In an increasingly complex and competitive energy market, the aim of the combination is to establish one of Norway’s largest and most efficient grid companies, which will contribute to a power supply in central Norway with high security of supply and competitive grid rent.
Commercial, legal and political hurdles
The new grid group is owned by three shareholders. A significant challenge was to combine the business of the two grid operating companies under a common brand, whilst ensuring a separation of the companies through legal structure and geographic area. It was critical for the shareholders to retain the different tariffs and income restrictions applicable within their areas.
The Norwegian grid operating business is a monopoly business within a defined geographic area. The business is subject to a strict, complex and ever-changing legal framework which meant a complicated transaction. The grid operating business also has a strong local history which directly affects the people in the region, so political considerations were key in the transaction.
Traditionally, the grid operating business has been integrated with other related energy businesses, e.g. power production and sale. A challenge in the transaction was to review all separation issues and facilitate a new structure, operating on a stand-alone basis.
Structuring to maximise synergies
We assisted our client in establishing a group structure, with each of the grid companies operating as separate subsidiaries under a shared management. The transaction was completed without using the merger process or by one company acquiring the other. This allows the companies to share their expertise under the increasing legal requirements and to maximise synergies, whilst at the same time operating on a stand-alone basis.
Our engagement focused on the transaction structure and setting up the corporate framework for the shared ownership and operation. We reviewed the companies’ businesses and operations in detail and assisted with preparing new agreements on the different aspects.
A new business with new opportunities
The transaction has enabled the shareholders to join their grid operating business, capitalising on a more effective business, while simultaneously safeguarding the tariffs and income restrictions, and navigating the political interests.
Our assistance on the overall structure, together with the in-depth knowledge and understanding of the business, helped our client identify business opportunities and growth potential.