Investors sue Norway over gas pipeline tariff cuts

A group of international investors is suing Norway in an attempt to overturn its decision to cut gas pipeline tariffs, arguing that the fee reduction will cost them 15 billion crowns (US$1.9 billion) in lost earnings through 2028.

Challenging Norway's reputation as a predictable place to do business, investors including Allianz, UBS, the Abu Dhabi Investment Authority and the Canada Pension Plan Investment Board, argue that Norway illegally cut fees on the 8000 km (5000 mile) Gassled natural gas pipeline network.

In a trial that started on Monday and is due to last until mid-June, the plaintiffs, who own 45% of Gassled, say the government broke their contract and is liable for damages because the tariff was a fundamental condition of their investment, documents filed in the Oslo district court show.

The investors bought into the pipe network via a series of deals through early 2012 before Oslo cut some of the tariffs in 2013, arguing that returns were above agreed levels and fees were so high that they discouraged new offshore investment.

The government, which denies any wrongdoing, said profit from oil and gas should be derived from the fields, not from the infrastructure, and that pipeline tariffs needed to be cut from October 2016 because the predicted return had been achieved.

The government, which is the biggest shareholder in Gassled with 45.8%, said the actual return was 10% in 2012 and was seen rising to 10.5% in 2028, well above the initial goal of 7%.

The tariff reduction was first announced by Norway's previous, centre-left government that was ousted in late 2013, but the new centre-right administration reaffirmed its support for the cut in one of its first decisions after taking office.

Gassled transports gas from platforms in the North and Norwegian Seas to processing plants in Norway and terminals in Britain, Germany, France and Belgium, supplying about a fifth of the European Union's gas needs.

Investor reaction

“Sophisticated, long-term infrastructure investors have seriously recalibrated their assessment of Norway,” said Mark Wiseman, Chief Executive of CPPIB, in a letter last year to the Norwegian Finance Ministry.

With yields on debt securities at rock-bottom levels, the lure of steady, long-term returns is drawing many big investors to pipelines, ports and other infrastructure projects. But bankers and lawyers in the sector say the Norwegian case has some investors reassessing the political risk of this kind of investment in Europe, where governments, especially of Nordic countries, have been seen as reliable partners.

Edited from various sources by Elizabeth Corner

Sources: Reuters, Wall Street Journal

Read the article online at: https://www.worldpipelines.com/business-news/29042015/investors-sue-norway-over-gas-pipeline-tariff-cuts/