Norway Business Group Sees Long Effort to Rebuild Investor Faith

Norway will need years to smooth out the damage caused by unexpected cuts to gas pipeline tariffs and the withdrawal of support for its export credit lender, according to the head of its biggest business group.

Those moves introduced “uncertainty” and interfered with predictability that investors depend on, said Kristin Skogen Lund, head of the Confederation of Norwegian Enterprise, in a Dec. 13 interview at her office in Oslo.

“You can say that we guarantee that this will be untouched for the next” so many years, she said. “Time horizons are a way to bring back predictability.”

Investors were dealt a set-back this month after the Conservative-led government agreed to back the tariff decision by the former Labor coalition, a move that’s estimated to reduce returns by $6.5 billion. The investors, which spent 32 billion ($5.2 billion) on a 44 percent stake in the gas infrastructure, have said they will take legal action.

Lund said the government will need to provide guarantees that the term of investments will not be changed again.

“The new government has a fresh start to do so,” she said.

The tariff cuts came less than 1 1/2 years after Norway ended its support of the erstwhile AAA and now junk-rated lender Eksportfinans ASA. That move roiled bond markets as far away as Japan as the lender’s $39 billion in bonds tumbled.

Understandably So

Four months after that move, the government also unexpectedly decided to increase taxes on oil companies.

Gassled’s owners, which include Canadian pension funds and Abu Dhabi’s sovereign wealth fund, have said the cuts damage the Nordic country’s reputation as a stable and predictable place. The funds have said they won’t put money into the country’s next gas pipeline, planned in the Arctic Norwegian Sea. Their lenders have also said that a reluctance to invest in Norway could also damage other parts of the economy.

“There have been a couple of examples of policy changes that obviously upsets investors, understandably so,” Lund said. “They belong to the exception. Those few examples are unfortunate and will probably have a negative effect on international investors.”

While Moody’s Investors Service said this month that the events have proven that the risk of “political interference is relatively high” in Norway, a new approach under Conservative leader Erna Solberg’s government, which has promised to reduce state involvement in the economy, could improve sentiment. The government will need it as the administration has flagged it will seek to sell stakes in companies including Statoil ASA.

Norway is western Europe’s biggest oil exporter, and has an $810 billion sovereign wealth fund. The country’s five-year CDS traded at about 12 basis points, while Germany’s stood at 25 basis points. Credit default swaps show Norway is considered the world’s safest credit.

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