Ørsted to sell power unit for $3.2bn

December 2019 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

December 2019 Issue

In keeping with its vision of a world run entirely on green energy, renewable energy company Ørsted is divesting its Danish power distribution (Radius), residential customer and City Light businesses to fellow energy company SEAS-NVE for $3.2bn.

The deal was agreed following an unsolicited, non-binding offer which Ørsted received from SEAS-NVE in June 2019. The transaction is on a cash and debt-free basis, with proceeds to be paid in cash upon closing of the transaction.

The power distribution business (Radius), has approximately one million power customers in the Copenhagen area, North Zealand and parts of central Zealand. The power supply to the customers is delivered through a grid reaching approximately 19,000km.

The residential customer business sells electricity to approximately 717,000 customers, gas to approximately 105,000 customers and has approximately 44,000 heat customers. The City Light business operates and maintains approximately 145,000 streetlights in 15 municipalities on Zealand.

In H1 2019, the three businesses accounted for 7.9 percent of Ørsted’s operating profit and 9.4 percent of its capital employed.

Previously known as Danish Oil and Natural Gas (DONG) Energy, Ørsted’s strategic ambition to become a global leader in green energy prompted it to divest its upstream oil and gas business, change its name, and its board of directors and executive management to conclude that Ørsted was not the best long-term owner of the Radius, residential customer and City Light businesses.

Furthermore, this led Ørsted to initiate a structured divestment process for the three businesses in autumn 2018. In January 2019, however, this process was discontinued as the political support required to continue the process was no longer there.

Headquartered in Denmark and employing 6300 people, Ørsted develops, constructs and operates offshore and onshore wind farms, bioenergy plants and provides energy products to its customers. Its shares are listed on Nasdaq Copenhagen (Orsted). The company is 50.1 percent owned by the Danish state.

“With Ørsted’s global expansion in renewable energy, we are no longer the right owner of Radius and the Danish residential customer and City Light businesses,” said Henrik Poulsen, chief executive and president of Ørsted “We are therefore happy to enter into an agreement with SEAS-NVE, which is Denmark’s second largest cooperatively-owned energy company, to buy these businesses.”

Over the past century SEAS-NVE has grown from two small energy companies on Zealand to a group of companies with more than 390,000 cooperative owners. SEAS-NVE also provides power to most of Zealand, owns a high-tech fibre network, and ensures service and maintenance of Denmark’s longest power grid. The company has 978 employees.

Subject to regulatory approvals by competition authorities and the Danish Energy Agency, the transaction is expected to close in the first half of 2020. Furthermore, at closing, approximately 750 employees working for Radius and the Danish residential customer and City Light businesses will transfer to employment with SEAS-NVE.

Danske Bank and Citigroup acted as financial advisers to Ørsted.

“The agreement ensures an attractive transaction for Ørsted’s shareholders and provides a good future home for customers, and for our highly skilled employees,” concluded Mr Poulsen. “We will use the proceeds from the divestment to continue our global investments in green energy.”

Fraser Tennant