German utility RWE AG has revised the terms of its deal to sell oil and gas unit RWE Dea AG to Russian investors, trimming the price to €5 billion ($5.8 billion) and inserting a clause protecting the U.K. operations from potential sanctions on the buyers.
Essen-based RWE had agreed in March to sell the unit for €5.1 billion to LetterOne Holding SA, an investment vehicle backed by Russian tycoons including Mikhail Fridman and German Khan. The deal stalled in October after the British government refused to provide guarantees that the buyer's ability to operate assets located in the U.K. North Sea would not be effected by possible future sanctions.
"LetterOne Group will keep Dea UK separate from the remaining RWE Dea activities for a number of years," RWE said on Friday, Jan. 16. "In the unlikely event that sanctions on LetterOne or its owners were imposed, RWE will retain the obligation to re-purchase the UK business during the first year post completion of the sale of RWE Dea."
RWE would repurchase the U.K. operation at a pre-determined price and would then sell the operations on to an independent third party, the German company said, without providing details of the price or naming the potential buyer.
The German utility wants to offload the oil and gas unit, which operates in 14 countries, to avoid further investment in exploration and production and raise cash to cut its roughly €30 billion of debt.
"The economics are attractive and therefore the Dea disposal remains an essential step towards executing our strategy and improving our financial strength," RWE CEO Peter Terium said in a statement.
London-based RWE Dea UK principally operates in the southern North Sea gas basin. Its assets are worth €1 billion, RWE CFO Bernhard Geunther said in November. That value may have declined in recent months along with the gas price. The NYMEX Natural Gas benchmark price closed Thursday at $3.10 per one million British Thermal Units, or mmbtu, down from over $4.50, per mmbtu in March and about $4 per mmbtu in October.
For LetterOne, the acquisition of RWE Dea would enable Fridman and his partners to diversify their investments away from Russia and its inherent political risks. The acquisition will also add a first oil asset to the roughly €13.5 billion of telecom assets that were housed in the investment vehicle at its inception.
"DEA is a strategic transaction for LetterOne and will serve as a platform for further growth in the industry," LetterOne Chairman Fridman said in a statement.
The deal is expected to close by early March.
Shares in RWE traded Friday at €23.80, up €1.28 , or 5.7%, on their Thursday close. The company has a market capitalization of €14.4 billion.
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