Norwegian global fund takes €1.1bn hit on BP

Giant investor says it backs BP board

The Norwegian Government Pension Fund Global has disclosed it has lost more than €1bn on its 1.75% stake in oil giant BP in the wake of the Deepwater Horizon oil spill in the Gulf of Mexico.
The fund has seen its stake plummet from NOK18.9bn (€2.4bn) at the end of March to just NOK10.6bn (€1.3bn) at the end of June, according to the fund’s second quarter report released today. “The single worst-performing investment was in oil producer BP,” the fund said in a statement.
“The oil spill following the explosion on BP’s Deepwater Horizon drilling rig on April 20 is the largest in US history and the company’s cleanup and compensation costs are expected to be considerable,” the fund stated. The fund’s oil and gas stocks returned -14.9% in the quarter.
“The spill put the spotlight on safety standards in the oil industry,” said Yngve Slyngstad, chief executive of Norges Bank Investment Management, the arm of the central bank which manages the fund’s assets.
“NBIM supports the board of BP’s commitment to ensure that safe and reliable operations top thecompany’s set of priorities. We also seek a wider industry effort that should be led by the largest companies to improve safety and environmental standards.”
Overall, the Global Fund returned -5.4% in the period, pulled down by a decline in global equity markets. The fund grew overall, however, by NOK29bn to NOK2.8trn (€356bn) as a result of government cash receipts.
NBIM added that it filed shareholder proposals at five US companies in the second quarter, to split the roles of chairman and CEO. During the quarter, it also backed UK watchdog the Financial Reporting Council’s proposal on the annual election of board members.
There was a problem with some of its proxy voting between March 26 and April 21, as some of its proxy voting failed to follow its guidelines because of an “error on the part of the agent”.
This affected Norges’ vote on 164 resolutions at 134 companies, mainly on the issue of independent chairman. “We and the agent have taken steps to prevent a reoccurrence,” Norges said.