Norway proposed cutting tariffs to ship gas through its pipelines by 90 percent, in a blow to funds that have spent more than $5 billion since 2010 buying stakes in the infrastructure of western Europe’s largest gas producer.
Norway proposed lowering the prices charged by Gassled, whose owners include Canadian pension funds and a UBS AG (UBSN) infrastructure fund, the Oslo-based Oil and Energy Ministry said today. The reduction would apply to new contracts.
“Norwegian policy has always been to take out the super- profits on these resources and tax it heavily,” Oil and Energy Minister Ola Borten Moe said today in an interview in Sandefjord, Norway. “We’re well within the boundaries of our job and our mandate as regulator. There will still be very good returns in Gassled after these changes.”
Gassled, a joint venture created in 2003 between oil and gas companies operating on the Norwegian continental shelf, owns Norway’s gas transport infrastructure. Its biggest owners are now state-owned Petoro AS and Solveig Gas Norway AS. The so- called K-Element for tariffs would be cut to 0.55 krone from 5.5 kroner in area A, to 0.35 krone from 3.5 kroner in area B and to 1 krone from 10 kroner in area C, according to the proposal.
Gassled had gross tariffs of 25 billion kroner ($4.5 billion) in 2011, according Gassco AS, the operator of the network that ships gas to the U.K., France, Belgium and Germany.
The company is “concerned about the implications of the proposal for the Gassled owners and the long-term development of the gas transportation infrastructure,” said Njord Gas Infrastructure AS, a subsidiary of UBS International Infrastructure Fund and CDC Infrastructure SA. Njord, which owns 8 percent, agreed to buy its stake in April 2010 from Exxon Mobil Corp (XOM:US), for undisclosed sum.
“Significant parts of the Gassled system are already booked for several years to come and so, the potential implications for the company aren’t substantial in the short to medium term, but will increase,” Njord said today in a statement. “However, based on a preliminary analysis of the implications of the proposal, the company forecasts that it will generate sufficient cash to service its debt obligations.”
Njord has outstanding bonds in pounds, Norwegian kroner and dollars totaling $684 million. Solveig Gas has a 1 billion kroner bond maturing in 2027 that was sold last year. There was no pricing available.
The yield on Njord’s 5.241 percent pound-denominated bond maturing in 2027 jumped 40 basis points to 4.34 percent as of 12:10 p.m. in London.
Solveig said in a statement that a cut in tariffs will be “significantly” offset by lower income taxes and that calculations indicate that the concession life coverage and debt ratio will remain above 1.2-1 until “at least” 2017. “As a result, these ratios remain above the level which would otherwise prevent distributions to shareholders.”
Statoil ASA (STL), which is 67 percent owned by the Norwegian state, sold a 24 percent stake in Gassled in 2011 for 17.35 billion kroner, bringing its holding down to 5 percent. The stake was bought by Solveig, a company owned by Canada Pension Plan Investment Board, Allianz Capital Partners, a subsidiary of Allianz, and Infinity Investments SA, a unit of the Abu Dhabi Investment Authority.
Total AS and Royal Dutch Shell Plc (RDSA) also sold stakes in Gassled in 2011.
Shell in September 2011 agreed to sell its 5 percent stake for 3.9 billion kroner to Infragas Norge AS, a unit of Canada’s Public Sector Pension Investment Board. Total in June 2011 agreed to sell its 6.4 percent stake for 4.6 billion kroner to Silex Gas Norway AS, owned by Allianz.
Other owners include GDF Suez (GSZ) AS, which owns 0.3 percent and ConocoPhillips, which has 1.7 percent.
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