Norway Tariff Cut Wiped $2.1 Billion Off Gas Pipes' Value

Updated on
  • Conoco sale shows market value fell 23% since 2010-2012 deals
  • Tariff cuts have drawn lawsuit from international investors

Norway wiped almost a quarter off the value of its gas pipeline network when it ambushed investors by cutting tariffs by as much as 90 percent.

That was revealed in documents showing the price of a 1.9 percent stake sold by ConocoPhillips last year. The buyer, CapeOmega AS, paid 1.09 billion kroner ($134 million), valuing the 8,000-kilometer (5000-mile) network at 57.6 billion kroner, according to a Finance Ministry document obtained by Bloomberg. That compares with a valuation of 75.1 billion kroner, on average, in three deals from 2010 to 2012 before the tariff cuts.

The lower valuation chimes well with claims from investors including Allianz SE, Abu Dhabi’s sovereign wealth fund and Canadian pension funds, who are suing Norway to reclaim lost values. The investors, who together spent 32 billion kroner buying a 44 percent stake in Gassled from companies including state-controlled Statoil ASA, argue the cuts will reduce their income by 15 billion kroner from 2016 to 2028. The plaintiffs lost in the Oslo District Court last year but have appealed, with a new trial set for the beginning of 2017.

The November 2015 document obtained by Bloomberg through a freedom-of-information request is the first to show the value of Conoco’s Gassled sale, which includes a direct 1.68 percent share and an indirect stake through Norsea Gas AS. It reveals the impact of the tariff cuts in the asset market, though cash flow earned in the years between the 2010-2012 deals and 2015 also account for the decline.

Officials at CapeOmega, Norway’s Petroleum and Energy Ministry and ConocoPhillips all declined to comment.

The document shows that CapeOmega, a Norwegian private equity investor, agreed to pay an “additional consideration” should the investors who have sued the government be successful in getting the tariff cuts overturned.

DONG Energy A/S also sold its 0.98 percent stake in Gassled to CapeOmega last year. That divestment and the sale of its interest in the Glenlivet field adds up to about 600 million kroner ($91 million), it said in its annual report. The company declined to provide further details, spokesman Carsten Birkeland Kjaer said in an e-mail.

While two successive Norwegian governments have argued that the tariff cuts will help make marginal offshore gas discoveries more profitable and boost exploration drilling, the investors say the move have hurt the Nordic nation’s reputation as a stable and predictable business environment.

Norway’s fully state-owned Petoro AS is the biggest stakeholder in Gassled with 45.8 percent, while Statoil still owns 5 percent. Solveig Gas Norway AS, which is owned by the Canada Pension Plan Investment Board, Allianz Capital Partners GmbH and the Abu Dhabi Investment Authority and bought its stake from Statoil, is Gassled’s next-biggest owner with 24.8 percent.