Oslo and Bergen residents lose billions on cheap electricity – E24

Low electricity prices in 2020 benefit the private economy, but will greatly affect the municipal finances of Oslo and Bergen.

The red-green city council of Oslo proposes in the 2021 municipal budget to cut NOK 623 million in stock dividends. It adds to a cut of 713 million this year. The municipality’s dividend comes mainly from the Hafslund E-CO company, in addition to some from Fortum Oslo Varme.

The annual dividend, both this year and next, was planned to be around NOK 1.5 billion. The cut in Oslo’s energy revenue was notable and several of the red greens’ biggest electoral promises must be postponed.

– No one could predict these electricity prices. This makes it more difficult when it occurs in addition to the corona pandemic, says Einar Wilhelmsen (MDG), who is the financial adviser in Oslo.

Bergen: – Dramatic

In Bergen, the dividend from power company BKK is likely to be cut in half. In a letter from BKK to the owner municipalities, they expect weaker results and lower dividends. Bergen may end up reducing its BKK dividend from 230 million in 2020 to around 90 million in 2021.

Dividends from power companies in both places go directly to the municipal operating budget. This gives the two largest cities in the country very little room for maneuver.

Erlend Horn (V) is a financial advisor in Bergen. You cannot say exactly how big the failure will be.

– But we get a dramatic loss of dividends, he says.

A lot of snow in the mountains and high temperatures have pushed the price of electricity far below normal. The lowest ever, analyst Tor Reier Lilleholt told Wattsight at E24 in June. The reduction in consumption as a result of the pandemic has also affected the price.

Stavanger Stavanger

The cuts are in stark contrast to the situation in Stavanger. The municipality owns 45.7 percent of Lyse. They have stayed there previously during the good years, in order to maintain the level of dividends during the bad years.

– We can endure a bad year with our model, says CFO Eirik Børve Monsen at Lyse.

Their long-term ambition is that 60 percent of the profits go to the owners. City manager Per Kristian Vareide in Stavanger is pleased with this.

– We want stability instead of maximizing from year to year. It can create uncertainty, which is difficult to handle, says Vareide.

Oslo believes in its own model

At Hafslund E-CO, they don’t have a formal rule for dividend levels. The board conducts an evaluation from year to year.

Finansbyråd Wilhelmsen in Oslo believes that dividend policy in Oslo is good.

– I think it’s a sensible model. The municipality is a good long-term owner. We have the finances to withstand such fluctuations.

– How about a reserve fund for bad years?

– We have the Premium Diversion Fund. You can also lean on it in special situations. But we prefer not to use it, he says.

The premium variation fund actually belongs to the municipality’s pension fund. The pension fund cushion is easily explained in the event of bad times and is around 3,000 million. In the municipal budget for 2021, the city council proposes to use 200 million of the fund, and they plan to spend 50 million the following year.

Øystein Sundelin is the group leader of the Conservative Party in Oslo City Hall. She thinks it is difficult to change the model or create a reserve fund for bad times.

– This is the money we need. They take them directly to the city coffers and go out again for the welfare. It’s hard to get away from it now. But if I had to do it first, maybe this is the time, as the dividend is so low, he says.

Assessment of changes in Bergen

Finansbyråd Horn in Bergen says that a decrease in revenue of NOK 100 million will challenge them.

– It weakens our room for maneuver. We have a strict and tight budget. It’s also due to the crown and other challenges, says Horn.

The liberal politician does not want to anticipate what steps he has to take now.

– But when we have a failure of this type, we have to look at all the elements of the budget to find a solution, he says.

BKK has a long-term plan to give 70 percent dividends. Anne Marit Steen is the CFO of BKK. You have an idea of ​​what Lyse has done in Stavanger.

– Lyse stops during the good years. It could be a good alternative. Our dividend policy is designed to get a high credit rating on our loans, he says.

Horn says the Bergen municipality, in dialogue with the BKK board, should consider whether to take action.

– But I think other models may also have their weaknesses. Dividend policy has been good in recent years. It has given stable returns. This year we have an extraordinary situation, with record prices for electricity, he says.