Owners in Norway's gas pipeline network on Monday kicked off their effort in an Oslo court to recoup what they claim will be about 34 billion kroner ($4.34 billion) in lost income from tariff cuts pushed through in 2013.
Investors in Gassled, whose owners include Allianz, Canadian pension funds, Abu Dhabi's sovereign wealth fund and a fund run by UBS, have sued Norway to reverse the unexpected 90% reduction set to take effect in late 2016. The trial is scheduled to run through June 16 at the Oslo District Court.
The investors, who in 2011 and 2012 paid about 32 billion kroner for a 44% stake in the pipelines of Western Europe's biggest gas producer, argue the cuts violate Norway's petroleum law, European conventions on private property and the nation's constitution, according to a pretrial document filed to the court. They also ask for compensation in the event the court should find the changes legal.
“Low earnings and risk were not what these companies invested in when they took this business decision,” Jan Birger Jansen, a lawyer representing the investors, said in an opening statement in court Monday.
The government, for its part, said in its pretrial statement it's free to change tariffs to promote “good resource management” and the definition of that is “naturally at the discretion of the government.”
Two successive governments have justified the adjustments as necessary to boost exploration and to make more new discoveries profitable. The industry is now also grappling with plunging oil prices and companies have cut thousands of jobs in Norway since last year.
Allianz last year in a letter to Prime Minister Erna Solberg pleaded for a meeting, saying the cuts led to “significant” losses and write-downs on its 6.1 billion kroner investment. The insurer said the reductions damaged trust in Norway, potentially harmed investment in infrastructure in general and hurt German and Norwegian citizens. The C$238.8 billion ($194.9 billion) Canada Pension Plan Investment Board, Toronto, also said last year that it was “seriously recalibrating” its view of Norway after the reductions.
The government said in a pretrial filing that the move will reduce income for all of Gassled by almost 15 billion kroner through 2028 and that the investments will give a “reasonable” return. The agreements under the old tariffs are expected to generate about 112 billion kroner in income from 2013 to 2028, according to the government.
Gassled, the formal owner of the Norwegian gas transport infrastructure, supplies about 20% of Europe's gas demand through links to the U.K., France, Belgium and Germany.
Tolle Stabell, Norway's assistant attorney general, and the plaintiffs declined to comment before the start of the trial.