DENMARK – Danish pension funds ATP and PFA are to invest DKK3bn (€402m) in state enterprise DONG Energy, as part of a highly controversial deal to recapitalise the ailing company, which has now split the country’s coalition government.

As part of the recapitalisation, funds managed by US banking group Goldman Sachs will put in DKK11bn for an 18% stake in the company.

ATP will invest DKK2.2bn for a 4.9% stake, and PFA will take 1.8% for DKK800m.

The government’s holding will be reduced to 57.3% from 81%.

A Danish parliamentary committee approved the Goldman Sachs investment yesterday.

Finance minister Bjarne Corydon said: “It is good DONG Energy now has solid ground under its feet. Today, Parliament has ensured that one or the biggest companies we have here can make massive investment instead of cutting back.”

Carsten Stendevad, chief executive at ATP, said it was a great deal for ATP members. 

“We see a significant upside potential in DONG Energy and have great confidence in the ability of the executive team to deliver on the business case,” he said.

ATP looked forward to working with the company and its co-investors on unlocking value, Stendevad said.

The deal now depends on the conclusion of final agreements between the parties.

Goldman Sachs’s involvement has prompted public and political criticism, and led to demonstrations outside the Danish Parliament. 

Critics have cited the US bank’s behaviour during the global financial crisis and voiced concerns over the fairness of the investor selection process.

Events reached a climax yesterday as Annette Vilhelmsen resigned as chairman of the Socialist People’s Party (SF), and her party withdrew from the ruling Social Democrat-led government coalition.

Vilhelmsen said she failed to persuade the government to consider alternatives to the DONG Energy deal or to get her own party to side with the government in approving the deal as it stood.

Prime minister Helle Thorning-Schmidt said she would soon announce a new government, but that SF would remain its close collaborator in Parliament.

On Saturday, the labour organisations behind four labour-market pension funds — Lærernes Pension, PKA, PBU and PenSam — called on the government to consider a “Danish solution to DONG’s need for new capital”, suggesting the pension funds could themselves provide the money in a joint investment project.

However, the Finance Ministry rejected the approach, saying it had not received a serious proposition from the labour organisations’ leaders.

“The process has been very structured and everyone has had the opportunity to take part along the way, including the pension funds that have gone to the media today,” the ministry said in a statement.

PFA’s chairman Henrik Heideby responded to the furore surrounding the deal, saying the stake it was taking in DONG was only small and that it would not have a place on the company’s board.

“Having said that, I would like to emphasise that the process leading to the offer to the Danish state from Goldman Sachs, ATP and PFA has been both fair and professional, from our viewpoint,” he said.

DONG Energy’s main focus is deep drilling, but it is also the largest power producer in Denmark. It has built and operates high-profile offshore windfarms off the coasts of Denmark and the UK.