DUESSELDORF (Reuters) - An agreement for Finland’s Fortum (FORTUM.HE) to buy a 46.65 percent stake in German energy group Uniper (UN01.DE) from E.ON (EONGn.DE) could face intense scrutiny in Russia, Uniper’s Chief Executive Klaus Schaefer told journalists on Thursday.
State-controlled Fortum has committed to seek regulatory approval for the deal from relevant jurisdictions, including Russia, by Oct. 31 at the latest, according to official offer documents.
Securing approval in Russia, where Uniper operates several power plants, could be challenging, Schaefer said, pointing to a law that effectively prohibits foreign states or state-owned entities from gaining control over assets deemed as strategic.
“And that is the case for our activities,” Schaefer said. “This law has a high relevance and therefore you have to consider how such an approval could look like, or not.”
A Fortum spokeswoman said the Finnish company had filed for merger approval in Russia, as well as approval under the Russian strategic investment act, and expects both applications to be cleared.
Russia’s Federal Antimonopoly service in October voiced concern about the deal, which would involve the purchase of more than 25 percent of Uniper’s Russian assets (UPRO.MM).
Fortum was offered only 0.47 percent of Uniper shares in a tender that expired in February, on top of a 46.65 percent stake it negotiated separately with E.ON, after Uniper’s management advised shareholders not to tender their shares.
Uniper fought against the bid, saying it was hostile and too low and that the combination would make little sense given its heavy exposure to gas and coal-fired power plants while Fortum’s focus is on clean technologies. Separately, Fortum said some of its own investors had complained the Uniper deal would raise the company’s carbon footprint, and had also voiced scepticism over the involvement in building the Nord Stream 2 pipeline for Russian gas.
“Many stakeholders such as SRI (socially responsible investors) have contacted Fortum to discuss the bid. The main concern ... has been the strategic fit of Uniper’s fossil-based production with Fortum low-carbon assets,” it said.
The company defended its plans, however, arguing conventional energy production was still needed to ensure affordable security of supply in Europe.
“Fortum acknowledges that not only the use of coal but also the origin of coal is a source of concern to some stakeholders ... Uniper is much more than a coal company,” it said.
While Fortum supports a phase-out of power generated from coal, this should be achieved within the European Union’s emissions trading scheme (ETS), the company added.
Reporting by Christoph Steitz, Vera Eckert, Tuomas Forsell from Helsinki and Lefteris Karagiannopoulos from Oslo; Editing by David Goodman and Mark Potter