Danish gov't takes fresh hits from DONG sale to Goldman

Reuters

By Shida Chayesteh and Erik Matzen

COPENHAGEN, Jan 31 (Reuters) - Danish Prime Minister Helle Thorning-Schmidt, deserted by a key ally over plans to sell part of a state energy utility to Goldman Sachs, suffered further blows when its chairman resigned and a poll on Friday showed her weakened by the plan.

One of Thorning-Schmidt's two coalition allies, the Socialist People's Party, quit on Thursday over plans to sell 25 percent of the DONG energy utility, highlighting Europe's growing unease and sometimes outright animosity towards private utilities.

"My party sees Goldman Sachs as a bandit in financial matters that has played a damaging role in the development of the financial crisis in 2008, and an investment bank that at almost any cost is prepared to move revenues away from Denmark to evade Danish tax," said Steen Gade, an MP for the Socialist People's Party.

While ostensibly backing free energy markets, many European governments from Spain to Hungary have squeezed utilities by intervening in power generation, capping energy prices or re-nationalising some services.

DONG Chairman Fritz Schur, who stewarded a transformation into a utility with a focus on offshore wind energy, quit late on Thursday saying he "welcomed the new investors" but it was time to go with a new minority shareholder coming in.

DONG is 81 percent owned by government with most of the rest held by municipalities and other energy service providers.

A Gallup poll showed that 54 percent of voters think Thorning-Schmidt had been weakened by the row, a bad omen as she started talks on Friday with the Social Liberal Party, her only remaining ally, to fill six vacant cabinet posts.

GOLDMAN REJECTS CRITICISM

Danish pension fund ATP, which manages 600 billion crowns ($109 billion) and teamed up with Goldman for the DONG stake, said the political storm would not change its decision.

"The government has no influence on ATP," Carsten Stendevad, the fund's chief executive said. "It is not a risk-free investment. We have looked at the risks and estimated that the yield we could hope for corresponds to those risks."

Goldman also rejected the criticism.

"This is a long-term commitment which reflects our support for the management team's current strategy...including the significant renewable energy investments," Goldman said in a statement.

Scandinavia has so far resisted a European Union drive to liberalise utilities, keeping energy state owned through innovative firms building business empires across Europe.

Sweden's Vattenfall has become a key player on the German market while Norway's Statkraft has grown into Europe's biggest renewable energy firm with production from Britain to Germany.

Bulgaria's government fell last year after mass protests against power prices. Hungary forced utilities to implement big price cuts to relieve indebted households, making power and gas prices the number one issue in the upcoming election.

Britain's opposition has also proposed price caps.

Georg Zachmann, a researcher at Brussels think tank Bruegel, said Denmark was something of an outlier at a time of re-nationalisation for Europe, with local distribution networks being bought back by municipalities in places such as Germany.

The fight may indeed be about a national champion, similar to when Microsoft bought Nokia's coveted handset business and a Chinese investor bought Volvo Cars, said Paul Krüger Andersen, a professor at Aarhus University.

"You might say this is anti-capitalism," he said.

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