Allianz, Abu Dhabi Kick Off $4 Billion Norway Court Contest

Updated on

Owners in Norway’s gas pipeline network today kicked off their effort in an Oslo court to recoup what they claim will be about 34 billion kroner ($4.4 billion) in lost income from tariff cuts pushed through in 2013.

Investors in Gassled, whose owners include Allianz SE, Canadian pension funds, Abu Dhabi’s wealth fund and a fund run by UBS AG have sued Norway to reverse the unexpected 90 percent reduction set to take effect in late 2016. The trial is scheduled to run through June 16 at the Oslo District Court.

The investors, who in 2011 and 2012 paid about 32 billion kroner for a 44 percent stake in the pipelines of western Europe’s biggest gas producer, argue the cuts violate Norway’s petroleum law, European conventions on private property and the nation’s constitution, according to a pre-trial document filed to the court. They also ask for compensation in the event the court should find the changes legal.

“Low earnings and risk were not what these companies invested in when they took this business decision,” Jan Birger Jansen, a lawyer representing the investors, said in an opening statement in court Monday.

The government, for its part, said in its pre-trial statement it’s free to change tariffs to promote “good resource management” and the definition of that is “naturally at the discretion of the government.”

Harming Investments

Two successive governments have justified the adjustments as necessary to boost exploration and to make more new discoveries profitable. The industry is now also grappling with plunging oil prices and companies have cut thousands of jobs in Norway since last year.

Allianz last year in a letter to Prime Minister Erna Solberg pleaded for a meeting, saying the cuts led to “significant” losses and writedowns on its 6.1 billion-krone investment. The insurer said that the reductions damaged trust in Norway, potentially harmed investment in infrastructure in general and hurt German and Norwegian citizens. Canada Pension Plan Investment Board, the country’s largest pension-fund manager, also said last year that it was “seriously recalibrating” its view of Norway after the reductions.

The government said in a pre-trial filing that the move will reduce income for all of Gassled by almost 15 billion kroner through 2028 and that the investments will give a “reasonable” return. The agreements under the old tariffs are expected to generate about 112 billion kroner in income from 2013 to 2028, according to the government.

Not Party

Infragas Norge AS, Njord Gas Infrastructure Holding AS, Silex Gas Norway AS and Solveig Gas Norway AS are the official plaintiffs in the suit against Norway’s Petroleum and Energy Ministry. They bought their stakes from oil companies such as Statoil ASA, Total AS and Royal Dutch Shell Plc, which now stand to benefit from the tariff cuts.

The largest shareholder in Gassled, state-owned Petoro AS, isn’t part of the suit. The second-biggest owner is Solveig Gas, with 24.8 percent.

Gassled, the formal owner of the Norwegian gas transport infrastructure, supplies about 20 percent of Europe’s gas demand through links to the U.K., France, Belgium and Germany.

Tolle Stabell, Norway’s assistant attorney general, and the plaintiffs declined to comment before the start of the trial.

The case has the official docket number 14-010957TVI-OTIR.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE