* Deal expected to close later this year
* Enterprise value is 5.1 billion euros
* Value includes about 0.6 billion euros of debt
* RWE says sees no opposition from German government
(Recasts, adds details on deal, background)
By Christoph Steitz and Tom Käckenhoff
FRANKFURT/DUESSELDORF, Germany, March 16 (Reuters) -
G ermany's debt-burdened utility RWE has struck a deal
to sell its oil and gas production arm DEA to a group
of investors led by Russian tycoon Mikhail Fridman, valuing the
unit at about 5.1 billion euros ($7.10 billion) including debt.
Under pressure from a deep and prolonged industry crisis,
caused by a surge in rivals' renewable capacity as well as weak
energy demand in its core market Europe, RWE has been looking
for ways to reduce its debt pile of more than 30 billion euros,
including cutting jobs and shedding assets.
The group, which earlier this month revealed its first net
loss since 1949, had announced plans to sell DEA about a year
ago, aiming to rid itself of large investments needed to keep
the unit's exploration business afloat.
"This agreement is a major milestone in delivering our
announced strategic realignment of the group," RWE's Chief
Executive Peter Terium said in a statement. "In addition, it is
a further and essential step towards improving our financial
With operations in 14 countries, DEA employs about 1,400
staff and owns stakes in about 190 oil and gas licenses or
concessions in Europe, the Middle East and North Africa, some of
which are non-producing and in need of large investments.
It accounted for about nine percent of RWE's operating
profit in 2013.
FIRST STRATEGIC STEP
Luxembourg-based investment vehicle LetterOne, set up by
Russian billionaire Fridman last year to invest $20 billion or
more in global oil and gas projects, said the purchase marked
"its first strategic step in entering the oil and gas industry".
The deal comes as East-West relations have hit a new low
over a crisis in Crimea, leading German Chancellor Angela Merkel
to warn of a "catastrophe" if Russia does not back down on plans
on annex the region, which is part of Ukraine.
A spokesman for RWE, Germany's second-biggest utility by
market value after E.ON, said the group had informed
the German government about the transaction, a standard
procedure for deals of this magnitude, and received no
indication that Berlin would be opposed to it.
The deal, which includes about 600 million euros in debt, is
still subject to the approval of RWE's supervisory board as well
as authorities in several countries, RWE said, adding the
transaction was expected to close later this year.
Sources told Reuters earlier this month that bidders had
begun to submit binding offers for RWE DEA, and named BASF
unit Wintershall, and Hungarian oil and gas Group MOL
($1 = 0.7181 Euros)
(Additional reporting by Marilyn Gerlach and Arno Schuetze in
Frankfurt; Editing by Robin Pomeroy and Sophie Walker)