LETTERONE & WINTERSHALL MERGER

FT - Russian billionaire Mikhail Fridman is on course to become part-owner of a UK gasfield two years after he was ordered by the British government to sell his North Sea assets.

Mr Fridman would acquire an interest in the Wingate gas platform off the east coast of England as part of a proposed merger between DEA, an energy company he controls, and Wintershall of Germany, which operates the UK field.

If completed, the deal would give Mr Fridman, founder of Alfa-Bank and one of Russia's richest men, a small foothold in the UK North Sea, and create a new test of government attitudes towards Russian investment in Britain's energy system.

Mr Fridman was issued with a de facto ban on owning UK oil and gasfields in 2015 when the government threatened to revoke DEA's exploration and production licences because of concern that the company could be exposed to US and EU sanctions against Russia.

That forced DEA to sell its UK business in what, at the time, was the most aggressive intervention by a western government to block a Russian investment since the imposition of sanctions related to the conflict in Ukraine.

Mr Fridman's indirect stake in the Wingate field, which accounts for almost 2 per cent of UK gas production, would be via his investment vehicle, LetterOne, and its proposed one-third share of Wintershall DEA.

The other two-thirds would be held by BASF, the German chemicals group, which agreed earlier this month to merge its Wintershall energy unit with DEA to create Europe's largest independent oil and gas producer. Wingate represents a small part of a portfolio spanning Russia, the Middle East and South America.

The Department for Business, Energy and Industrial Strategy and the UK Oil and Gas Authority, which regulates the North Sea industry, declined to comment on the transaction, as did LetterOne and BASF.

The UK government has been sensitive to the risks posed by sanctions to foreign-owned oil and gasfields since BP's Rhum field off the north-east coast of Scotland was shut between 2010 and 2014 because of the 50 per cent stake owned by Iran's national oil company.

People involved in the Wintershall DEA deal said that UK concerns about Mr Fridman in 2015 had proved unfounded because no sanctions had since been imposed against him or his companies. These people said it would be irrational for the government to object to LetterOne indirectly owning part of Wingate when Gazprom, the state-owned Russian gas producer, already has a large stake in the field.

Wingate is 49.5 per cent owned by a joint-venture between Wintershall and Gazprom, and the latter has an additional direct stake of its own.

Wingate is less strategically important to the UK than some of the assets DEA was ejected from in 2015 because it is located close to the maritime border with the Netherlands and its gas is piped to the Dutch grid, not Britain's.

LetterOne is a Luxembourg-based investment fund set up with billions of dollars of proceeds from Mr Fridman's sale of his stake in TNK-BP to Rosneft of Russia in 2013. Its L1 Energy arm is run by John Browne, former chief executive of BP.

Recent investments by LetterOne include a £1.8bn deal in June to buy Holland & Barrett, the UK-based health food retailer.

The UK was the only country to raise objections when LetterOne acquired DEA, which has assets across northern Europe and north Africa, from RWE of Germany in 2015.

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Earlier:

2017, December, 13, 12:20:00 LETTERONE & BASF MERGER LETTERONE - BASF and L1 Energy, the energy investment arm of LetterOne, announce their intention to merge their oil and gas subsidiaries.

2016, August, 31, 18:30:00 LETTERONE IS LOOKING LetterOne, Russian billionaire Mikhail Fridman's investment vehicle, is looking at acquisitions in renewable energy and oil assets in the North Sea outside of Britain, its executive chairman John Browne told.

2015, October, 15, 19:35:00 THE NEW RUSSIAN EMPIRE - 10 DEA Deutsche Erdoel (DEA), a company based in Germany controlled by Russian billionaire Mikhail Fridman’s investment firm LetterOne, signed an agreement to buy 100% of E.ON’s shares in E.ON E&P Norge for $1.6 billion, explaining that the transaction will allow DEA doubling its current production in Norway.

2015, October, 7, 19:20:00 THE NEW RUSSIAN EMPIRE - 8 Russian billionaire Mikhail Fridman’s LetterOne Group is in advanced talks to buy stakes in big oil and gasfields in the Norwegian North Sea owned by Germany’s Eon, in a $1bn-plus deal.

2015, September, 29, 20:45:00 THE NEW RUSSIAN EMPIRE - 7 The offers, which were submitted in July, nevertheless fell far short of LetterOne's target price of up to $1.2 billion, with the highest offers coming in at around $750 million, according to several sources close to the process.