Italian energy giant Snam confirmed on Friday (November 14) that it has officially withdrawn its plan to acquire a minority stake in Germany’s largest independent natural gas transmission company, OGE. The €9.2 billion deal fell through due to intervention by the German Ministry of Economic Affairs.
According to Reuters, the German Ministry of Economic Affairs cited the Foreign Direct Investment (FDI) review mechanism to scrutinize the transaction. The ministry opposed the deal not directly targeting Snam, but due to the presence of indirect investment from the Chinese state grid company (State Grid) in the ownership structure of the Italian energy giant.
Earlier, Reuters reported, citing two knowledgeable sources, that Berlin expressed concerns over the €9.2 billion deal precisely because of Snam’s indirect investment from the Chinese state grid.
The Chinese state grid is an indirect investor in Italian state-owned financial institution CDP Reti, which controls Snam. Although the Chinese state grid is only a minority indirect shareholder, Berlin is worried that allowing a company associated with Chinese state capital to participate in the operation of critical infrastructure in Germany could pose security risks.
Snam had initially planned to acquire a 24.99% stake in OGE’s owner, Vier Gas Holding. OGE operates Germany’s largest natural gas pipeline network, crucial for Germany’s national energy security and the cross-border transport of natural gas within Europe, making it a key infrastructure for Germany.
This is not the first time that Germany has blocked Chinese state capital. Back in 2018, the German government intervened to prevent the Chinese state grid from acquiring a stake in German power grid operator 50Hertz.
The failure of the Snam transaction clearly reflects a regulatory trend in Europe: European governments are adopting a tougher stance on investments from outside the European Union, especially those involving Chinese state-owned enterprises.
The CEO of Snam had expressed frustration with the lengthy approval process earlier, indicating that the company would “continue to pursue this acquisition at all costs.”
Snam stated in a press release that the agreement was terminated after a lengthy Foreign Direct Investment review process in Germany. The remedial measures proposed by Snam to obtain regulatory approval were ultimately deemed “insufficient” by the German authorities.
Snam is a major natural gas transportation and dispatch operator in Italy, owning nearly all of Italy’s natural gas transportation infrastructure, operating approximately 38,000 kilometers of natural gas pipelines (including international operations), and having one of the largest natural gas storage capacities in Europe (around 17 billion cubic meters).
Despite the cancellation of the transaction, Snam stated that this development would not affect its full-year financial outlook for 2025.