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Thursday, May 23, 2024

Power speculator’s losses cost others

Einar Aas, a media-shy man from the southern coastal town of Grimstad, ranked as having Norway’s highest income last year. He also paid more tax than any other person in Norway, but now he faces personal bankruptcy after losing badly on his investments in the power market.

Speculation in the market for electric power led to huge losses for an investor in Grimstad that also are spilling over to others in the market. PHOTO:

Newspapers Dagens Næringsliv (DN) and Fædrelandsvennen in Kristiansand reported that Aas issued a press release announcing that extraordinary price changes in the Nordic and German power markets had all but wiped him out. He had anticipated a dry autumn and that the price of hydroelectric power would shoot up, but then it started to rain. He held contracts for power at high prices that he was forced to cover, and he had to turn over the last NOK 350 million of his liquid reserves earlier this week.

Not even that was enough to cover his losses. His entire portfolio on the Nasdaq exchange was subject to forced sale on Wednesday. That has set off a chain reaction that’s forcing other investors on the exchange to cover the deficit in the market’s reserves. Nearly 70 percent of its reserve fund was wiped out by Aas’ unfortunate trading, meaning all 200 members of the exchange must cover it. They’ve been ordered to pay in a total of EUR 107 million, equivalent to around NOK 1 billion, by Monday.

Several Norwegian companies were already reporting on Friday that they were receiving claims for large sums to replenish the reserves, including Statkraft and Equinor. Calls were going out for an immediate investigation into how one player in the market, Aas, could have been allowed to hold as huge a position as he did without covering it himself.

This is one of the few photos of media-shy investor Einar Aas. PHOTO: Wikipedia

“Einar Aas became too big for the market,” Thore Johnsen, a professor of finance at the Norwegian business school NHH told DN. “He nearly became the market. That’s not supposed to happen. The exchange should not have allowed anyone to get so big that they can’t manage to get out in time.”

Erik Spildo of the power company BKK was also raising questions and demanding an explanation. “It’s important that we get a clarification of how this could happen,” Spildo told Norwegian Broadcasting (NRK) on Friday afternoon. “The point is that we must secure full confidence in the exchange for the players, and this must never happen again, not of this dimension.”

Statkraft needs to pay EUR 5 million (nearly NOK 50 million) to the market’s fund. Agder Energi is obligated to pay in NOK 18 million. Those are just some of the claims being reported on Friday.

Aas himself, who listed income of NOK 833 million in 2016 and paid NOK 227 million in taxes, had a taxable fortune of around NOK 2.1 billion. DN reported how his enormous success as a power speculator in earlier years has allowed him to invest heavily in the real estate market as well. He has spent an estimated NOK 130 million on luxury properties include a penthouse apartment in Oslo’s Tjuvholmen development, in the mountains of Telemark and Marbella in Spain. He and his family live on a seaside estate in Grimstad. He’s likely logged big profits on all the real estate, but all if not most of it may now need to be sold as well to cover his losses.

His position as Norway’s largest taxpayer will also likely have consequences for the municipality of Grimstad, which has been able to invest more in schools, the local library and day care centers, thanks to the enormous amounts of taxes Aas has paid over the years. Now, with no income and little if any fortune left, his tax contribution is expected to plummet.

“He has meant a lot for us,” Tone Marie Nybø Solheim, the top administrator in Grimstad, told DN. “Grimstad has been grateful for his contribution, and his tax payments have allowed us to realize projects we otherwise could not have afforded. We are thinking about him and his family a lot in the difficult situation they now finds themselves in.” Berglund



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