The Energy Mergers & Acquisitions Review: Denmark
The Danish energy M&A market is very active and has been so for many years. The level of activity has continuously been rising and with the increased focus on the environment and sustainability, and thus renewable energy, activity should continue its rise in the coming years.
Domestic natural gas and oil resources, as well as domestic renewable sources of energy such as waste, woodchips, sun, wind and biogas are the main methods of meeting the Danish energy demand. Danish energy policy emerged in the wake of the oil crises in the 1970s, where the focus was particularly energy prices and security of supply. Later, these considerations were supplemented by a climate dimension, and as such, the current Danish energy policy primarily aims to (1) ensure a stable and secure energy supply; (2) which reflects the government's goal of independence from fossil fuels by 2050; and (3) reduces greenhouse gas emissions.
Traditionally, Danish energy policy has been governed by political agreements entered with a broad sphere of political parties to ensure political stability for the sake of market participants. The most recent major energy policy agreements were entered in March 2013,2 and in June 2018.3
The energy sector is highly contingent on public entities, including the state, to subsidise and promote (e.g., green energy solutions such as wind and solar). Therefore, the state's involvement is still to some extent a prerequisite for the Danish energy market to continue its development.
In the subsoil area of Danish territorial territories, the Danish state has a general right to all hydrocarbons. The state can award licences to investigate, explore and produce hydrocarbons in advance; however, the Danish state is engaged in exploratory and hydrocarbon development concessions through the Danish North Sea Fund.
The partially government-owned company, Ørsted A/S, operates upstream pipelines and runs the gas processing facility, whereas Energinet – after the completion of its recent purchase of the gas distribution network – now has the entire gas distribution network.
Electricity grid companies have a distribution monopoly in their respective municipalities. The overall supply protection is, however, the responsibility of the transmission system provider (Energinet), which must ensure the overall balance and efficiency of the electricity supply system.
In addition to the above-mentioned involvement, several new energy policy proposals are being drafted and introduced to speed up and promote the transition to green energy. The exact content of such proposals is still not clear and this is why it is too early to consider in detail the effects of them and their impact on the Danish energy M&A market.
Year in review
Although the covid-19 pandemic had a negative impact on the number of transactions during Q1 and Q2, the trend is showing a significant improvement in the aggregate number of transactions during Q3.4
Over the last 12 months, 18 transactions related to power and utilities were conducted,5 which represents an increase compared to the average number of transactions conducted yearly from 2016 to 2019 (15), and is almost similar to the aggregate number of transactions conducted in 2019 (19).6
Therefore, and despite the impact of covid-19, during 2019–2020, several noteworthy transactions have taken place, such as:
- Total's acquisition of all the share capital of Chevron Denmark. The acquisition included Chevron Denmark's 12 per cent interest in the Danish Underground Consortium (DUC) and a 7.5 per cent stake in the Tyra West pipeline;7
- European Energy issuance of a €140 million green bond. The bond was the first Danish green corporate bond listed on Nasdaq Copenhagen's green bond segment. Part of the proceeds will fund new green projects, while the remaining proceeds will be used for an early redemption of the company's outstanding 2021 bonds;8
- Eurowind Energy A/S's acquisition of SE Blue Renewables and its onshore wind fleet of 222 wind turbines, totalling 184 MW;9 and
- Ørsted A/S's divestment of its power distribution (Radius), residential customers and city light businesses to SEAS-NVE for a price of 21.3 billion Danish kroner on a cash and debt-free basis.10
Further, renewables and green energy solutions continue to function as both a transactional and regulatory driver, the former being exemplified by, for example:
- Google and Better Energy announcing the completion of a new zero-subsidy 51MWp solar park in Næstved, Denmark, built to power Google's data centre in Denmark. The park is the result of a long-term power purchase agreement (PPA) from 2019, in which Better Energy started the construction of three new solar parks in Denmark with a combined capacity of 100MWp;11
- The expansion of Facebook's data centre in Odense, Denmark, which will ensure that surplus heat can be delivered to approximately 11,000 households in the area. With the expansion, Facebook's data centre will in total constitute an investment of more than 10 billion Danish kroner;12 and
- GreenGo's announcement of a partnership agreement with Encavis AG concerning a 500MW+ portfolio of utility scale subsidy-free solar projects in Denmark.13
As already indicated above, several regulatory changes were also adopted by the Danish parliament from late 2019 until mid-2020. This regulatory trend is expected to continue in the current sessional year of the Danish Parliament (late 2020 to mid-2021).14
Regarding the latter, although the majority of the legislative changes do not directly relate to M&A transactions within the energy sector, the following changes might have an indirect impact on transaction activity and the market in general:
- Act No. 1567 of 27 December 2019, which aims to support a new regulation of the water sector, which ensures a more flexible revenue framework and provides flexibility to invest in long-term and sustainable solutions that support high quality in delivery, high environmental performance and low prices for consumers. The act functions as a preparatory framework for the implementation of the new regulation of the water sector, which will be implemented in a later bill.
