Ness 402 – Statkraft sløser bort pengene våre

NES, a podcast from the news. >> A heartfelt welcome to Ole Andre Hagen, fund manager at Førstfondet. And today I've brought you here, Ole Andre, because I'd like to have a little chat about Statkraft. Uh, this enormous, very important, very valuable renewable energy company. slash hydropower company that controls uh, yes, approximately 50% of the power supply in Norway. Yes. And uh, and which we all have a relationship with through the power plug, but which we don't really know much about, but which is 100% state-owned. And then I thought I'd ask, what kind of company is it? How well is Statkraft run? Is money flowing in or out? Yes, thank you. Uh, thank you for having me. Uh, shall we try to, uh, help a little along the way in, uh, understanding Statkraft a bit more, at least through the lens that I use. And Statkraft is, I would say, a company where money is both flowing in, uh, incredibly, uh, but also out, incredibly. Uh, and if we are to put it very simply, I get a very strong feeling, which I also get from Equinor or Statoil as it was called in the old days. Uh, uh, which is also a very good company on the Norwegian continental shelf. So, I have analyzed the oil industry quite in-depth before, and, uh, Equinor is world-class when it comes to operating, uh, on the Norwegian continental shelf with oil and gas projects. Uh, while abroad, it is not world-class. There have been enormously expensive ventures, uh, costly ventures, hopeless projects. And they are often involved in projects where they lack competence. So one would think that if you are in the oil business, you can't just buy an oil company in the USA onshore, meaning on land, uh, which perhaps deals with tight oil or shale gas and so on. And that is a completely different business model. Uh, and when you operate in countries where you may not have had much experience and in areas of competence that you don't really know, it is often a recipe for losing money. Uh, and here one would think that the state, as a professional owner, could perhaps have learned something from Equinor and so on and brought that into Statkraft. Uh, and what has happened, and we can go into that a bit more, is that, uh, electricity prices have soared in recent years for various reasons. Uh, and that has caused Statkraft's earnings to also explode upwards. They have generated enormous cash flows. Uh, and then one can >> cash flows, that's money coming in, simply put. >> Yes. Yes, that's money coming in. The costs shouldn't really increase much for an electricity company, uh, even if the electricity price goes up. Uh, and then it's like this: if you sell a product with a fixed cost and the revenue doubles, triples, then money just pours in. And for some companies and management, it's very boring to just take that money and distribute it to the owners. Uh, it seems a bit boring because it's enormous sums, and people like money and power, and often believe they can perhaps do something sensible with this money. And what Statkraft has done in my world is to build an empire. And that empire is the result of them having had another explosion in costs, and they have spent an unbelievable amount of money buying things they actually know nothing about. And then, what do you think the result will be? If you buy a lot of things you know nothing about, uh, then the result will be losses and poor returns on capital. And that is the fact so far with, uh, Statkraft: the acquisitions they have made have not come close to yielding any return that gives cause for optimism. >> Can you tell us a bit about what they, what they bought? And this was probably a lot under Kristian Ryning Tønnen, was that his name? >> Yes. >> Yes, it was probably both before and after him. Uh, but if we put the numbers into perspective, then, uh, let me see if I can recall some of the figures here. Uh, they have now invested 90 billion internationally in recent years. Uh, >> 90 billion kroner. Yes. >> Yes. Uh, I just need to navigate a bit here. Yes, so usually Statskraft has invested around 7 billion kroner previously. Uh, and if one were to use that as a benchmark for what the investments could have been previously, then they have significantly exceeded that in recent years. And they have then spent an extra 72 billion in recent years from 2020 to 2025. And you can say the electricity price really started to rise towards the end of 2021. And, and that 72 billion is extremely much, to put it that way. Uh, they have what is often called invested capital. That is the capital that, in a way, drives a company. It's like what it costs to build hydropower. What it costs to build a factory. Uh, and when it comes to Statkraft, you can say that in the Nordics, uh, in 2018, they had around 70 billion in so-called invested capital. That's what they have invested in, uh, hydropower, and then they expect a return on that. And usually, one expects perhaps, let's say, a 10% return. That's a decent return when making an investment. And then you might get 7 billion in annual profit based on that. Uh, if you have even better, you might have a 20% return, and 20% return on 70, then you're perhaps at 14 billion, and so on. And generally, hydropower has been a very low-cost operation. And as long as you can connect to pricing regimes that are not hydropower, you will have a very good return. And that has been the case here in the Nordics. If you look internationally, in 2018, they had around 30 billion in invested capital, meaning in factory facilities, to use that analogy, or then in wind farms or other power generation. 