German energy company RWE sold its oil and gas production unit Dea to global investment vehicle LetterOne. However, the UK government may pour cold water on the LetterOne plans.
On March 2, RWE closed the sale of Dea to LetterOne that is owned by Alfa Group shareholders Mikhail Fridman, Alexei Kuzmichov and German Khan. The sale values Dea at about €5.1 billion. The deal went through despite the fact that London still has not drawn up a “letter of comfort” that would guarantee that the UK licenses of Dea will not be revoked in case sanctions are imposed against LetterOne and its owners.
LetterOne announced that it took measures in order to protect its new UK asset from consequences of possible sanctions. The asset will form a special structure under the Dutch law called stichting. Such an innovative decision does not satisfy the United Kingdom. The UK authorities believe that stichting is a way of getting around possible sanctions illegally.
The UK Department of Energy and Climate Change does not agree with the structure of the transaction. In the previous year, the deal was approved by all antimonopoly services of the Dea operating countries (Germany, Norway, and Ukraine) except for the UK.
If the authorities insist on the further sale of Dea UK to a third party, LetterOne will “seek judicial review”. The investment vehicle said that “our right to seek compensation for any damage caused to the value of our investment in RWE DEA”. LetterOne also warns that it intends to file a lawsuit under the international Energy Charter Treaty in this case.
LetterOne reckons on the fact that the UK government will leave the idea of the Dea UK resale. This will only damage the management and operations of Dea, the Russian side believes.