- Act No. 738 of 30 May 2020: the purpose of the bill is, inter alia, to authorise the Minister of Climate, Energy and Utilities to be able to initiate calls for technology-neutral tenders supporting electricity produced through onshore wind turbines, open-door offshore wind turbines, solar, wave and hydropower from 2020 to 2024.
- Act No. 965 of 26 June 2020 the 'Climate Act' has as its declared purpose to introduce binding sub-targets and binding long-term climate targets. The law contains a target of reducing greenhouse gas emissions by 70 per cent by 2030, compared to the level in 1990.
In December 2018, the Danish Parliament adopted a new operating subsidy scheme for electricity produced using biomass. Since the adoption, the scheme has been awaiting approval by the European Commission. The approval was given, and the scheme entered into force on 1 July 2020.17
Furthermore, the Danish Consumer Ombudsman has, in collaboration with a number of industry and interest organisations, negotiated guidelines that create a common framework for when and how electricity suppliers can use statements such as 'green electricity' as part of their marketing strategy, without misleading consumers.18
Legal and regulatory framework
From a broad perspective, private M&A transactions are not governed through specific legislation but instead through common legal principles, etc. However, depending on the structure, a transaction within the energy sector will, as with M&A in general, fall within the scope of, for example, the Companies Act,19 the Act on Transfers of Undertakings,20 the Contracts Act,21 the Sale of Goods Act,22 the Data Protection Act,23 and various tax-related legislation.
As the Danish energy sector is still, to a wide extent, contingent on cooperation with the state and local municipalities, transactions will more often also hinge on, for example, legal principles related to the express and implied authority for municipal activities.
For the same reason, the energy sector is subject to sector-specific regulation found within, for example, the Natural Gas Supply Act,24 the Heat Supply Act,25 and the Electricity Supply Act.26 Although this regulation primarily relates to operational aspects, the rules do – to some extent – contain transactional aspects as well.27
Furthermore, the general Danish merger control rules apply. Looking beyond EU merger regulation, merger control is regulated within Chapter 4 of the Danish Competition Act,28 which is supplemented through the Executive Order on Notification of Mergers.29 The Danish definition of a merger corresponds with the EU Merger Regulation, and a merger within the energy sector will, therefore, be subject to merger control if the merger falls within one of two different thresholds based on the combined annual revenue.30
In relation to the extent of particular ownership stake, it is important to note that if the requirement for unbundling of ownership mentioned below is not met, the company is required to inform the Danish Utility Regulator and regain a revised approval or certification from said authority.31
Cross-border transactions and foreign investment
Except for Q2, the general trend in cross-border transactions, inbound as well as outbound, indicates some slowdown in the inbound cross-border transactions compared to 2019, whereas the number of outbound cross-border transactions is almost similar to 2019.32 The primary players still consist of companies already established within the energy sector, as well as major pension and infrastructure funds.
The parties are free to choose the governing law and jurisdiction of the transaction, however, and it is not a requirement that the transaction is governed by Danish law. Danish legal formalities for the transfer of shares or assets should, however, still be met.
As of 2020, Denmark has no cross-sectoral regime for screening foreign direct investments (FDIs). The Danish Act on the Continental Shelf and certain Pipeline Facilities in Territorial Waters33 is currently the only piece of legislation in Denmark that considers foreign and national security interests in part.