30. So, so the Nordics, uh, mainly Norway, but as the Nordics, they group it in their accounts, was at 70, and internationally it was much smaller, only around 30. >> So 70% and 30% to put it simply then, almost. Yes. >> Yes. >> You grasped that very quickly, and that's absolutely correct, isn't it? >> Uh, and then we can say, okay, what has happened now? Because I've said that they have made a lot of investments since 2018. Uh, and in the Nordics, they have increased their share in what generates cash flows by 18%. It has gone from around 70 to 83, so not a very big increase here. While internationally, where they know little, remember that Statkraft's competence has been hydropower in Norway. That's where they are good, right? That's where they are world-class. Uh, wind power, Spain, I know nothing about, right? But but they found that, this is what we will do, right? And and made acquisitions. So, so the factory values there, to call it that, have gone from around 30 to now 87. So they have more internationally than in the Nordics now. >> Absolutely correct. Absolutely correct. Uh, and the return they have on these 87, that is, if I, I manage equity funds, or two equity funds, and if I invest 100 billion now, then one often talks about a required return perhaps being 7-8%, right? So, so at a minimum, you should generate, like, 7% in earnings on those companies if you invest 100. But, uh, Statskraft's international venture is a bit like when you buy something you know nothing about. Very bad, very weak. So, in fact, they lost money in 2025, and they also lost money in 2024. So they had a 2% negative return last year, just to give you a figure. And that's before we even consider that the company has written down, uh, 12 billion in the last two years in so-called write-downs. >> Explain to people what, what is a write-down? >> Well, a write-down is when you make an acquisition, and if you, let's say you buy something for 10 billion kroner, then you expect, in a way, that what you have bought is worth 10 billion. You hope it's worth much more, uh, but you would never pay 10 billion if you think it's worth 8. Uh, then you don't make a bid for it, right? Uh, but then it often happens that you buy something, especially if you buy something you know nothing about, or know little about, then you find out a bit, uh, that, oh, we were a bit mistaken in our assumptions. We can't generate these prices that we thought we would, uh, on these wind turbines in, uh, Sweden, for example. Uh, we thought we would generate 50 øre per kilowatt-hour. And then it turns out, because if you take Sweden specifically, it turns out that, uh, in a couple of areas there, in Luleå and Sundsvall, I believe, they are at around 10% of the time. Uh, prices are negative. And when prices are negative, it means that these wind turbines are so efficient that they produce so much electricity for a few hours that there is too much, uh, power in the market. And then it becomes like if you stand in a market square, you have a lot of apples and very few customers buying apples, and then you just have to lower the price to give it away to get rid of the stock you have. And this is seen, as I said, around 10% of the time in two of these areas where there is a lot of wind power in Sweden. And when it's 10% of the time, it's quite a significant portion of the time that a wind turbine generates electricity. Because a wind turbine doesn't blow all the time. So they generate perhaps wind, uh, or generate income perhaps around 30% of the time. So 70% of the time it's too little wind, or in extreme cases, too much, to be able to, uh, operate. Uh, the wind turbines. Uh, while 30% of the time they generate income, but sometimes they generate so much electricity during those 30% that the price becomes negative. And if you then bought, for example, wind turbines for 10 billion, and then you find out that, yes, we see that the electricity price in Sweden on average is perhaps 50 øre, but these facilities we have bought, they generate at times zero. So actually, a third of the time we have them, 30 to 40% of the time we have them, they generate zero income. Even though the wind is blowing and they are generating a lot of electricity, the prices are very low, and at times even negative, uh, prices. Uh, and and that damages the business case. So if we look at Sweden, uh, the business world there has had quite a lot of good articles about the electricity market there. And, uh, what it turns out is that the wind turbines generate electricity at the same time. And when they don't generate, they generate nothing at the same time. Uh, and if there are too many of them, uh, then the prices become very bad. And 80% of, uh, wind turbines in 2024, uh, had, uh, had losses in Sweden. And from 2017 to 2024, according to Affärsvärlden, they have accumulated losses of 25 billion Swedish kroner. And that's even though revenue has gone from 4 billion a year in 2017 to 12 billion now. And they lose, with a revenue of 12, they often lose around 4.5 billion a year. So, so wind turbines in some areas of Sweden have been unusually, uh, bad business. And then the question is, do you think Statkraft has managed to get themselves into Sweden and bought some of those there? And, and unfortunately, the answer is yes, they have. So, so one of the things they had to write down last year, uh, because they paid too much, or simply because the earnings from what they bought were much lower than they assumed in their models, then you have to write down the values, as it's called. Because then you do a write-down and you simply say, okay, sorry, we paid 10 billion. It's only worth five. So we have actually lost 5 billion, uh, for paying too much for an asset that no longer generates the cash flows that we thought would come. >> And then, and then you say that the capital is, uh, 5 billion, but even after these write-downs, they don't get a return. >> No. As I said, in 2025, they had a 2% negative return abroad. And that's after they wrote down, uh, in 2024, by around 6 billion, uh, both in the Nordics and internationally, uh, and also in Norway. So what one can say is that Statkraft's track record so far has been, uh, weak, I would say, on what they have bought abroad. And there we can actually go back a bit, because we have actually jumped into the subject here now. I was actually thinking we could start a bit with how they ended up in a situation where