Political turmoil in Denmark has been sparked by news that Goldman Sachs Group Inc. (NYSE: GS) will head a consortium of investment funds that plan to buy 19% of Denmark’s state-owned Dong Energy. The sale has sparked strong opposition from left-wing parties, even though the current ruling coalition in Denmark is led by the center-left Social Democrats. The current Prime Minister and head of the Social Democrats, Helle Thorning-Schmidt, has now lost the support of the Socialists, which puts her coalition in a weaker position. A petition against the partial sale of the state-run energy company has already gathered over 200,000 signatures.
Dong Energy Struggling Since 2008
Danish company Dong Energy has been in talks with private firms since 2008 regarding the partial buy out of the company. Initial plans for privatization were cancelled back in 2008 as it was falling far short on required capital to remain solvent. The group of firms that are now planning to own a part of Dong Energy is headlined by Goldman Sachs, and includes a number of Danish pension funds.
Yesterday, the final approval for the transaction was given by the Danish parliament’s finance committee and motivated opponents to begin petitioning the government. The main opponents of the partial privatization, members of the Socialist Party, were initially backing the proposal through their leader, Annette Vilhelmsen. Following strong inter-party opposition, Ms. Vilhelmsen pulled her party out of government and quit as chairwoman.
Opponents are very worried about what it would mean for the future of Dong Energy if the world’s premier investment bank, Goldman Sachs, were to take such an important role in the company’s management. Many are troubled by the potential mergers and acquisitions that may not be in the best interest of the Danish clients of Dong Energy. The opposition has been forceful on this issue, but the Socialists have said that despite their leaving government the party will continue to support the ruling coalition on other matters.
Mrs. Thorning Schmidt said that she would shortly reorganize her cabinet, and added that she “expect[s] that the Socialist People’s Party and the government will continue to have a close and confidential co-operation.” The government is expected to survive the current political unrest, but the future of Dong Energy is still unknown.