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Ørsted stops downstream divestment after Danish state withdraws support

Ørsted A/S is pressing pause on the sale of its power distribution and residential customer business in Denmark after the government, which holds a majority stake in the company, withdrew its support for the divestment.

The Danish energy company announced in June 2018 that it was seeking to shed the assets as it solidifies its leading position in the offshore wind market. Italy's Enel SpA and Danish utility SEAS-NVE Holding A/S were two of at least four companies bidding for the businesses, according to Reuters.

But Ørsted said on Jan. 14 that it would discontinue the structured divestment process after the Danish Ministry of Finance informed the company the previous day that the government was withdrawing its support.

"It is still the Board of Directors' assessment that Ørsted is not the best long-term owner of the businesses in question, and that it is in the best interest of the company, the shareholders and the customers that they are transferred to another owner, enabling Ørsted to strengthen its strategic focus and ambition to create a global leader in green energy," the company said in a statement.

Ørsted will keep classifying the businesses as assets held for sale and probe different options, including a separation to shareholders, it said. The turnaround from the state, which owns just over 50% of the company, was prompted by the opposition Social Democrat party, according to several news reports.

Ørsted has been focused almost exclusively on offshore wind, which has received more than 85% of its annual investments. In the face of its pivot to renewable generation, the company sees little value in keeping its Danish downstream assets. In addition to the distribution grid and power and gas retail business, these also include its City Light network of streetlights.

"As time goes by, [these businesses] will become relatively still smaller and smaller components in what essentially is a growing global renewables business," President and CEO Henrik Poulsen told investors on a call in late November 2018, emphasizing that there had been "strong market interest" for the assets.

The company had planned to decide on a possible divestment before the end of the first half of 2019 and said this week that the small group of potential buyers still in play included only pension funds and utilities from Denmark and Western countries in the Organisation for Economic Co-operation and Development.

In 2017, the Danish power distribution business, residential power and gas business and City Light totaled 5.6% of Ørsted's EBITDA.