Statkraft started to earn a lot of money. How Statkraft reacted or acted when they started to earn a lot of money. So, did you choose to distribute everything to owners, or did they, in a way, choose to build an empire? I have, for that matter, jumped ahead of events. And, uh, whether that has been a good strategy, the choices Statkraft has made there. Take, take that, start with that. Why did Statkraft start to earn money? How >> Yes, before that, I think we can go one step further back here. Uh, if we take the electricity market, uh, I heard you've also had some podcasts before on, uh, a bit about the electricity market and a bit about how we should build out new electricity, and, uh, what I find a bit interesting about these discussions is that they start with a premise that we need new electricity. And I think one can start first with, do we need more electricity? Uh, and, and just brainstorm around that. Because if we take the electricity market, it's actually very simple. In Norway, we produce 150 terawatt-hours per year. Let's just call it 150 units just so we don't use terawatt-hours, and people might get a bit, perhaps, not follow when we use difficult words. Uh, like in mathematics sometimes, you get a bit of a numerical confusion. But, but we produce 150 units per year. Uh, how much do you think the basic, uh, consumption is? If we say basic consumption, that's households and regular businesses. I'll just quickly shoot it at you. Now you have your opinion. >> Uh, well, households plus businesses. >> Yes. >> Uh, I'll guess that's around 50 units, to stick with that. >> Yes. No, it's around 40 units for each of the two. >> Each of the two. >> Yes. So households consume 40 terawatt-hours per year, 40 units. And businesses the same. And that's quite stable too. Uh, a small digression here. One often hears talk about Norway's prices, and there are some who are angry here and say that, oh, fixed price, and the price is only 40 øre, then consumption will just explode and so on. Uh, and I find it interesting that very many people say that, both with the title analyst and, uh, title expert and so on, but, but you have the data for this over quite many years, uh, what consumption is. And we had prices in 2020 of 20 øre per kilowatt-hour on average. 20 øre, that was low. Uh, and we have had prices of 120 øre a couple of years later, uh, which is a sixfold increase. What do you think happened to consumption? Uh, when the price increases sixfold, nothing. Completely flat. So, so we, we consume 40 plus or minus. It's more weather than price that affects changes in consumption here. Uh, so, so consumption, and remember that we have electrification with more people driving electric cars, replacing gasoline, diesel with electricity, without that having significantly affected the total figures. So we have energy efficiency at the other end. Uh, so 40 units is consumers, 40 units is businesses. So we use 80. Uh, and, and when you need 80 and you produce 150, then it's a bit like the market trade again, right? You stand here with 150 apples, and then there are only 80 consumers who buy a maximum of one apple a day. And then you understand, what happens to the price then? It becomes very low, right? It becomes zero, uh, or below cost. And hydropower is very cheap. So, so hydropower costs around 15 øre per kilowatt-hour today. And, and the price would then be below 15 øre. And, and we see that in Northern Norway, where prices have been that low in recent, uh, couple of years at times, or over longer, uh, periods. But then one can say that it's not a desirable situation, really, that power companies don't make money. That is, that the costs are 10-15 øre, and then they have to sell for five. Then, then you understand, then they go bankrupt. So, so, so it's something that all politicians and, in fact, citizens too, are aware of, that we don't want that. So, then we have to do something. Either we can reduce production. Uh, but that's a bit like being wasteful. These hydropower plants are already built. Or you can export, then, find other buyers who are not Norwegian, since the Norwegians buy 80 a year, and then there are 70 we are missing. Uh, that's quite a lot. And, and in that sense, you can say that Norway is perhaps the country that produces the most electricity relative to basic consumption, meaning what? Businesses and households use. Uh, and of those 70, uh, then, either you can export it with clean cables, just send it out, or you can perhaps think about creating some jobs, maybe we can create some industry that uses enormous amounts of electricity, and since hydropower with such a cost of around 10-15 øre per kilowatt-hour is the lowest in the world. So it's not possible to build cheaper than that. Solar, solar energy when the sun shines can be as low as that, but, but the sun doesn't shine all day, right? So, so hydropower is absolutely superior there. So that has led to the establishment of a quite large industry in Norway that uses enormous amounts of electricity compared to other industries. So-called energy-intensive industry, and to put it simply, the electricity market is, as I said, very simple. How much do you think they use per year? I'll guess 41 units. >> 41 units. Yes. >> Yes. So everything is 40 in the electricity market in Norway. Uh, it's a bit below 40, but let's say 37-38, but it's between a little over 35 and, uh, a maximum of 40 in recent years. And what is then the competitive advantage or necessity for running energy-intensive industries is, not surprisingly, low electricity prices. And electricity prices before the new cables that we got, they were around 30 øre per kilowatt-hour. And that has then enabled a good energy-intensive industry in Norway. Uh, now I'm jumping ahead a bit here, but, but something has happened to these prices recently. Uh, and that also means that something is happening to the, uh, competitive advantage of energy-intensive industries. But before I go into that, we can take, uh, now we've taken 40 for households, so