Norwegian gas export cut possible threat to funds

Exports of natural gas from Norway could plummet depending on the direction that UK climate policies take in future, in turn posing questions for managers exposed to the local stock market.

The warning on gas exports is carried in Dagens Næringsliv, on the basis of projections being considered at National Grid, the UK firm responsible for the transmission of gas across the UK – and which accounts for a quarter of Norway’s gas exports, overall worth about NOK170bn (€23bn).

National Grid has published three scenarios for the UK gas market until 2030. One suggests the UK will not achieve its greenhouse gas commitments, which would see an increase in gas imports by 2030. Another is that the UK achieves its 2020 targets in line with the EU Renewables Directive, which would lead to a halving of demand for Norwegian gas from today’s levels. The third scenario would see gas exports fall to zero, as the UK speeds towards a domestic base of renewable energy.

Dagens Næringsliv said that these scenarios are considerably different from the Norwegian government picture of increasing petroleum based exports to Europe in coming years.

According to data from FE, there are over 2,600 funds with some exposure to Norway, where the local stock market is dominated by companies such as Statoil, and a large number of oil industry services suppliers.

Some 20 funds have exposure to the Norwegian market of more more than 25%. Passive funds are most exposed, including the SSga Norway Index, Global X FTSE 30, and iShares MSCI Norway Capped Investible Market.

Nordic providers’ funds are naturally in the firing line, including the Nordea 1 Norwegian Equity, Skagen Vekst, FIM Nordic and Danske Invest Nordic Small Cap.

However, non-Nordic names also appear on the list, including Neptune Euoprean Max Alpha (33.8% weighting to Norway) and Invesco Perpetual European Smaller Companies (25.72%).

None of the 20 funds which also have a minimum three-year track record have returned less then about 14% in gross euro terms, with the Ssga Norway Index fund returning more than 50% over the period. Euro based returns are being boosted currently by the strong NOK, but any weakness in gas exports would have a considerable impact on the overall market.

Fund 3yr %
SSgA Norway Index Equity P NOK in EU 56.01
Nordea 1 Norwegian Equity BP NOK in EU 49.60
Nordea 1 Norwegian Bond BP NOK in EU 33.22
Invesco Perp European Smaller Companies Gross TR in EU 31.37
Skandia Invesco Perp European Small Companies Pn Gross TR in EU 28.38
SIP Invesco Perpetual European Smaller Companies S6 in EU 27.41
SIP Invesco Perpetual European Smaller Companies Pn S6 Gross TR in EU 27.39
Nordea 1 Norwegian Kroner Reserve BP NOK in EU 26.32
Danske Inv Nordic Small Cap G in EU 26.27
Skandia Invesco Perpetual Euro Smaller Companies in EU 25.63
Aviva Invesco Perpetual Euro Smaller Companies S1 in EU 25.55
SKAGEN Vekst in EU 24.19
Phoenix H Invesco European Smaller Companies in EU 19.53
Neptune European Max Alpha A Gross TR in EU 18.35
FIM Nordic in EU 13.56

 

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