RUSSIAN oligarch Mikhail Fridman has completed a controversial £3.7bn deal to buy a raft of North Sea oil and gas fields despite opposition from the UK Government.
The billionaire had threatened legal action if his bid was blocked by Whitehall.
But after months of uncertainty, RWE, the German utility firm, announced it had completed the sale of Dea, its oil and gas production unit, to LetterOne, Mr Fridman's investment company.
Under the deal, LetterOne will create L1 Energy, a new subsidiary, to be run by Lord Browne, the former BP boss.
"We are delighted to have completed the acquisition of Dea," said Mr Fridman, Chairman of LetterOne. "We are convinced that the current macroeconomic environment and the low oil price, give us an opportunity to achieve our ambition," he added.
The Department for Energy and Climate Change(DECC)had raised concerns because a deal involving a European petrochemical business being taken over by a Russian firm coincides with sanctions imposed on Moscow for its actions in Ukraine. UK Ministers are worried that any future sanctions could impact negatively on North Sea production, creating possible "serious health and safety and environmental risks".
The dispute is thought to be the first time a western government has intervened in a business deal because sanctions against Russia might be strengthened.
In a letter to Ed Davey, the Energy Secretary, Jonathan Muir, LetterOne's Chief Executive, expressed how his company was "deeply disappointed and concerned" by the UK Government's position.
He berated the Secretary of State for going public in expressing the UK Government's opposition, which, he suggested seemed "designed to put on notice third parties, potentially creating the uncertainty that DECC alleges it is guarding against through its letter and the position taken in it. In the circumstances, we had no option but to respond setting out our position; from which you will have seen that we take your letter very seriously".
Earlier this year, LetterOne and RWE had sought to allay its concerns by offering to keep Dea's British assets separate for a number of years and committing RWE to buy them back should the EU or US impose sanctions on LetterOne's owners within a year after the closing.
As a result of British opposition, RWE was forced to abandon its original plan to seal the deal in 2014 and move the date further out into 2015, burdening its shares and fuelling concerns that the transaction might fall apart.
The UK Government said that if the deal went ahead as planned it could require the companies to arrange for a further sale of the British assets held by Dea, worth around £750m, to a third party.
But LetterOne has made clear it would "seek judicial review" in such a case, including "our right to seek compensation for any damage caused to the value of our investment in RWE Dea".
The sale provides RWE with a much-needed cash injection as the group suffers from weak wholesale power prices, a boom in competing renewable energy capacity as well as a £23bn debt pile it has accumulated over the past decade.
"The sale of RWE Dea demonstrates that, even in difficult conditions, we continue to realize our plans. Both parties negotiated good value for money and RWE can now focus fully on its core business," said Peter Terium, RWE's Chief Executive.
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