then we're at 120. We're not up to 150, so we still have 30 available to ruin the price market, so to speak, unless we sell those last 30. And the oil industry has come here and taken 10-12 of those. Uh, so electrifying the continental shelf and using electricity there instead of gas power plants is, in my opinion, complete idiocy, both economically and climatically, but it's still something that has been chosen to do. Uh, and regardless of what I might think about it, it does consume at least 12 of these remaining 30. Um, and then you have around 20, uh, plus or minus left that must be exported for the electricity market to become tight in Norway, and thus for prices to become higher than 15 øre per kilowatt-hour. And then we come to these cables, for we have had electricity cables in Norway for many years, so it's nothing new. And, and if we look at what we had in terms of capacity before, we had the capacity to export around 50 terawatt-hours per year. So we had that before the new cables that came up in, uh, after 2020-2021. Uh, so, and when we then need to export around 20, and we have the capacity to export over 50, one would think we have enough cables. Uh, but the problem was that those cables mostly went to other markets where electricity prices were quite low, especially Sweden. And Statkraft naturally thought that was an unusually idiotic idea to export to a market where prices are also low. Uh, because what you want with export is not primarily the income from export. What you want is to create scarcity in the domestic market, Norway. And, and that has, of course, been a formidable task since we only consume 80 and produce 150. But then an energy-intensive industry has been established over many years, uh, which now takes 40 as well. Uh, and, and then you have the capacity to export. But what has been the main idea of Statkraft and other power companies must be to push the cables towards dysfunctional countries, countries that do not have a sensible balance in their electricity market. And there are two such countries, uh, Great Britain, and not least Germany. Germany is world-class in making bad political choices for its own population. Uh, and the electricity market is probably an example of that. I won't be a German expert, a Germany expert beyond other choices they must have made here. But, but Germany, to put it very simply, they are very green and very ideological and like a green world, and, and, uh, those are good thoughts, but what they do is that they often become so ideological that their actions are not necessarily in line with their goals. So Germany produces around 600 terawatt-hours of electricity per year. 600 units. So not much more than Norway. Actually, only four times more than Norway. And the population of Germany is significantly more than four times the population of Norway. Uh, but they produced 600. And of those 600, 133 terawatt-hours in 2010 was nuclear power. So, so most of it was, uh, and nuclear power has no CO2 emissions. But then Fukushima happened in Japan, which made the ideologues in Germany suddenly think that nuclear power was a bit more scary, and they wanted to get rid of it. And what has happened since then is that they have succeeded in removing it. It's much easier to remove things than to create things. Uh, and, and they now have 0 terawatt-hours from nuclear power, which has been shut down. And electricity production. The idea was probably here that we would push a lot of renewables on top, and they have also done that. But they have also removed a lot of coal, and, uh, removing coal and pushing renewables is very sensible. But removing, uh, nuclear power and coal, then you remove a lot of so-called baseload, a kind of production you have at the bottom, without, in many ways, having put in place any battery technologies or other, uh, ways to, uh, handle the scarcity that occurs when the sun doesn't shine and the wind doesn't blow. Uh, so electricity production in Germany has gone from 600 down to 500, uh, terawatt-hours. Uh, Germany also has, as I say, they think a lot of nice things, but, but they don't always do equally well. Uh, you can say one of the important things if you are to, uh, manage electricity prices and use them to influence consumption, uh, then you must have smart meters so that you can bill people per hour. >> That's what we have at home, where they constantly monitor how much we use. >> Absolutely correct. In Norway, it's mandatory and 100% have it. Uh, and it's in Norway where we actually have water reservoirs. So, so we, Statkraft produces electricity at any minute, at any hour of the year, without the costs changing with it. Uh, the equivalent of Statkraft in Germany, they are not in the same, uh, beautiful situation. Uh, what happens there is that they have a lot of renewables that, at times, produce very cheap electricity. But when the wind suddenly doesn't blow, the sun doesn't shine, it's evening, or it's too much, uh, then they have to, uh, generate electricity in another way. In Norway, we just open the reservoir a bit more and let a bit more water through, uh, and generate more electricity. In Germany, you then have to start up, uh, so-called peaker plants, as they are nicely called. Gas power plants that don't run all the time, uh, but that you have to pay a bit extra for. Uh, that's part of the game, and if the price is high enough, they are willing to start up the gas power plant on very short notice and run it. And that means that the gas price sets the marginal price in Europe for large parts of the day, and not least when the wind and sun, uh, don't deliver electricity in, uh, Germany. Uh, so that leads to enormous fluctuations, but it also means that in Germany, since they don't have smart meters, German consumers have no price signal saying, oh, now you shouldn't shower. Uh, or now you should turn off the light, or now the wind isn't blowing. It's 5 o'clock. Uh, but electricity prices are 5 kroner per kilowatt-hour. If you wait an hour to make your dinner, you