Although no general FDI regime exists within Danish law, the Danish government has announced its plans to introduce a 'national investment screening scheme' before 2023, most likely in 2021.34
Energy projects or infrastructure projects are generally very sought after and viewed as a sound investment, even more so with the increased focus on sustainability and renewables. Most Danish energy and infrastructure companies are well consolidated and are often not very debt heavy. Therefore, the traditional funding methods (corporate financing, acquisition or project financing, company-bonds, etc.) are typically available to the companies in the sector if they are not able to (or chose not to) finance the project or acquisition by way of their own available funds. In conclusion, actors on the energy M&A market will have fairly easy access to acquisition or project funding whether it be via external financing (debt) or via investments (equity or convertible loans).
There is no requirement for authorisation or permission to make investments in or payments into Denmark, nor is any authorisation or permission required in relation to the expatriation of funds, save as for otherwise stated in this article. Danish companies are, therefore, free to obtain financing on the international markets without being subject to limitations on repayment periods, etc.
The covid-19 pandemic and the related economic consequences thereof led to a shutdown of the European leverage finance markets. The primary leveraged loan market was essentially closed as borrowers were met by wide market flex provisions reflecting bank weariness to underwrite debt during the period of market uncertainty. For now, banks have been willing to waive defaults or borrowers have been able to find other forms of liquidity funding (including through government backed schemes), which has minimised the number of distressed Danish companies for now (also within the energy sector). Going forward, it is, however, likely that the energy-sector will also be affected by the economic consequences of the covid-19 pandemic, inter alia, via higher interest rates on loans that could affect the willingness to invest. On the other hand, the current crisis could lead to good investment opportunities in the sector for those energy companies that are more or less unaffected by the crisis, which would be most Danish and foreign energy companies.
Given the complexity and size of most Danish energy and infrastructure transactions, a thorough due diligence is definitely the norm. In larger transactions that are constructed as an auction process, it is normal that a vendor due diligence is carried out and a subsequent vendor due diligence report is provided to the bidders.
The legal due diligence (whether as buyer or seller due diligence) will usually cover the following topics or matters:
- corporate matters;
- shares and shareholders;
- real estate;
- environmental matters;
- intellectual property rights;
- contractual matters;
- acquisitions and divestments;
- financial matters;
- related party transactions;
- compliance (e.g., General Data Protection Regulations) and regulatory matters;
- competition law matters;
- litigation and disputes;
- insurance matters; and
- tax matters.
It goes without saying that the topics will differ depending on the transaction in question. If the transaction concerns the (direct or indirect) purchase of a power grid, the due diligence efforts should pay extra attention to, inter alia, real property aspects (e.g., buildings on leased or third-party land), environmental aspects and regulatory aspects (e.g., permits) whereas the contractual aspects (e.g., power purchase agreements) and technical or operational aspects will be of more importance if the transaction concerns a wind farm.
It is normal (and very advisable) that (1) legal due diligence, (2) tax due diligence and (3) financial due diligence is conducted. It is getting more and more common that technical or commercial and environmental due diligence is also carried out by the buyer. If there is a vendor due diligence report, the buyer's due diligence investigations will sometimes be performed as 'top-up' due diligence, which complements and is on top of the existing vendor due diligence reports. If there is no management presentation conducted, it is advisable (as a buyer) to seek to get a management interview set up that can give very valuable insight into the business of the target.
The covid-19 pandemic and its effects has caused buyers to be more careful and thorough in their due diligence efforts. The same goes for underwriters in the context of warranty and indemnity insurance (W&I insurance), where insurers are likely to pay particular attention to warranties relating to a target's business continuity measures, financials, insurance arrangements, employment and material contracts with suppliers and customers.
Purchase agreements and documentation
The documentation for an energy or infrastructure transaction, whether it be a business transfer agreement (where assets or activities are transferred) or a share purchase agreement (where only shares are transferred) more or less follows the general M&A trend. The same applies in respect of the warranties taken on by the seller. However, given that most of the Danish energy and infrastructure companies are owned by the municipalities or by the end-customers,35 other considerations are also at play; namely, political and geographical considerations. This means that in some transactions there could be more unusual terms needed. This could be terms addressing the level of activity (and employees) in the local community after completion of the transaction, terms concerning corporate governance or certain very strict conditions for the conclusion of the transaction (e.g., right of first refusal for all customers).
