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Billionaire Fridman’s L1 Buys RWE Unit for $7.1 Billion

RWE Dea AG's Mittelplate Oil Drilling and Production Island
RWE Dea AG's Mittelplate oil drilling and production island is seen in the Schleswig-Holstein Wadden Sea, off the coast of northern Germany. Source: RWE Dea AG via Bloomberg

L1 Energy, the investment vehicle of Russia’s fourth-richest man Mikhail Fridman, agreed to buy RWE AG’s Dea oil and gas unit, gaining assets in the U.K., Germany and the North Sea.

The sale values Dea at about 5.1 billion euros ($7.1 billion), including debt, Germany’s largest power generator said in a statement yesterday. The deal is the first for LetterOne, the group set up by Fridman, 49, and co-investor German Khan last year to invest part of $14 billion they gained from selling a stake in the Moscow-based TNK-BP oil venture.

The agreement helps Fridman and Khan move their energy investment abroad as RWE, which reported its first full-year loss since the foundation of the Federal Republic of Germany in 1949, looks to raise cash from asset sales.

LetterOne has earmarked as much as $10 billion for investment in the global oil and gas business over the next five years and attracted a number of high-profile energy executives to its advisory board, including former BP Plc Chief Executive Officer John Browne and Anadarko Petroleum Corp.’s Jim Hackett.

The transaction must still win final approval from RWE’s supervisory board and regulators in several countries, the utility said. Dea pumps oil and gas in the U.K., Germany and Norway and is “no longer” of strategic importance, RWE CEO Peter Terium said in April last year.

RWE rose 1.3 percent to 28.835 euros by the close in Frankfurt.

Political Turmoil

Germany’s slumping power prices led to billions of euros in writedowns for RWE, which like other European utilities, is selling assets to reduce debt. RWE’s closest rival EON SE has sold about 20 billion euros of assets.

The sale concludes a quest to sell energy assets that took more than two years. An earlier plan to sell Dea assets in Egypt stalled amid the political turmoil that followed the ouster of former president Hosni Mubarak, people familiar with the matter said at the time.

RWE had sought to raise as much as 5 billion euros from selling Dea, a person familiar with the matter said last year.

Fridman, a Russian citizen with a fortune estimated by Bloomberg at $14.5 billion, ranking him at No. 65 globally, pooled more than $29 billion of assets in Luxembourg-based LetterOne last year, including his investments in Russian carrier VimpelCom Ltd. and Turkey’s biggest mobile-phone operator Turkcell Iletisim Hizmetleri AS.

Alfa Growth

The Russian billionaire co-founded one of Russia’s biggest private consortiums, Alfa Group, in 1989. Rising from scalping theater tickets as a student, Fridman led Alfa’s growth into an empire that now spans banks in at least four countries, asset management, an insurance company, and food retail.

After a decade of jointly developing Russian oil producer TNK-BP with the U.K.’s BP, Fridman, Khan and other partners sold the company to state-run OAO Rosneft in a $55 billion deal. The purchase made Rosneft the world’s largest traded oil producer by volume.

Rosneft CEO Igor Sechin, who formerly served as deputy prime minister in Vladimir Putin’s cabinet, is among a list of Russians that may face European Union and U.S. sanctions, Germany’s Bild newspaper reported March 14, citing people in Washington and Brussels it didn’t identify.

Putin, who was elected president in 2012 for a third time after serving as prime minister in the previous five years, has clashed with the U.S. and the European Union over the political upheaval in Ukraine.

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