do the German society a small favor because we put less pressure on the grid and we don't need to fire up as much gas. So, as expected, there's a bit of wind towards the evening or something, and so on, or that industry shuts down a bit, and so on. Uh, there you could have price signals, but in Germany, you don't have them. Uh, so, so when electricity prices, we had extremely high electricity prices in Norway, especially in 2022 and into 2023. And we Norwegians, we might have had to skip showering some mornings, and so on. And, and we tried to adapt a bit because we have smart meters that punish us severely if we consume at the wrong time. And when we then refrained from showering in the morning, we did it so that the German could shower for an extra 10 minutes in hot water, even though he has a fixed electricity price throughout the day, regardless of when he showers. So, so it's a bit like that. One should at least have it as a requirement when we, uh, connect to another country, that they have the same incentive structure to adapt demand and, uh, when we do that. But, but, but that hasn't been the case in Germany. And there, in fact, there are only 3% smart meter penetration. When it comes to electric cars, in Norway, we are at 95% of new car sales are electric cars. In Germany, it's 20%. Uh, in heat pumps, which are an extremely efficient way to heat our homes electrically, we are at 64% in Norway. In Germany, it's 5%. So Germany scores very poorly on, shall we say, uh, a number of key criteria if you are to measure how far they have come in the green transition. They have voluntarily shut down enormous amounts of clean electricity production, which, of course, creates a structural demand need for, uh, electricity. And then there is also the disadvantage. One would think that cooperating, uh, with electricity by building up development cables, as they are often called, it becomes an export cable for us and an import cable for Germany, but the term exchange cables is often used. And the main idea here is very nice in the sense that you build up, uh, production in the respective country to cover domestic demand. And then you can draw a bit from neighboring countries when you are a bit unlucky or, and so on, but that over time you send as much both ways. That, that, that could be a nice thought. But what one should know is that having power production always has negative externalities, as they say, which is a nice word. >> Explain what that is. Having power production always has negative externalities. It doesn't make sense. No, it's, it's, it's that having power production, no one wants it. >> Not in my backyard, so to speak. So that's what it means. >> No one wants a wind turbine or a coal power plant or a village below a water reservoir. >> Yes. No one wants the water to be affected or nature to be affected by hydropower. Uh, no one wants wind turbines standing and making noise and spoiling the view and so on. No one wants a valley covered with solar panels, as they do in, uh, China. No one wants a natural gas power plant with the risks, with the emissions, with, uh, yes, with the risks and what it entails, or coal or nuclear power, and so on. So no one wants it, but we need it. So we have it anyway. But if, for example, Germany can choose, and they have two options, either we put up a wind turbine here right outside Berlin, or we put it up on Hardangervidda in Norway. And there, the Germans are very clear about where they want that wind turbine. Unfortunately, we in Norway are too. We put it up in Norwegian nature. Even though we produce 150 and need 80, we are willing to degrade our nature so that Germany doesn't have to. So I looked a bit at how much wind power has been built out in the last five years. So this is a couple of years ago I did those figures. But then Germany was building, uh, no, in Norway we built, I think it was 610 watts per inhabitant. 610. Germany, which has removed, meaning production has fallen from 600 to 500. It has an extreme need to build more. We built 610 watts per inhabitant. We don't need it. Germany built 130, and they need it. So they refuse to build wind. They have green thoughts, very nice ideology, and all that, but the ideology runs so deep that they can't be bothered to build it themselves. They would rather import it from neighboring countries and let them bear the cost of building it. And that's, in a way, what we've been doing a bit in Norway. Absolutely in Sweden. They have built so much and degraded so much nature with those wind turbines, they don't make money. That is, 80% lose money. Uh, so one thing is that it has been an economically bad idea for very many. Uh, but the other is, in my world, perhaps not a logic that we should degrade Norwegian nature so that we can provide more electricity to Germany. Uh, but the thing is, anyway, I was talking about these cables. We, we had enough capacity. We could have exported over 50 terawatt-hours per year, but it went to low-price regions. So what they figured out was that now we're putting up some export, uh, cables to dysfunctional markets. And, and I hope you have understood a bit that Germany is a rather dysfunctional electricity market where they have voluntarily reduced a lot of capacity and have been unwilling to take certain steps, like heat pumps, like smart meters, and so on, to, uh, adapt to their lower production. So then I thought, uh, Statkraft, or rather, the power industry in Norway wanted higher prices, and then you need export cables to countries with high prices. Uh, and they lobbied for that, and got some consulting firms and so on to write a lot of reports saying that the price effect of these report cables would be two to four øre. And I have, uh, created a long thread on the internet, on Twitter and LinkedIn and so on, which I call the great power bluff. And there are many power bluffs, but this is perhaps one of the biggest. Uh, and Spitalen, who is no analytical expert on the power industry, he immediately understands that that's just a bluff. And he said that in 2014 and so on. And of course, the others said no, no, no. CPS parties say 24 to 4 øre. And then we have now got these cables, and, and what we can confirm is that historically the price was around 30 øre, uh, per kilowatt-hour. And the price exploded immediately when those cables came into use. And these development cables were not development cables. Uh, never before in history has the power industry, with Statkraft at the forefront, emptied the reservoirs faster and more efficiently to levels that created enormously high prices in Norway. And prices have, on average since the cables came, increased from 30 øre per kilowatt-hour to 90 øre per kilowatt-hour for households. >> So what was supposed to be two to four øre became 60 øre. >> It became 60 øre. Yes. So >> we missed by a