Fundamentally, the main reason for structuring an acquisition as a purchase of assets or activities is the possibility it provides to exclude certain actual or contingent liabilities (including tax legacy). The extent of due diligence investigations and seller's representations, warranties and covenants are, however, often substantially the same whether shares or assets or activities are acquired. For the buyer, an asset purchase will have the advantage that the book value of the assets, on incorporation into the buyer's balance sheet, may be increased to fair market value, thereby increasing the basis for obtaining the necessary loan financing and also increasing the basis for depreciation for tax purposes. On the other hand, the benefit of structuring an acquisition as a purchase of shares is that it is often easier to handle and conclude and the buyer does not run the risk of missing any assets. From a Danish energy M&A perspective, the structure of the transactions is more or less evenly divided between share deals and asset deals.
As mentioned above, the documentation for an energy or infrastructure transaction generally follows that of an 'ordinary' transaction. Without regard to the very specific terms that can sometimes be seen in Danish energy or infrastructure transactions, the following general items will usually be found in a Danish share purchase agreement or business or asset transfer agreement:
- description of the parties;
- description of the subject of the transaction (shares or assets or activities);
- purchase price and payment terms;
- conditions precedent to closing;
- closing and closing obligations;
- buyer's investigations;
- seller's warranties;
- specific indemnities;
- conduct of business until closing;
- non-compete clause;
- confidentiality provisions; and
- governing law and dispute resolution.
As for warranties and specific indemnities given by the seller, this is always the more heavily negotiated part of the transaction. A buyer will (outside of the fundamental warranties such as ownership, third party rights, etc.) always demand warranties for regulatory matters and compliance as some of the most important warranties. For the most heavily regulated energy-businesses (such as, inter alia, power plants or electricity supply companies) it is often seen that specific indemnities are required to mitigate known cases that are being processed by the relevant Danish regulatory entity.
It is not unusual in Danish energy or infrastructure transactions that there are separation issues (e.g., access to historic data or employees not part of the transaction) that require handling as part of the transaction. These separation issues are often dealt with in separate transitional services agreements.
The covid-19 pandemic has meant that specific covid-19 clauses (similar to material adverse change (MAC) clauses) have been introduced in some transaction documentation. We expect that such clauses or more detailed MAC clauses will continue to have focus going forward.
Key regulatory issues
Besides the above-mentioned general description of the Danish regulation of merger control, it is important to assess the possible market definitions at the earliest possible point in time, to identify potential issues in relation to competition law. This in turn makes the preparation of any remedies that might be needed possible, and gives a comprehensive picture of the transaction envisioned, and the divestitures necessary to get an approval from the Danish competition authorities.
Furthermore, awareness towards not implementing any parts of the transaction before approval is critical, as this could be considered gun-jumping, which is a practice subject to extensive fines.
ii Environmental protection
Under the Polluted Soil Act,36 the Danish regional authorities chart the pollution and potential contamination of land based on available knowledge on land usage – both in the past and in the present – and based on field studies. Field studies are, however, performed only on land that is known to be so polluted or so situated that public health, including drinking water, or the environment is at risk.
The Environmental Protection Act sets out the 'polluter pays concept', which is detailed and extended in the Polluted Soil Act. The principle entails that the polluter is liable to enforce and pay the expense of all appropriate steps to avoid, limit, evaluate and clean up emissions. However, if the buyer chooses to build on the property or to make use of the property, the buyer will have to carry out and pay for analysis, decontamination or pollution encapsulation steps to satisfy the conditions of the relevant building or usage permits.
For plant construction and plant expansion or modification causing increased emissions, a permit is required. Depending on the size of the plant, the permit is granted by the relevant town or regional council. Permits for large plants require a public hearing beforehand and for major plants, the environmental impact assessment under the Planning Act may be required to be carried out.
Furthermore, establishing offshore installations is contingent on Danish Energy Association approval, and requires various permits issued by the same authority, including an operating licence, management and operational strategy approval and contingency plan approval. For an operating permit to be issued, an assessment of the installation safety and operating conditions must be carried out.
In the event of a sale of shares in a target company, the employer's identity will remain the same. As such, employees will retain their jobs with the target company on unchanged terms post-closing.
The Act on Transfers of Undertakings will, however, apply in the case of an asset transfer, which constitutes a transfer of a company or a part of a business. In this case, employees working in the target company will immediately be transferred to the buyer, unless the employees use their individual right to object to the transfer. The buyer will subsequently regain all rights and responsibilities under the individual employment and collective bargaining agreements.
The Act on Transfers of Undertakings does not extend to senior managers reporting to the board of directors (e.g., the company's chief executive officer). For these individuals, a special arrangement must be entered into to effectuate a transition to the buyer.
