Dividends and In Norway, rising energy costs spark debate about oil wealth

If you think about countries that amassed great wealth from oil and gas, likely your first answers would tend to be those in the middle east – Saudi Arabia, Qatar and the other countries. Later you would ask yourself where the great oil fields in the world and you might consider Siberia’s oil fields which allows Russia to do what it wants. Another great oil field is under the North Sea which has benefited the UK and Norway. The politicians in Norway set up a fund for generations or a Sovereign Wealth Fund and it is now over one trillion dollars. The fund owns stocks in 9,000 companies in 70 countries and unlike other countries, the fund is still growing. In other countries, funds were set up but politicians like to spend, and they built infrastructure and when the economy went into its normal cycles, paid down debt in the downturns which rarely allows the fund to grow. Norway has been disciplined enough to spend 3% of the fund and there are calls to lower it to 2.5%.

In an article by Paul Waldie of the Globe and Mail, Norway has a problem, it is one of the largest generators of electricity in Europe through hydro, but due to decisions made years ago, hydro rates are going in Norway. For generations, hydro rates were at cost or very inexpensive for the average household.

Most of the people in Norway live in the southern portion of the country, where normal rainfall patterns have changed and while they are not dealing with California type situations, Norway’s reservoirs have decreased by 20% cutting power generation at the hydroelectric plants. In the northern part of the country, all is normal, but that output is designed to be sold to Europe. The market is deregulated which means the hydro is sold to the highest bidder. The hydro wires that bring the electricity to Europe are not connected to the southern Norway grid.

The government of Norway has offered subsidies to people, but electricity prices are higher than before.

Linking to dividend paying stocks, when a company is profitable there are more demands on it and saying no is there only method to stay profitable. It is difficult to say no all the time and profitable companies have to pick the causes they give and how much. Companies which make a profit hear about deals all the time, most of them are not deals and management has learnt to say no. As a dividend investor, often times what you do not invest in saves you money and over time makes you even more. For your investments, do have ideas what your senior management said no to?

There are more questions than answers, till the next time – to raising questions.


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