A factor of 20. Yes. So you can say that if you say if if you say two øre over a 10-year period would have been 20 øre then, right? Over 30 years, it would have been 60 øre, right? So, so one got in one year now annually what one actually should have taken 30 or yes 30 years to get back. So, so, so that is the biggest bluff ever. And and it is actually quite simple to understand because it is completely clear that when you set up export capacity of 25 terawatt-hours, which these cables have, and you connect them to two markets with some of the highest prices in Europe, and you can sell 25 terawatt-hours, and you don't need to sell 25 to get high prices in Norway. You only need to sell somewhere between 15 and 20, and you are guaranteed to get prices that resemble German prices, British prices. >> So if I am to try now. Now I am the tabloid journalist here, and I am just trying to summarize the bluff, and you are the sensible manager that you are, who is used to investing money and thinking wisely and calmly. So tell me when I go too far. But the bluff, the big power bluff, is a precise term. And what happened was that we had overproduction and low prices. And that is very sad for the producers. Of whom Statkraft is the largest. So what they get the idea for is, good heavens, let's lay export capacity down to Great Britain and to Germany. And then you get a jackpot because Germany and also Great Britain choose to pursue an energy policy that is probably even crazier than Statkraft could imagine in their wildest fantasies. The result is that European and German prices go bananas. It spills right over to the Norwegian market. Statkraft pours money in, and they think, good heavens, we have gone from being boring hydropower producers to becoming incredibly rich renewable energy companies. They market themselves as Europe's largest renewable energy company. And then the rational thing would have been to pay this out to the owners, increase dividends. But no, let's pump money into renewable projects. And thus, Norwegians have been ripped off in two ways. We have had to pay much more for electricity, and much of the money that renewable energy or power companies have earned has also been wasted on stupid projects. >> Yes, I think that summarizes it quite well in the way I also assess it. You can say that what makes this even a little more interesting is that to make all of this happen, you had to install smart meters in all households in Norway. And that has not been managed in Germany. While in Norway, it's like, yes, no, it costs the same whether we produce electricity at 9 AM in Norway or at 12 PM or at 5 PM. But Statkraft and the power industry understood that the export demand here is much higher at certain times in Germany and England, so at some of these times, the price will be very high in Norway. The only way to be able to invoice higher in Norway is that you measure on an hourly basis in Norway or quarterly, 15-minute basis eventually as it becomes. And I must say that they have been unusually foresighted, and they have had an ability to get things through that one does not have in Germany, which, after all, is, I would say, in a continuous power crisis. They have not installed smart meters. They have decided to build it out. They decide to build out a lot of wind as well. They just refuse to do it. It's procrastination and so on. And we have talked a lot about how they have, in a way, spent a lot of money on investments that I would say have a highly uncertain return, even though the jury is still out here, and they will surely claim that this takes a little time and so on. But what can be said from data points has been, if we just complete the investment part, has been that one has become clearer, not just in Sweden, that the wind blows at the same time, which means that at times the price will be extremely low. For the benefit of consumers and businesses and so on, but very much to the detriment of those who build it out. So you can say that the electricity price regime that we have in Norway and Europe now, which is a market-price driven one where the marginal swing producer sets the price. As I mentioned a while ago, gas power, the price of gas power, is actually not a price regime that is very beneficial for the renewable industry, because they need predictability and so on. So even though it might cost, even though a wind turbine can be built and deliver electricity at an average price of 40 øre per kilowatt-hour, the reality is unfortunately that they often realize prices much lower. Because where the project economics, where the calculations looked very good, what happens in a capitalist society happens. There becomes a lot of supply, and the better the calculations look, the more is built out, which in turn ruins the calculations. And that is also a type of mistake that is made in many analyses when looking at expected increases in consumption. Because there are many forecasts about how electricity consumption in Norway will increase very sharply in the coming years. But what has often been done in the analysis here is that it has been assumed that there will be low Norwegian electricity prices of 30 øre per kilowatt-hour. And it is