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Back in March the German utility RWE announced that it planned to sell off its oil and gas unit, DEA, in order to reduce costs next year as it struggles with lower revenues and higher debt. Amongst some of the interested parties arrives the Russian billionaire Mikhail Fridman, who is looking to invest in diverse energy assets through his L1 Energy investment company.
A source close to the deal told Reuters that “a Fridman-led consortium is preparing to hand in a bid for DEA by the Christmas deadline.”
RWE’s power plants have been suffering this year as operating costs have risen above revenues earned, the German renewable sector has grown more powerful, and its net debts have risen to €30.8 billion ($41.5 billion). It hopes that by offloading DEA it will reduce its overheads and avoid spending the billions of euros needed to be invested in exploration and production.
Fridman received a large payoff after selling the Anglo-Russian oil company TNK-BP to Rosneft earlier in the year for $55 billion, and now plans to invest as much as $20 billion into new energy investments over the next three to five years.
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Reuters reports that DEA could be valued at around €5 billion, with operations in 14 different countries, including Germany, Britain, Norway, and Egypt, employing nearly 1,400 staff, and contributed nearly 11 percent of RWE’s net operating profit last year.
It appears to make a good fit for L1 Energy as the spread of assets around the world offer the ability of large-scale diversification away from Russia.
Other parties interested in buying DEA include; the US equity firm KKR, which has joined with Kuwait Petroleum Corp in order to place a bid for the oil and gas company. Wintershell, a subsidiary of BASF, has also announced its interest in a deal, as have Blackstone and Centrica.
Qatar Petroleum International (QPI) had been very interested, but has recently backed off since Egyptian President Mursi was overthrown. QPI were supporters of Mursi, and DEA no longer poses such an attractive investment as it owns many assets in Egypt.
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com