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RWE profit down, doubts over DEA sale

Thursday, November 13, 2014 - 02:19

German utility RWE's sale of its oil and gas business DEA to Russian billionaire Mikhail Fridman may take longer than expected. As David Pollard reports, that news is adding to the uncertainty over the fate of the 5.1 billion euro ($6.4 billion) deal.

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Operating profit fell almost a third in the first nine months of the year. Down 31 per cent to 2.9 billion euros - on tumbling power prices and mild temperatures that have hit RWE and other European utilities. Darren Sinden, Market Commentator, Admiral Markets UK. SOUNDBITE (English) DARREN SINDEN, MARKET COMMENTATOR, ADMIRAL MARKETS UK: ''The numbers are down. They talk about warm weather and low electricity demand hampering their prospects for the coming year and because of the way the German power market is set up, even a weak oil price is not likely to benefit the big German utility companies.'' It's not the only thing driving the share price down for Germany's number two utility. Worries have surfaced over the proposed five billion euro sale of DEA - its oil and gas unit - to Russian oligarch Mikhail Fridman. The impact of the Russia-Ukraine crisis is making some parties to the deal nervous. Britain accounts for about a fifth of the unit's gas production. It's reportedly said that - in light of sanctions against Russia - it may not support the sale. In total, approval is required from 14 countries before the deal goes through. SOUNDBITE (English) DARREN SINDEN, MARKET COMMENTATOR, ADMIRAL MARKETS UK: ''It's very difficult for RWE. They'd like to do the deal, they'd like to close it as soon as possible, but Russian politics and the situation in Ukraine being what they are, have to walk a very careful tightrope. And, in fact, perhaps the decision is not really in their hands any more.'' DEA owns stakes in about 190 oil and gas licenses in Europe, Africa and the Middle East. Nearly a tenth of RWE's operating profit came from it last year. The sale is part of a major effort to cut 31 billion euros of debt. But the company itself admits it can't say whether talks on the deal will conclude this year. In the meantime, Russian sanctions are biting on Europe too, says Michael Hewson of CMC Markets. SOUNDBITE (English) MICHAEL HEWSON, ANALYST, CMC MARKETS: ''The slowdown we're seeing, the GDP numbers that are due out later this week from France, Italy and Germany are going to probably reflect the sanctions and the counter-sanctions with respect to Russia, and certainly given the current environment, I don't expect that to improve any time soon.'' If DEA doesn't go to Mikhail Fridman, others may still be keen. BASF unit Wintershall was a bidder when the sale was launched in March. MOL Group of Hungary also wanted to buy it - and says it still does.

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RWE profit down, doubts over DEA sale

Thursday, November 13, 2014 - 02:19