completely clear that demand growth is something completely different than when consumers on average in recent years have had 90 øre per kilowatt-hour. And that is the point I never quite landed on. But I did mention energy-intensive industry. They have also benefited from a 30 øre per kilowatt-hour price. There, the price has gone up from 30 øre to 50 øre now. Almost 50 years. >> And how far is energy-intensive industry from being outcompeted? I mean, I don't hear Hydro saying they are going to double their aluminum capacity, for example. >> No. The only reason energy-intensive industry doesn't have an equally high price, meaning they don't have an average price of 90 øre like households have had, has been that they have long-term contracts. As these long-term contracts expire, energy-intensive industry will have to renegotiate on increasingly higher terms or yes, conditions, the Norwegian word. And they will be de facto in liquidation. And if we take a concrete example here now, Elkem has shut down two of its furnaces there voluntarily. And the reason for that is because it's silicon. Isn't that what they make? Yes. Yes. And I'm a little unsure about exactly what those two factories produce, but it is energy-intensive industry. So, and what they have said here is that they are doing it because of weak profitability, the underlying industry they are in, and so on. But also >> Ferrosilicon, >> it's ferrosilicon, yes. >> Which was them. And what happens is that they shut down the one where they used the justification of high electricity prices. And since they have fixed prices or quite low electricity prices, the argument sounds a bit strange, but it's not really. Because what happens is that they shut them down, lay off employees, so NAV takes over the bill for the employees, and then Elkemen's electricity cells in the north. So they make their electricity available to other users in Northern Norway. And in that way, they voluntarily contribute to shutting down energy-intensive industry. This time, for just a short period. But it is a sign of weakness that the industry itself voluntarily, in a way, shuts down if the electricity price is high enough. But what we should be aware of is that energy-intensive industry has 40 terawatt-hours per year. It will go down to zero if we get European prices, or if it is as interesting to have energy-intensive industry in Norway as it is in the Netherlands or Belgium. If we are to have the same prices as in the Netherlands and Belgium. So politicians have probably implicitly decided to shut it down here. >> So we are actually in a completely hopeless dilemma. I mean, we want all the cables, which means we will get almost European prices, or German, British prices. >> But but everyone also wants lower electricity prices, and everyone also, so is the answer to this that we are now going to increase production. So that means a lot of offshore and onshore wind. >> Mhm. But for that to pay off, we need European prices. So we are actually in a kind of, what should one say? Yes, it's a kind of gallop that cannot end well, or? >> No, no, no. I mean, we cannot produce our way out. The simplest thing is, isn't it, if you have two options, if you want low prices in Norway, either you increase production enormously at very low cost. And we cannot achieve that in Norway. Because low cost means more hydropower, and we cannot build more of that. When it comes to solar power, which is the cheapest form of energy to build in the world today, the solar conditions in Norway are not very good. So it is built elsewhere. So it is not a good business case. When it comes to wind power, it's about whether we are willing to destroy our nature for Germany to have electricity. Germany does not lack land area to set up land wind. It's just that they don't want it there. They think it's ugly to look at, noisy, and destroys nature. And if we in Norway have a different relationship with nature, then it's perfectly fine that we build it here, apparently. So that is the status and energy-intensive industry. It is not a human right for any country to have energy-intensive industry. And it's not that it employs that many either, but it's about 20,000 people. So it is important for some local communities and so on. But energy-intensive industry should be located where electricity prices are lowest at any given time. And that has been the case in Norway for many decades. And that is why we have this industry. And then it is common logic that if we no longer have the lowest prices, then energy-intensive industry should not be located here either. >> And now, in addition, the data center industry is coming and suddenly giving them demand growth that has been seen. >> Yes. Yes. It is completely inexhaustible. As long as they get low prices, they build data centers where they are cheapest. And as long as Norway is willing to offer low prices, they will do that. The power industry, for example, wants that. Because they want to empty the capacity so that they get the highest possible price for these 80 basis points of demand plus the rest that they sell, right? So data centers can absorb some demand and drive up prices. And that is why, for example, in the USA, there is extreme resistance to data centers. Because what they see is that data centers are significantly increasing electricity bills there. We don't have the same resistance in Norway yet, but it is clear that we will build more. The demand for more electricity at low prices is infinite. So that is not the problem. What is the best business, data center or energy-intensive industry? >> No, I don't know that completely, but I would guess that there are more employees in energy-intensive industry. And there, at least today, we have an established value chain. And it is probably a bit more differentiable as well. It becomes a slightly different discussion here, but if I were to follow up with the data center, then at least my wish would have been that if we had had slightly smarter politicians, we could have