This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

RWE Sells DEA Unit To Russian Billionaire For $7B

Leading German electricity utility RWE has agreed to sell its RWE DEA oil and gas unit to an oil and telecoms investment vehicle led by Russian billionaire Mikhail Fridman for an enterprise value of 5.1 billion euros ($7.1 billion).

The purchase by LetterOne Holding SA is the first significant acquisition since Fridman and five partners established the vehicle with some of the $14 billion they received from the sale of a stake in TNK-BP Ltd. to OAO Rosneft.

For Essen-based RWE, the deal is a means to free itself from further investment in the exploration and production operation and raises cash to pay down 30.1 billion euros of debt. Those loans have become increasingly onerous as the company's valuation has slid almost 60% since the end of 2009.

Slumping wholesale power prices on the continent have hurt energy utilities in both Germany and France, leading to asset write-offs and sales. RWE earlier this month posted its first annual net loss in more than six decades after writing off nearly 5 billion euros in assets. France's No. 2 energy utility, GDF Suez SA, wrote off 15 billion euros of assets at the end of February.

The agreement for DEA is at the top end of an expected price fork of between 3.5 billion euros and 5 billion euros. Luxembourg-based LetterOne submitted its offer earlier this month as part of an auction that also attracted interest from a consortium of Kohlberg Kravis Roberts & Co. and Kuwait Petroleum Corp., BASF SE's Wintershall oil and gas exploration unit and Hungarian oil and gas group MOL Hungarian Oil and Gas plc.

RWE said on Sunday, March 16, that it had agreed on the broad terms of the sale and was working to "clarify further details shortly in order to enter into the sales and purchase agreement."

The deal comes at a tense moment in German and Russian relations following Russia's decision to deploy troops in the Crimean Peninsular of Ukraine. Germany's government had led the European Union's failed effort to negotiate Russia's exit from the region, and on Monday it joined Paris and London in insisting that Russia should face economic sanctions following the Crimean parliament's decision to declare independence and apply to become part of the Russian Federation.

Germany, which is heavily dependent on Russia for natural gas supplies, had earlier resisted calls for sanctions but has changed its position in recent days. EU leaders are due to meet Monday to discuss possible measures. Germany's Bild newspaper reported March 14 that the sanctions were likely to include travel bans on Russian energy executives, including OAO Gazprom CEO Alexey Miller, and Igor Sechin, who heads Rosneft.

DEA's enterprise value of 5.1 billion euros includes about 600 million euros of liabilities that will be assumed by LetterOne. The transaction needs approval from RWE's board and regulators in several countries, said RWE.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,131.97 +100.83 0.59%
S&P 500 1,998.98 +14.85 0.75%
NASDAQ 4,552.7590 +33.8570 0.75%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs