Store Norske, in a significant step toward transitioning to new industries beyond coal mining, announced Monday it is buying all of the properties of Hurtigruten Svalbard – the archipelago’s largest tour company – and the two companies are entering into a 30-year operations agreement.
The future-looking deal actually steps 33 years back into the past when Store Norske founded Spitsbergen Travel as the oldest dedicated tour company in 1988. Hurtigruten bought a 50 percent share of the tour company in 1992 and the remaining shares in 1997, and renamed the company Hurtigruten Svalbard in 2017.
The value of the current deal is approximately 690 million kroner, of which 105 million assumes Hurtigruten reaches its growth and revenue targets in hotel operations, according to a statement issued by Store Norske. The company, fully owned by the Norwegian government, will receive 40 percent of the funding from the Ministry of Trade and Industry in the form of a budget allocation and 60 percent as a loan.
“Commercial real estate is a focus area for us and we have long wanted to buy Hurtigruten Group’s building portfolio in Svalbard,” Store Norske Administrative Director Jan Morten Ertsaas said in a prepared statement. “Hurtigruten Svalbard is the largest tourism player on Svalbard which through long-term, professional and systematic work has contributed to developing Svalbard into a very attractive travel destination. This is an exciting and commercial investment that fits in well with our existing business and we look forward to developing Svalbard as a tourism destination together with Hurtigruten in the years to come.”
Hurtigruten Group has spent several years trying to find a long-term tourism investment partner for it subsidiary company Hurtigruten Svalbard, according to Store Norske’s statement.
“Over time there has been great interest in our properties on Svalbard from several serious players,” Hurtigruten CEO Daniel Skjeldam said. “Svalbard is a key destination for us, and we have a infinite future perspective on our investment. Therefore it has been important for us to find a perfect partner who can contribute to the long-term development of tourism and the Svalbard community.”
Hurtigruten Group is agreeing to a 30-year lease for the buildings now being sold, according to the statement. They total about 40,000 square meters, includes three hotels with 290 rooms that have been significantly upgraded in recent years, office space, 40 apartments and two large retail premises.
“As we leave the building inventory to a professional real estate player we can now focus on what we are best at: namely creating unique experiences, and not least year-round activity and several year-round jobs on Svalbard,” Hurtigruten Svalbard Destination Director Per Brochmann said.
Store Norske, which became a fully state-owned company after the Norwegian government acquired the few privately held shares a few years as part of a bailout due to a coal price crisis, is in the process of shutting down all of its remaining mining operations. The facilities at Svea and Lunckefjell are being dismantled and restored to their natural state, while a phased shutdown of Mine 7 is scheduled to begin within a few years as new power plant is built in Longyearbyen to replace the aging coal-fueled plant.
Hurtigruten, which has experienced major setbacks during the past year due to poor handling of COVID-19 outbreaks on ships in Svalbard and elsewhere (and the overall loss of business during the pandemic), announced last October it was trying to sell most of all of its Svalbard properties. The announcement coincided with similar sale attempts by two other notable local tourism companies, although neither of the latter have announced any deals yet.
Hurtigruten’s announcement also touched off speculation – which some analysts dubbed as dubious – that private or state-owned China or Russia entities might try to acquire the properties. Such a deal, according to some concerned Norwegian officials and pundits, would give a significant boost in presence to a country considered an adversary in the rapidly heating “Arctic cold war” for rights and territory as the area is seen as a rich source of natural resources, transport and tourism during the coming decades.