Oil Price Slump Won't Derail IPO Timing for Dong, Denmark Says

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  • Danish government, Goldman plan to list Dong by early 2017
  • Finance Minister says market shouldn't focus on oil business

Denmark is urging investors to disregard crude prices as the government, together with Goldman Sachs, prepares the nation’s oil and gas utility for an initial public offering by the first quarter of next year.

Finance Minister Claus Hjort Frederiksen says Dong Energy A/S is now big enough in renewable energy to withstand plunging fossil fuel markets.

The roughly 17 percent decline in Brent crude since the IPO plan was announced in September “doesn’t change the fundamental rationale behind the IPO,” Frederiksen told Bloomberg. Dong’s renewable energy focus has grown so its “earnings are less dependent” on oil and gas prices, he said.

But Dong isn’t quite as immune to oil prices as it would like to be. The company earlier this year said it failed to find a buyer for its Exploration and Production unit. Shedding that business was supposed to help Dong focus on expanding its role as the world’s largest builder of offshore wind-turbine parks. E&P made up 53 percent of Dong’s 2015 earnings before interest, tax, depreciation and amortization, but the company also wrote down the value of the division by $2.35 billion to reflect collapsing energy prices.

The government said on Monday it may use the IPO to cut its stake in Dong to as little as 50.1 percent, compared with the 58.8 percent it holds now. Exactly when the sale goes ahead will depend more on the state of the stock market than on the price of oil, Frederiksen said.

“It’s clear that the market conditions will be considered,” the minister said. “No matter when Dong Energy will be listed, it will happen through a thorough and professional process. Nothing will be rushed through.”