Credit Suisse Fund Wary of Norway Risk Amid $4.4 Billion SpatMikael Holter
A Credit Suisse Group AG-managed fund that is looking to invest in Norwegian wind farms said a recent $4.4 billion conflict over sudden changes to gas pipe regulations had made the Nordic country a riskier place to do business.
Credit Suisse Energy Infrastructure Partners AG will keep an eye on the outcome of a lawsuit filed by international investors against the Norwegian government after it cut offshore gas-pipeline tariffs, according to Roland Doerig, a manager of the fund.
“You have to have a sharper eye on it. Now you have to look closely at what’s going on,” he said in a phone interview on June 19. “It will be a risk factor we have to follow carefully.”
Investors including Allianz SE, Abu Dhabi’s sovereign wealth fund and Canadian pension funds sued the Norwegian government after it imposed cuts of as much as 90 percent to tariffs on future natural gas transportation through Norway’s Gassled offshore pipeline network.
The cuts will reduce income by 34 billion kroner ($4.4 billion) by 2028 and have hurt Norway’s reputation as a stable and predictable place to do business, according to the plaintiffs. When the changes were first announced in 2013, the investors had already spent 32 billion kroner buying 44 percent of Gassled in transactions that closed as late as 2012. Two successive Norwegian governments have justified the move, arguing it will make more gas discoveries profitable and boost offshore exploration.
The tariff cuts are among a string of events over recent years that have highlighted political risk in Norway, a AAA-rated economy that is home to the world’s biggest sovereign wealth fund. In 2011 the government withdrew support for export lender Eksportfinans ASA, turning top-rated bonds into junk notes, while a 2013 tax increase wrong-footed oil companies. The following year, a political battle in parliament over power from land for offshore oil fields threatened to delay the country’s biggest industrial development in decades.
The Petroleum and Energy Ministry declined to immediately comment, spokeswoman Ella Bye Moerland said by phone.
The Gassled court proceedings ended June 16, with a ruling expected by October.
Credit Suisse’s Doerig, who said last week his fund is seeking a stake in two wind-power projects abandoned by Norway’s state-owned utility Statkraft AS, said the outcome of the Gassled trial would have no effect on his willingness to invest in those specific wind farms.
The fund currently has no holdings in Norway, Credit Suisse spokeswoman Charlotte Nelson said by e-mail. The Zurich-based bank doesn’t disclose the size of its funds, she said.
While “reliance on the regulations” remains the main risk as the fund looks for other opportunities in Norway, investments in renewable energy infrastructure are less exposed than in the conventional energy industry thanks to government incentives, Doerig said.
“Norway has formulated a clear energy strategy,” he said. “Renewable power, thereof wind power, plays a crucial role, so you have to set the circumstances that ensure the strategy is realized.”
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