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European Energy Giants Wait On Russia Approval For $2.6 Billion Deal

European Utility Giant

Russia could okay within half a year a deal that would pave the way for Finnish utility Fortum to boost its stake in Germany’s utility Uniper to more than 50 percent, Russian Economy Minister Maxim Oreshkin said on Monday.

Earlier this month, Finnish state firm Fortum said that it agreed to buy the combined 20.5-percent stake of activist funds Elliott and Knight Vinke in Uniper, which would give the Finnish company an ownership of more than 70.5 percent in the German utility Uniper, up from 49.99 percent now.

Russia, however, is a key jurisdiction that has to approve the deal, not only because both Fortum and Uniper have operations there, but also because a unit of the German utility holds a water license in Russia, which Moscow considers strategic and as such it does not allow, under current legislation, foreign state-held companies to hold more than 49.99 percent in strategic assets.

Announcing the deal in early October, Fortum said that the closing of the transaction to buy the 20.5-percent stake in Uniper, worth US$2.6 billion (2.3 billion euro), is subject to regulatory approvals in Russia and the United States.

“Fortum is in discussions with the Russian state authorities and has made a preparatory filing to the Russian Federal Antimonopoly Service,” the Finnish firm said, referring to the path to approval in Russia.

In June this year, Fortum’s chief executive officer Pekka Lundmark discussed the issue of the stake restriction with Russian President Vladimir Putin.

During the meeting, Lundmark “did raise the point that we have a restriction limiting any possible future investments into Uniper based on a negligible water treatment activity that Uniper conducts at one of their power plants in Russia,” a spokeswoman for Fortum wrote in an emailed statement to Reuters. 

Last week, the head of the Russian anti-monopoly service, Igor Artemyev, said that the regulator considers changing the rules and allowing Uniper to outsource its water business so that Fortum could own a majority stake in the German utility. 

By Tsvetana Paraskova for Oilprice.com

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