Dong's gas and oil business to fund renewables

DENMARK: Dong Energy will retain its gas and oil exploration and production (E&P) business when it floats on the stock exchange, with profits used to fund renewables.

Profits from Dong's oil and gas exploration and production business will be used to invest in renewable energy
Profits from Dong's oil and gas exploration and production business will be used to invest in renewable energy

Following a strategic review of the unit, Dong said it's E&P business comprised a "high-quality portfolio" in Denmark, Norway and the UK.

In September 2015, Dong issued an initial public offering (IPO) roadmap outlining plans to sell shares "as soon as possible". The decision to float on the stock exchange was taken after a capital injection in February 2014.

Dong is 58.8% owned by the Danish government. Following the share offering, the company said the government would continue to own a controlling share.

As part of the announcement, Dong said it would review its oil and gas exploration and production arm "to decide how to best position the business going forward".

One of the options would have been to spin off the unit into a separate company and retain the clean energy unit, similar to splits seen at E.on and RWE.

Instead, Dong has decided to keep E&P and use the cash flows generated to fund investements in renewable energy. Dong is the largest developer of offshore wind in the world, with a portfolio of more than 5GW.

Following the review, Dong said it was forced to write-down approximately DKK 16 billion (€2.1 billion) of the value of its business, due to falling oil and gas prices. The company said the write down would not affect its 2015 financial year guidance.

Business as normal

Meanwhile, the company's UK division has continued its preparation for the Burbo Bank Extension project, due to start installation in the summer.

Dong has leased an area of land in Birkenhead, near Liverpool, north-west England, to serve as the turbine assembly and construction area for the 258MW project. The lease will last two years.

The site is expected to employ 50 people and has been used for similar purposes before, Dong said.

The Burbon Bank Extension project will comprise 32 MHI Vestas V164 8MW turbines at a site, 8km off the UK's west coast. Completion is expected in 2017.

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