Taxational issues depend on whether the transaction is structured as an asset or share purchase deal.
In case of a purely asset-based deal, the taxable gain on the sale is taxed. The taxable profit is the difference between the tax-written values and the sales price. The profit is included in the calculation of the taxable income for the target, and in the joint taxation. As such, the price will often be higher in a purely asset-based transaction.
Gains from the sale of shares are tax-exempt for companies. A possible gain on the sale of the shares in the company to a buyer will, therefore, be exempt from taxation and, as such, the price will often be lower in a share-purchase based transaction, as the buyer undertakes any deferred tax obligations from the target.
v Real estate
To avoid legal proceedings against a property and for future recipients of the rights to property, any right on the property including ownership rights, rights of use and mortgages must be registered with the Danish Register of Land. The cost for registration varies depending on the form of right to be registered, the most expensive being the right to possession and the mortgage, where the cost amounts to a percentage of the purchase price and the amount obtained.
vi Anti-money laundering and anti-corruption
The Danish Money Laundering Act mandates, among others, that certain transaction participants, such as financial institutions, insurance and real estate companies, accountants, tax advisers, law firms and notaries, comply with certain anti-money laundering obligations (e.g., an obligation to report any suspicious transactions and information that might be related to an effort to commit money laundering or finance terrorism).
Under Danish law, anti-corruption is not subject to any general regulatory framework. However, the Danish Criminal Code forbids the selling, awarding, accepting, or soliciting of any object of value to manipulate the conduct of an official or other person in possession of a public or civil obligation, including bribery. Illegal kickbacks (secret commission) in private transactions will also constitute a criminal offence under Danish law.
vii Energy regulation
Generally, a licence is required for all exploration, production,37 transmission,38 distribution and storage activities. Without permission from the Danish Energy Agency, this licence cannot be passed directly or indirectly to others.39
Beyond this, the transactional dimensions of the Natural Gas Supply Act, Heat Supply Act and Electricity Supply Act are multifaceted and dependant on the nature of the target energy company. However, in broad terms, the main regulatory hurdles to consider are that:
- the ownership of transmission companies must be separated or unbundled from production and trading activities;40
- members of the board of directors may not participate, directly or indirectly, in the operation or management of the relevant companies that distribute or manufacture natural gas and electricity;41
- the ownership of certain transmission networks (e.g., electricity transmission networks between 100kV and 200kV) can only be transferred to the Danish state;42
- change of ownership could in some instances trigger an option for the state, municipality or the combined pool of consumers to purchase the combined shares in the transmission company or the transmission plant;43 and
- consumer influence and representation in a network or transmission company is widely required by law.44
viii Other issues
When municipalities divest utilities, the municipality's proceeds are covered by the 'set-off rules'.45 The set-off rules are generally structured in such a way that the municipalities must register distributions and remuneration when disposing of ownership interests in utility companies. This means that the rules cover both the municipality's sales proceeds and distributions, including the transfer of funds from electricity, heating or natural gas activities to activities related to the water sector or waste management.46
In the event of a sale, the municipality will, therefore, be set off against the state-sponsored block grant if the proceeds are transferred to one of the group's other utility companies, or if they are distributed to the municipality. On the other hand, if the proceeds are kept within the group, there will be no set-off, and the proceeds can be invested if it is not transferred to the municipality or other utility companies.47
From a general M&A perspective, it is increasingly common in Denmark that W&I insurance is used in larger transactions as a way to 'bridge the gap' and allocate risk between buyer and seller. The benefits for the seller are clear and they entail, inter alia: (1) a clean exit; (2) limited post-completion risk; (3) increased certainty on the transaction; and (4) maximising the vendor due diligence work carried out. From a buyer perspective, W&I insurance offers a solution to concerns about a seller's financial covenant strength or where limited seller recourse is available. Whereas W&I insurance has historically been mostly used by private equity funds and other professional actors in the M&A market, it is now more common that industrial sellers, family-owned companies and similar also make use of W&I insurance.
The same trend can be seen with respect to energy transactions in Denmark. This makes good sense because energy (and infrastructure) transactions are usually very complex and involve high-valued assets. Furthermore, the ownership structure of many Danish energy and infrastructure companies also supports this development because most of these companies are owned by the municipalities or the customers (cooperative societies). W&I insurance can thus be a good tool to mitigate the risk of any 'backtracking' on the transaction.
