BERLIN/FRANKFURT — Germany's Economy Ministry approved the sale of utility RWE's oil and gas unit DEA to a Russian investor despite tensions between Russia and the West over the Ukraine crisis.
The go-ahead announced on Friday removes the biggest hurdle for the 5.1 billion euro ($6.9 billion) sale, a major plank in RWE's struggle to reduce a debt burden of more than 30 billion euros ($39 billion).
As part of the deal, Russian tycoon Mikhail Fridman and his co-investors will get stakes in about 190 oil and gas licenses or concessions in Europe, the Middle East and North Africa.
Relations between Russia and the West were already deteriorating over Ukraine when the deal was announced in March.
The EU and the U.S. have imposed economic sanctions against Russia for its annexation of Ukraine's Crimean peninsula and its backing of pro-Russian separatists, who are fighting against government forces in eastern Ukraine. Russia, in turn, has slapped bans on Western food imports.
But Deputy Economy Minister Stefan Kapferer told journalists on Friday that the government found that the deal would not endanger Germany's energy supply and the buyer consortium's European Union base had also been a decisive factor.
Process Continues
The European Union's anti-trust watchdog has already given the green light but regulators in a few other countries, which RWE declined to name, have yet to give their approvals.
DEA has operations in about a dozen countries, including Britain, Norway, Denmark and Egypt.
The German government could theoretically have used a clause in its foreign trade law that allows it to block takeover deals that threaten "public safety and order," but it would have been an unprecedented move.
RWE, Germany's largest power producer, has previously said it expects the deal to be finalized this year.
"We will now pursue the process further as planned," the company said in a statement on Friday.
RWE, like other German utilities, is struggling to adjust to a power sector shake-up as Germany moves away from nuclear energy and encourages a shift to renewables, while Europe's energy demand is weak.
The debt-burdened firm's market value has halved in four years.
RWE has been looking for ways to reduce its debt, including cutting jobs and shedding assets, such as the 1.6 billion euro ($2.1 billion) sale of Czech gas pipeline operator Net4Gas last year.
See also:
Norway's Giant Oil Fund Confident in Russian Assets Despite Threat of Sanctions
A Message from The Moscow Times:
Dear readers,
We are facing unprecedented challenges. Russia's Prosecutor General's Office has designated The Moscow Times as an "undesirable" organization, criminalizing our work and putting our staff at risk of prosecution. This follows our earlier unjust labeling as a "foreign agent."
These actions are direct attempts to silence independent journalism in Russia. The authorities claim our work "discredits the decisions of the Russian leadership." We see things differently: we strive to provide accurate, unbiased reporting on Russia.
We, the journalists of The Moscow Times, refuse to be silenced. But to continue our work, we need your help.
Your support, no matter how small, makes a world of difference. If you can, please support us monthly starting from just $2. It's quick to set up, and every contribution makes a significant impact.
By supporting The Moscow Times, you're defending open, independent journalism in the face of repression. Thank you for standing with us.
Remind me later.