Hurtigruten is considering selling properties in Svalbard – E24

– Basically, we weren’t interested in selling. But when we look at who has made contact recently, we find that we had to map out this alternative more closely, says Per Brochmann, CEO of Hurtigruten Svalbard.

Hurtigruten announced in a stock exchange announcement Tuesday that it has begun a process to “evaluate strategic alternatives” for its Svalbard real estate portfolio.

Only properties are considered sold. Hurtigruten will remain responsible for the operation of the hotels and other tourism activities.

– We have received great interest from Norwegian and foreign players for our properties in Svalbard. Several of them see themselves as potentially good long-term partners in the work of further developing and strengthening Svalbard as a tourist destination, says Brochmann.

Extensive layoffs

In addition to sending tourists from around the world to Svalbard, Hurtigruten owns and operates a major hotel, commercial and excursion business on the island.

This business is managed through the wholly owned subsidiary Hurtigruten Svalbard and includes three hotels with about 300 rooms and 200 employees. Turnover in a normal year is around NOK 300 million, and the company generated an operating profit before depreciation (EBITDA) of NOK 52 million in 2019.

As a consequence, the crisis in the crown has hit operations hard, and today two-thirds of employees have been laid off. At the end of September, this year’s turnover was down by 100 million compared to last year.

Of the nearly 90 million that the Hurtigruten Group has received in support of the crown from the Norwegian authorities so far, 2.5 million has been earmarked for the Svalbard business.

– Doesn’t it seem like the best time in the world to sell tourism-related assets?

– These are difficult times, without a doubt. But the world won’t look like this forever. I recently read that Norwegian bank accounts increased during the crown crisis. We are a travel-loving people, and when society is fully reopened, I think it will be like a burst dam for the tourism industry, says Brochmann.

Fighting on various fronts

Like most tourism businesses, Hurtigruten is at a demanding time, with billing failures, cancellations and layoffs. The shipping company has also received harsh criticism from the Norwegian Maritime Directorate for mishandling a corona eruption aboard the expedition ship Roald Amundsen in July.

At the end of the second quarter, the company had a debt of close to NOK 13 billion and a negative equity of NOK 180 million.

In June, Hurtigruten obtained a loan of NOK 1.1 billion to secure money for operations, at an interest rate of up to 11 percent. This, in combination with expected government support, meant that liquidity was NOK 1.7 billion at the beginning of the second half of 2020.

At that time, the book value of the shares owned in Svalbard was NOK 241 million.

– Is the sales process in Svalbard moving forward because you have to strengthen your balance?

– I can deny that. The sale of the property in Svalbard is something that was considered even before the crisis of the crown. I’ve been in this job for four weeks and I sense this is something that has been there as a case and waited for me to join, says Brochmann, who was retired from the CEO role of Coop Helgeland.

According to Brochmann, they are looking for a buyer who shares Hurtigruten’s values ​​with regard to climate, the environment and alternative energy sources. One potential stakeholder could be the state-owned Store Norske, which has operated coal mines on the island for more than 100 years.

The coal business is winding down due to lack of profitability, and Store Norske has defined real estate and tourism as two of five strategically important investment areas going forward.

– I cannot comment on who has shown interest so far, says Brochmann.

Can be controversial

He notes that the Hurtigruten Svalbard board will be concerned with finding a partner, not just a real estate investor.

– We are also considering allowing a buyer to enter the operational side with a minority stake, but Hurtigruten will still have control over product development, says Brochmann.

The Hurtigruten Stock Exchange announcement states that the process that has been started can end with and without a transaction. The tourism group has hired the Carnegie brokerage as an advisor.

Svalbard’s Norwegian policy and assertion of Norwegian sovereignty mean that Hurtigruten’s property sales will quickly attract the Storting’s attention.

Five years ago, Chinese interests allegedly wanted to buy the largest private property in Svalbard. The state then stepped in and bought the property for NOK 300 million.

– We are aware of the political signals available and it is clear that we are listening to them, says Brochmann.

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