The terms and coverage cap of the W&I insurance will always depend on the transaction in question, the sector and risk profile of the target. The increasing number of underwriters in the W&I insurance market has meant insurance cover has in recent years become a cheaper and more attractive option because of the decreasing premiums, excess levels and areas excluded from coverage.
Even though there is always a risk of a dispute in the aftermath of an energy or infrastructure transaction, it is very rare that such disputes between the seller and the buyer evolve into actual litigation. At least, that is the way it has historically been in Denmark. However, although actual litigation processes in energy M&A are still fairly rare, we see a clear tendency in the direction of more disputes and litigation following transactions. The reasons for this are not quite clear but it could have something to do with the influence from the common law countries where litigation (especially within M&A) historically has been much more common.
In most energy or infrastructure transactions, the parties will have agreed to private or confidential arbitration, which in Denmark means that disputes between the parties will be referred to The Danish Institute of Arbitration.48 It is thus rare that disputes arising out of energy or infrastructure transactions are settled within the ordinary Danish courts.49
It is getting more common to also see alternative dispute resolution methods included in the transaction documents such as mediation and mandatory negotiation before a dispute can be referred to and handled by the Danish courts or by an arbitration tribunal. However, in our experience, these alternative dispute resolution methods are very often not actually used.
It seems almost a given that the focus on sustainability and renewable and alternative energy sources will continue and most likely be increased. From a Danish perspective, it is clear that the Danish government (independent of which political party is in office) will continue to strive at being at the forefront of this movement, continuously trying to make sure that Denmark is one of the best places to invest in clean energy and technology to that extent, all the while looking to be completely energy self-sufficient. Thus, it seems very likely that the Danish government will look to put in place relevant and adequate reforms or legislation to support and maintain such development and investments thereto.
However, an EU regulation50 on screening of FDIs has, effective from 11 October 2020, established a framework for cooperation between the Member States and the European Commission for screening of FDIs. The aforementioned regulation requires the Member States to share certain information about the national investments that are undergoing screening but also, upon request, information about national investments that are not subjected to a screening. The covid-19 pandemic has also been a catalyst for increased focus on national security of supply and dependence on critical infrastructure. Denmark does not currently have a cross-sectoral screening system, but the Danish government is expected to submit a specific proposal for legislation to the Danish Parliament in 2020 or 2021 that will reflect the new EU regulation. This new Danish legislation will (if adopted) likely focus on sectors of critical importance to Denmark such as critical infrastructure and energy companies. From a Danish energy M&A perspective, this will most likely entail that certain transactions within the energy and infrastructure sectors in the future will be subject to both notification and approval from the authorities.
1 Christian Richard Paarsgaard Ibsen is a partner at Kromann Reumert.
2 Agreement between the Danish government (Socialdemokraterne, Det Radikale Venstre and Socialistisk Folkeparti) and the opposition parties (Venstre, Dansk Folkeparti, Enhedslisten and Det Konservativ Folkeparti) on the Danish energy policy for 2012–2020, dated 22 March 2012, https://ens.dk/sites/ens.dk/files/EnergiKlimapolitik/aftale_22-03-2012_final_ren.doc.pdf.
3 Energy agreement dated 29 June 2018, https://kefm.dk/media/6646/energiaftale2018.pdf. For comprehensive overview of political energy agreements concluded from 1985–2019, see https://ens.dk/ansvarsomraader/energi-klimapolitik/politiske-aftaler-paa-energiomraadet drafted by the Danish Energy Agency.
4 Transaction Trends: Danish M&A Update – Q3 2020, EY, p. 2, https://assets.ey.com/content/dam/ey-sites/ey-com/da_dk/topics/transaction-advisory-services/transactions-pdfs/ey-transaction-trends-2020-
5 Transaction Trends: Danish M&A Update – Q3 2020, EY, p. 2, https://assets.ey.com/content/dam/ey-sites/ey-com/da_dk/topics/transaction-advisory-services/transactions-pdfs/ey-transaction-trends-2020-
6 Transaction Trends: Danish M&A Update – Q3 2020, EY, p. 4, https://assets.ey.com/content/dam/ey-sites/ey-com/da_dk/topics/transaction-advisory-services/transactions-pdfs/ey-transaction-trends-2020-
14 See the Danish government's legislative agenda, https://www.stm.dk/media/10043/lovprogram_folketingsaaret-2020-2021.pdf, pp. 30–33, from which it appears that the Danish Minister for Climate, Energy and Utilities expects to present an extensive number of bills directly related to specific parts of the energy sector.
