Norway International Update ' Q1 2023

• Published date: 08 September 2023
• Subject Matter: Corporate/Commercial Law, Employment and HR, Environment, Government, Public Sector, Tax, Strategy, Energy and Natural Resources, Industry Updates & Analysis, M&A/Private Equity, Corporate and Company Law, Redundancy/Layoff, Energy Law, Environmental Law, Human Rights, Sales Taxes: VAT, GST, Tax Authorities, Economic Analysis, Indigenous Peoples
• Law Firm: Wiersholm
• Author: Morten Goller, Jarle Kvam and Christine Li'ker Lindberg

This update explores some high level trends and legal developments across some of Norway's key sectors that have an international impact.

Q1 2023 was not anticipated to be a buoyant start to the year, but the Norwegian economy has fared better than expected, with unemployment remaining low and Confederation of Norwegian Enterprise (NHO) stating businesses are overall quite optimistic about the future. There is, however, anxiety about interest rate increases, with the policy rate raised once more from 2.75% to 3% on 22 March. Norway has lagged behind most of its trading partners in raising its interest rates and this, combined with increased market turbulence, has likely caused the NOK exchange rate to depreciate to lower than expected, losing around 15% and 18% of its value compared to EUR and USD respectively in the last 12 months. This is a much discussed topic nationally, particularly with the effect this has on increased prices for all households.

Q1 2023 saw subdued M&A activity and very little IPO activity with the window remaining closed. International interest remains strong, particularly with the current weakness of the NOK and there remain good opportunities in strongly performing sectors. However, the market still remains volatile and access to debt financing remains highly challenging. In particular, activity levels within real estate remain low due to increasing interest rates, currency depreciation and the resulting impact on yields making investment in this sector more unpredictable in the short term. A general observation is that the companies that are successfully selling are those that are highly attractive in any market. As always, predictions remain extremely challenging, but we remain in a cautiously optimistic mode for the second half of 2023 and we now see signs of increased activity levels within M&A compared with the previous quarter. At Wiersholm, we ranked #1 in the M&A rankings of legal advisers in Norway for Q1 2023 by Mergermarket, both by deal value and deal count, advising on 23 deals with a total deal value of USD 1.7 billion.

M&A

Key contacts: Harald Hellebust, Kai Th'gersen and Jarle Kvam

Many were expecting and hoping to see increased M&A activity in Q1. Observing activity levels in our M&A team would suggest a modest increase in the number of ongoing processes from Q4 2022. However, the market still remains volatile. Interest rates continue to increase - in Norway, most recently up to 3 per cent on 23 March - and inflation remains high. Access to debt financing remains highly challenging, as seen in the capital markets. Looking forward, the same deal drivers exist as across all of 2022, with good opportunities remaining, especially in highly attractive sectors, but there is also a need for greater macro and geopolitical stability, the wait for which continues. At Wiersholm, we ranked #1 in the M&A rankings of legal advisers in Norway for Q1 2023 by Mergermarket, both by deal value and deal count. Our team of M&A lawyers advised on 23 deals with a total deal value of USD 1.7 billion. The deals we have advised on included public and private M&A, private equity, small, mid and large cap deals.

Many were expecting and hoping to see increased M&A activity in Q1. Observing activity levels in our M&A team would suggest a modest increase in the number of ongoing processes from Q4 2022. As a general observation, sellers' pricing expectations appear to have adjusted to be more in line with the market, resulting in a higher chance of transactions completing, although perhaps not as many as was hoped for. International interest has always been present, but a Norwegian acquisition presents an even more attractive proposition with the current weakness of the Norwegian kroner, the favourable rate also helping to bridge the gap between and asking price and offer price.

However, the market still remains volatile. Interest rates continue to increase - in Norway, most recently up to 3 per cent on 23 March - and inflation remains high. Access to debt financing remains highly challenging, as seen in the capital markets. Conditions can and do change quickly on a deal to deal basis, resulting in frequent postponements and delays, with additional time taken to consider options and focus on preparation, planning and project management. High caution remains in the market, and similar to late 2022, strategic deals are more common, with less auction processes - although we have seen this slightly increasing lately. A general observation is that the companies that are successfully selling are those that are highly attractive in any market, or that have a critical need to sell.

