The Danish financial regulator (FSA) has ordered Pensionskassernes Administration (PKA), one of Denmark’s premier responsible investors, to supply it with a written explanation of what happened with its DKK1.1bn (€147m) investment in Genan, the Danish tyre recycler that almost collapsed earlier this month.
PKA, which looks after DKK195bn in assets from five Danish health care and social services pension schemes, has had a board seat on the firm for six years and the investment was described as being consistent with its renewable investment strategy.
“We will look specifically at the weaknesses in Genan’s management structure and whether PKA fully understood the risks it was taking by investing in the company,” said Jan Parner, an FSA Vice President who oversees Danish pension funds. “Ultimately, it’s about finding out whether the pension fund built up too great an exposure where it shouldn’t have done.” PKA declined to comment.
The FSA’s order comes amid the revelation that the pension scheme has written down 75% of its original investment in Genan.
On August 14, PKA, which was already a 48% owner in Genan, fully acquired the company to save it from bankruptcy saying it was the best option to protect both its investment and jobs.
Genan’s founder and former chairman Bent Nielsen wasforced out and replaced by Jens Kampmann, a former Social Democratic politician whose investment firm was acquired by PKA in 2007. Genan’s auditor, Bjarne Nielsen, departed amid press reports questioning his role in signing off the accounts.
A day after the rescue, Genan A/S released unconsolidated results for 2013, showing a profit of DKK30.3m on the one hand, and a loss of DKK112.8 at a sister company called Genan Business & Development on the other.
This compares with, respectively, a profit of DKK31m and a loss of DKK62.6m for 2012. Genan A/S did not disclose the reason why the losses at the sister company widened during 2013 – although the company has expanded recently with the opening of two new plants in France and the US.
Danish newspaper Jyllands-Posten said Genan’s accounts have been in disarray for years. “The big question is why the board did not do its job in ensuring that the company’s reporting was correct,” Lars Bo Langsted, a Professor of Law at Aalborg University, was quoted as saying. Michael Nelleman Pedersen, PKA’s Chief Investment Officer, has been a director since 2008.
However, Pedersen staunchly defended the board’s actions, telling the paper that it only became aware of the irregularities in Genan’s accounts after one of the firm’s employees came forward earlier this year.