Sermitsiaq.AG. Leiff JosefsenJørgen Schultz-NielsenTuesday, 05...

Sermitsiaq.AG. Leiff JosefsenJørgen Schultz-NielsenTuesday, 05 December 2023 - 11:45
Arbitration proceedings can make new projects more expensive.
The historically large arbitration case, which an Australian mining company has brought against both the Danish state and Greenland, may make large and future business projects more expensive while the case is ongoing, assesses the chairman of the Economic Council, Professor Torben M. Andersen.

Torben M. Andersen states that new large commercial projects run the risk of having to pay a risk premium due to the arbitration case.

The arbitration case, which the Australian mining company Energy Transition Minerals has brought with a claim for a compensation amount of almost DKK 80 billion, may have financial consequences for other business projects in Greenland.-
The case may have an impact on future business projects, as it is an uncertainty factor linked to the possibility of changes in regulations and more, states Professor Torben M. Andersen, chairman of the Economic Council, to Sermitsiaq.AG.
He explains that in large projects with significant investment needs, "uncertainty is a significant factor, as these are typically projects with a long time horizon". Risk premium- Increased uncertainty can then either mean that investors refrain entirely, or that there will be an extra risk premium attached to the financing, Torben M. Andersen assesses. Thus, it is not only the raw materials area that may be affected by the arbitration case.For example, the large hydropower projects that require billions of dollars in investment can risk becoming much more expensive because lenders want much higher interest rates for their investment.
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