goldman’s investment in 2014 in part because “the message was that Dong was in trouble and if we didn’t do anything, it would be a catastrophe,” Christensen said.

“But history has shown that Dong would still be here today” even without Goldman’s capital injection, Christensen added.

The question now is whether such a transaction would ever again be allowed in Denmark.

Goldman hired another former Danish prime minister, Anders Fogh Rasmussen, to help it navigate its way through the political storm that followed its investment in Dong.

Dragsted said the process has been a lesson for Danish politicians in how not to handle foreign investment.

“There’s definitely a lot to learn from this case,” Christensen said. “If I were in the same situation today, I’d definitely ask a lot more questions.”

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