Looking forward, the same deal drivers exist as across all of 2022, with good opportunities remaining, especially in highly attractive sectors, but there is also a need for greater macro and geopolitical stability, the wait for which continues.

At Wiersholm, we ranked #1 in the M&A rankings of legal advisers in Norway for Q1 2023 by Mergermarket, both by deal value and deal count. Our team of M&A lawyers advised on 23 deals with a total deal value of USD 1.7 billion. The deals we have advised on included public and private M&A, private equity, small, mid and large cap deals.

IPOs

Key contacts: Simen Mejl'nder, Sverre Sandvik, Tone 'stensen and Anne Lise E. Gryte

Q1 2023 saw very little activity with the IPO window remaining closed. Seacrest Petroleo was the only company that completed an IPO in the first quarter, which demonstrates the fact that it is still possible to attract investors within certain segments. The optimism that has carried over from 2022 remains as there are specific transactions being prepared. The hope is that these continued postponements will result in a healthy pipeline in the second half of 2023.

Q1 2023 saw very little activity with the IPO window remaining closed. Seacrest Petroleo was the only company that completed an IPO in the first quarter, which demonstrates the fact that it is still possible to attract investors within certain segments. There are still some good opportunities in strongly performing sectors, such as shipping, drilling and oil and ancillary businesses. It continues to be challenging to get cornerstone investors on board for a listing, with the result being that the large listings planned in 2022 continue to be in planning and 'wait and see' mode. There remains activity for public-to-private processes, in particular with investor interest from abroad. There are interesting targets in Oslo still, but these are complex processes with a lot of varying factors and they take time.

The optimism that has carried over from 2022 remains as there are specific transactions being prepared. The hope is that these continued postponements will result in a healthy pipeline in the second half of 2023. As always, predictions remains extremely challenging, but we remain in a cautiously optimistic mode for the second half of 2023.

Energy: First Norwegian offshore wind tender

Key contacts: Jon Rabben, Sondre Dyrland and Inge Ekker Bartnes

On Wednesday 29th of March, the Norwegian Ministry of Petroleum and Energy announced the tender for allocation of project areas at S'rlige Nordsj' II and Utsira Nord. The tender documents set out the terms and conditions for the tenders, and describe the process leading up to the award of project areas, the tender parameters and the documentation to be submitted by the participants. While the start-up for offshore wind development in Norway has been announced several times, the Government's announcement indicates that the race is now definitely underway.

The tendering for offshore wind projects on the Norwegian continental shelf is finally underway. The tender documents set out the terms and conditions for the tenders, and describe the process leading up to the award of project areas, the tender parameters and the documentation to be submitted by the participants. While the start-up for offshore wind development in Norway has been announced several times, the Government's announcement indicates that the race is now definitely underway.

There are several similarities between the tender documents for S'rlige Nordsj' II and Utsira Nord, but also a number of significant differences as to type of tender and how applicants are assessed. The differences may to a large extent be traced back to the difference in maturity of the projects, and the expected level of costs between bottom-fixed and floating offshore wind.

The tender documents are based on the proposals submitted for consultation by the Government in December 2022. However, the final tender documents contain substantial clarifications and elaborations in relation to the consultation documents, especially for the process leading up to the allocation. It is also clear that the Government has listened to the views of the industry and the public consultation feedback in several areas. One example is the requirements for reference projects, where the requirement for experience from development of HVDC grid facilities has been adjusted for S'rlige Nordsj' II.

For S'rlige Nordsj' II,suited for bottom-fixed turbines, award of acreage will be based on a two-step process with an initial prequalification, and a subsequent auction on a CFD contract. The prequalification deadline is set to 4 August 2023, with the auction expected in December 2023.

The Utsira Nord Area is suited only for floating wind turbines. Here the award process will be conducted through a single qualitative competition. The application deadline is 1 September 2023. For Utsira Nord, a subsequent CFD competition is indicated as part of the licensing process.

The Government also announced at the press conference that a new tendering process for offshore wind areas will be launched in 2025.

Please find more information in our separate newsletter published on March 29: Tendering for offshore wind in Norway launched

Energy: Carbon capture and storage (CCS)

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