Goldman-Backed Dong Rules Out Wind Unit Sale Ex-CEO Had Backed

Dong Energy A/S rejected suggestions it would be ready to get rid of its offshore wind turbine division as it prepares for an initial public offering.

“We have no plans” to sell or spin off the unit, Chief Financial Officer Marianne Wiinholt said by phone. “It has been important for us to maintain our wind strategy.”

A review of Dong being conducted by JPMorgan Chase & Co. explores a number of options, including one that envisages spinning off, or selling, the oil exploration and production unit, Bloomberg News reported last month. Former Chief Executive Officer Anders Eldrup said last week Dong Energy should have spun off the wind unit, which had been planned during his tenure under the name Project Red.

Wiinholt said Dong can now “rule out a Project Red,” though she declined to make similarly categorical predictions on any other units. Dong is owned by the Danish state together with a group of investors that includes Goldman Sachs Group Inc.

About 40 percent of Denmark’s electricity production comes from wind turbines, which is a world record. The country plans to get 100 percent of its energy supply from renewable sources by 2050.

Other European utilities, like Germany’s EON SE, have opted for splits that carve out their renewable energy units.

“EON is doing it right now and there are other examples from past years,” said Elchin Mammadov, European utilities analyst at Bloomberg Intelligence. “It’s difficult to say what will happen with Dong Energy, but I think it’s likely that they will want to keep the wind unit at the core of the company up to the IPO.”

Bondholders

Some of Dong Energy’s bondholders have spoken in support of the prospect of getting rid of the oil business, arguing the unit has turned into a liability. Skaerbaek, Denmark-based Dong Energy, the world’s largest operator of offshore wind parks, is struggling to find the right balance between its operations in wind, thermal power and oil and gas as energy prices fall.

The government last year allowed Dong Energy to take a capital injection from Goldman and pension funds ATP and PFA A/S, after the utility lost money on failed natural gas bets.

Goldman paid about $1.5 billion for its 18 percent stake in Dong, which it bought through its European merchant banking unit in a company called New Energy Investment S.a.r.l. The Danish state still owns 59 percent.

Goldman’s money has made Project Red unnecessary, Wiinholt said.

“We got the capital injection instead as we decided it was a better solution to get the capital on the top level,” she said. “That was more effective from a capital structure point of view, and also easier from a governance perspective.”

Danish Finance Minister Bjarne Corydon said last week the government and the other owners will base any decision to split up the utility on the review due to be published later this year.

A sale of the oil and gas unit may fetch as much $8 billion, according to Bloomberg Intelligence estimates.

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