Goldman Deal on Danish Energy Splits Copenhagen Coalition
Denmark’s government mustered enough votes to let Goldman Sachs Group Inc. (GS) buy a stake in state-owned Dong Energy A/S after resistance to the deal prompted one of the ruling coalition’s three parties to quit.
The government of Prime Minister Helle Thorning-Schmidt won majority lawmaker backing for the deal even after the Socialist People’s Party left the coalition today.
Parliament’s finance committee agreed to let the Wall Street bank pay 8 billion kroner ($1.5 billion) for an 18 percent stake in Dong. A Megafon poll conducted by TV2 showed 68 percent of Danes are against Goldman holding the stake and thousands of protesters gathered outside the parliament last night to voice their anger over the deal.
Dong is selling the shares as part of a financial restructuring announced in February last year to cut costs, reduce debt and bolster investments in oil and gas exploration, as well as in wind farms. The plan included cutting expenses by 20 percent and selling assets to raise 10 billion kroner.
“It’s good that Dong Energy now has firm ground under its feet,” Finance Minister Bjarne Corydon said in a statement on his office’s website. “Parliament has today made sure that one of our biggest companies now can make substantial investments rather than scaling back.”
Corydon, a member of the premier’s Social Democrat party, fought off opposition to the deal from voters, unions and lawmakers, who said Dong should be owned by Danish investors. Poul Nyrup Rasmussen, a former Social Democrat premier, publicly urged Corydon to scrap the deal, calling Goldman a “shady partner.”
Goldman is buying the stake through its European merchant banking unit in a company named New Energy Investment S.a.r.l. Goldman will partner up with Denmark’s two largest pension funds, ATP and PFA, which will own 4.9 percent and 1.8 percent, respectively.
“It’s a good contract,” ATP Chief Executive Officer Carsten Stendevad said in an interview today. “It’s good for all parties. We hope for the sake of Dong that soon our focus can return to the very difficult investment case.”
The Socialist People’s Party will continue to support the government from outside the coalition, according to Annette Vilhelmsen, who said today she will step down as party leader. At least two of the Social Democrats’ 45 members in parliament had said publicly the government should postpone the Goldman deal. Thorning-Schmidt said today she will “soon” announce a new Cabinet.
The Red-Green Alliance, which helps secure the government its majority in parliament, on Jan. 28 grilled Corydon for almost four hours in a hearing, criticizing him for his plans for Dong, the world’s biggest operator of offshore wind farms.
Protesters gathering outside the parliament in Copenhagen late yesterday had draped a yellow banner with a drawing of a vampire squid around a statue of King Frederick VII, which stands in front of the parliament’s main entrance.
“This case emerged out of nowhere; there are so many things that seem off about this, and this was the time to come out,” said Solveig Weiss, a retired Social Liberal voter who was among the protesters. “I’m very disappointed a red government can push this kind of sale. It’s completely right-wing policies and certainly doesn’t help that they’re selling shares to a somewhat dodgy enterprise.”
Goldman said the political and popular backlash won’t prompt the fifth-biggest U.S. bank by assets to reassess its bid. The bank won’t -- “as a matter of principle” -- comment on the political situation in Denmark, Sophie Ramsay, a London-based spokeswoman at Goldman Sachs, said earlier this week.
The Social Democrats started sliding in opinion polls soon after Thorning-Schmidt became the first woman to head a Danish government in 2011. Buffeted by a recession and widening deficits, she introduced polices that conflicted with the party’s traditional welfare values. The government, which also includes the Social Liberal Party, has raised the pension age, cut corporate taxes and lowered benefits for the unemployed and students.
“The government already has low support in polls and this case won’t help in any way,” Jens Hoff, a professor of political science at the University of Copenhagen, said by phone. “Core voters are running away because Social Democrats and Socialists consider the whole thing a very bad idea.”
Goldman’s investment in Dong “is privatization which fits with the image of what a center-right government would have done,” Hoff said. “This fits the tale of a Social Democrat government pushing right-wing policies and Corydon hasn’t been able to change that agenda; the question remains who will be able to do that.”
In a Jan. 26 poll published by newspaper Berlingske, 55.1 percent of Danes said they’d vote for the opposition bloc led by Lars Loekke Rasmussen’s Liberal Party. That compares with 49.7 percent in the Sept. 15, 2011 general elections. A Danish electoral term lasts a maximum of four years.
Corydon rejected calls urging him to inject state funds into Dong or to delay the Goldman deal until new alternative offers are examined. Postponing the vote would have harmed Dong’s credit ratings and its ability to negotiate with its banks and investment partners, he said.