had some requirements that some competence should be built in connection with these data centers, so that if Google sets up a data center, it is an absolute requirement that one builds up perhaps an AI environment, that one sets up its own study program at NTNU, that one builds up a competence organization in Norway as a requirement. That is where the Chinese have been incredibly good in the last 20-30 years when they have built up the industrial nation China, which China was not 30 years ago. It has been that they have set requirements for Western companies when they have established themselves in China to train the Chinese in that. So if we were to follow up here, then I think that if you set up a data center without any competence requirements, without any requirements for Google or Facebook or Meta, as it is called, then I think we are better served by having energy-intensive industry, like ferrosilicon or aluminum, and so on. But and there, as I said, we have established value chains. So I'm not saying that we should shut it down. But I think politicians must be aware that they have de facto decided to shut down energy-intensive industry unless they ensure that there are mechanisms that prevent us from exporting electricity in such a way that it becomes price-driving above certain levels we have in Norway. What fascinates me here, now we must unfortunately land, but what fascinates me here is the enormous power this industry and sector has had, to shape energy policy and electricity policy, and then invest the money they have earned at low returns. >> Yes. And I just want to make one last point that hasn't been brought up here, and that is cost escalation. Because we have talked a lot about how they have perhaps made some investments, that they have spent enormous sums, and that employed capital, as I said, has grown larger internationally than in the Nordics, even though the return is negative. But if we look at labor costs, they were 3.6 billion kroner in 2018. That's a lot of money. Today it's 10 billion. So it has tripled. The payroll budget. And that has happened with a combination of doubling the number of employees and the average salary going from 1.1 million to 1.5 million kroner. So the average salary at Statkraft is one and a half million. And if we start calculating how many primary school teachers could be hired if the state had stopped this waste. Because the point here is that even though labor costs have tripled, production is up 8%. Barely anything. >> So labor costs have increased >> three times. >> Three times and production has increased by 8%, so >> Yes. Or 10% if you include >> said. In other words, Statkraft has become less productive. >> Extremely much less productive. If you measure it strictly here. And one might think that when labor costs have gone from 3.6 billion to 10 billion, what do you think has happened to consultant usage? Because consultants are often things you hire when you don't have enough capacity internally in the organization. And in 2018, they spent 1.6 billion on consultants, and then they had 3.6 in salaries. So 1.6 in last year, 2025, it was 5.0 billion. 5 billion. They have also tripled that. So it's almost as if you can believe that every new employee, on their first day of work, gets a McKinsey consultant or some other consultant sitting next to them to train them. It's incredible. And part of the reason why consultant usage has increased so much is actually that they have spent so much money buying things they know nothing about. What do you have to do then? Then you have to hire people. It's like if you bought a Boeing plane, a private jet. You bought a Boeing, and then you can't fly. You have to hire a pilot, right? You have to hire a mechanic, right? It becomes expensive. And so, just on salaries and consultants, they have gone from 5 billion kroner a year to 15 billion kroner a year. 10 billion kroner a year. >> How much, if you have to sit like this, how much money has the state wasted by being a bad owner here? >> No, I mean, if you say that here, if you look at total costs, they have increased by around 17 billion from 2018 until now. And of that, 4 billion is depreciation, so 13 billion is salaries, consultants, and other usage. And some is due to increased activity levels, as I said, 10%, and then there will also be some inflation in the period here now. But I would venture to say that they could probably cut costs by 8 billion kroner a year. And that would be very welcome for understaffed teachers who need more employees. I think it's a more sensible use of people and salary kroner in Norway today than what Statkraft is doing. Because unfortunately, and you know that too, nothing is worse than well-paid economists who have little to do at work and have a large money pot where they can spend money on. Those are often not the best acquisitions in such situations. >> This is a tragedy. And the worst is that, as you began by saying, this is the Equinor story of making good money at home and wasting it abroad, as Equinor has done, especially in North America, and which Statkraft has now been allowed to do. >> Yes. I mean, I wish, what I think is important here is that Statkraft is absolutely sure to do a great job in Norway, and the operational organization. There are many talented people, and they are certainly world-class there. While the management work that has been done, they have fallen into the same trap that I think is inherent in human nature, when money flows a bit too easily and so on, and that is that one often invests, sells things one doesn't know much about, as long as the money pot is large enough and access to easy money is large enough. >> That will be the last word. Thank you very much for coming. Yes, thank you for letting me come. If you like this podcast, you can support iNyheter, either by a VIPS transfer or to a bank account. You see our numbers on the screen now. Don't forget to subscribe to our YouTube channel and follow us on X, Facebook, and other social media. M.