15 Danish legislative changes intended to implement EU rules include (1) Act No. 1293 of 5 December 2019 implementing, for example, Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity and (2) Act No. 1294 of 5 December 2019 implementing, for example, Directive 2019/692 of the European Parliament and of the Council of 17 April 2019 amending Directive 2009/73/EC concerning common rules for the internal market in natural gas.
16 See the Danish government's legislative agenda for the previous sessional year of the Danish Parliament (2019 to 2020), https://www.regeringen.dk/media/7332/lovprogram-2019-2020.pdf, pp. 23–26.
18 See https://www.forbrugerombudsmanden.dk/media/55841/elhandleres-brug-af-klimamaessige-
19 Act No. 763 of 23 July 2019.
20 Act No. 710 of 20 August 2002.
21 Act No. 193 of 2 March 2016.
22 Act No. 140 of 17 February 2014.
23 Act No. 502 of 23 May 2018.
24 Act No. 126 of 6 February 2020.
25 Act No. 1215 of 14 August 2020.
26 Act No. 119 of 6 February 2020.
27 See Section VIII.vii for further description.
28 Act No. 155 of 1 March 2018.
29 Executive Order No. 690 of 25 May 2020.
30 See, the Competition Act Section 12(1) No. 1-2.
31 See, the Electricity Supply Act Section 19(d).
32 Transaction Trends: Danish M&A Update – Q3 2020, EY, p. 2, https://assets.ey.com/content/dam/ey-sites/ey-com/da_dk/topics/transaction-advisory-services/transactions-pdfs/ey-transaction-trends-2020-
33 Act No. 1189 of 21 September 2018.
34 For a detailed description of the current and expected regulatory regime related to FDI, see https://www.kromannreumert.com/Insights/2020/Foreign-Direct-Investments-New-regime-in-Denmark and https://en.kromannreumert.com/Our-Expertise/Foreign-Direct-Investments/Denmark.
35 According to a survey by the association Danish Energy, 42 out of 43 energy groups are owned by either a municipality or the end-customers (https://www.danskenergi.dk/fakta-fokus/danske-model).
36 Act No. 282 of 27 March 2017.
37 See, for example, the Electricity Supply Act Section 10(1) regarding electricity production through plants with a capacity above 25MW. Only applicants with the requisite expertise and economic potential can be granted natural gas and electricity licences. Furthermore, see Section 11(1) regarding establishment of new production plants and material changes to existing plants and Section 12(a) regarding electricity production through oxidation.
38 See, for example, the Electricity Supply Act Section 19(1).
39 See, for example, the Electricity Supply Act Section 53(1).
40 See, for example, the Electricity Supply Act Section 19(a). Lacking separation is, however, to some extent accepted, although in such case, the company will be required to establish a programme that describes the efforts to insure non-discriminatory conduct, see Section 20a.
41 See, for example, the Electricity Supply Act Section 45(2).
42 See, for example, the Electricity Supply Act Section 35(1).
43 See, for example, the Electricity Supply Act Section 35(2-13) and the Heat Supply Act Section 23f.
44 See, for example, the Electricity Supply Act Sections 40 to 44 and the Heat Supply Act Section 23h to 23k supplemented by Executive Order No. 1624 of 18 December 2017.
45 See, for example, the Electricity Supply Act Section 35(2-13).
46 See, for example, the Electricity Supply Act Section 37 and the Heat Supply Act Section 23l.
47 Executive Order No. 1624 of 18 December 2017 Appendix 1, Example 1. However, the municipality will be required to issue a statement to the Danish Energy Agency confirming the proceeds have not been transferred to the municipality or other utility companies, see Section 4(1).
49 The Danish court system is composed of three levels: the lower courts, the High Courts (eastern and western divisions) and the Supreme Court. The lower courts are first instance for all matters, but a party can request that the High Court adjudicate the dispute as first instance if the matter is fundamental in character. As a general rule, the parties can only appeal a court ruling once. In certain commercial matters, the Maritime and Commercial High Court in Copenhagen can be chosen as venue.