Dong Energy IPO to value windfarm operator at £11bn

Danish-based Dong Energy, a major investor in British offshore windfarms, is heading for the world’s biggest stock market flotation so far this year with a price tag for the entire business of 106.5bn kroner (£11bn).

The group, which has been a flag carrier for companies moving from fossil fuels to renewable energy, expects to sell up to 17% of its shares, each priced between 200 and 255 kroner.

The Copenhagen government, which owns 59% of Dong, said it wanted to retain a controlling half stake in a company that has invested in UK gas fields off the north of Scotland as well as windfarms such as London Array off the Kent coast.

The float, to be completed on 9 June, comes amid a 75% rise in the oil price since January lows, which has helped lift the share prices and pushed up the valuation of renewable energy suppliers such as Vestas Wind Systems in Denmark.

Thomas Thune Andersen, Dong’s chairman, said it was the right time to find new shareholders for a company that reported a 35% increase in first quarter profits last month.

“Over the past decade, Dong Energy has transformed itself. It is now a financially secure, fast-growing, profitable business with a leading position in the exciting offshore wind sector.

“We have built a strong and differentiated profile in renewable energy and made excellent progress towards becoming a leader among European energy companies in the transition to renewable energy. We look forward to welcoming new shareholders who can join us in our journey towards building a greener energy future.”

Morten Imsgard, an analyst at Sydbank in Denmark, said the pricing was at the high end of his expectations. “It is a company that is relatively complex to value. Because it’s crucial what expectations you have as an investor on the offshore wind turbine sector,” he told news agency Ritzau.

It is not the first time Dong has tried to tap stock market investors. Three previous efforts were abandoned amid indications the IPO would not be successful.

Dong, which was formed out of an oil and gas business plus a host of local Danish utilities, employs 700 people in Britain and has invested £6bn in this country.

The company has said it will double this spending by 2020 through constructing projects such as the Hornsea Project One windfarm off the east Yorkshire coast.

That would become the world’s largest offshore windfarm once completed in 2020 with a capacity of 1.2GW. Each turbine will be 190 metres tall – larger than the Gherkin building in London.

The selling off of Dong stock has not been universally popular in Denmark, with an earlier disposal of a 18% stake to US investment bank Goldman Sachstriggering the exit from a coalition government of the leftwing Socialist People’s party.

If the float is successful it should dwarf that of China’s Zheshang bank, which raised $1.9bn (£1.3bn).

Henrik Poulsen, the Dong chief executive, said he had been “encouraged by the positive feedback we have received so far in the process from the investors that we have seen around the world over the past couple of months”.

Elchin Mammadov, a utility analyst at Bloomberg Intelligence, said the proposed share prices were based on different sectors of the business: “The lower range represents where European oil and gas companies are trading, while the higher range corresponds to where utilities are valued at the moment.”

Dong’s profits from renewables were 3bn kroner, with 2bn kroner from oil and gas, plus 1bn kroner from the electricity grid system it operates in Denmark, the company reported last month. Earnings from renewables, mainly offshore wind, had risen by more than 50% but group profits were bolstered by almost 2bn kroner of disposals.

 

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