Norway blocks Rolls-Royce plan to sell engine maker to Russians

Norway will block Rolls-Royce from selling its maritime engine maker to a Russian company on national security grounds, dealing a blow to the aerospace group’s attempts to raise money from disposals. 

Monica Maeland, Norway’s minister of justice and public security, said the sale of the Norwegian-based business, Bergen Engines, would be formally stopped on Friday. 

“The central question is whether a sale of this business, which would be controlled from a country with which we don’t have a security co-operation, would represent a risk to national security. The government takes and has taken this very seriously,” she said.

The decision is a setback for Rolls-Royce, which only last month announced the disposal of Bergen Engines, a producer of propulsion equipment for offshore oil and gas vessels, tankers and ferries, to TMH, a Russian engineering group, for about €150m.

The sale of the lossmaking business was part of Rolls-Royce’s attempts to raise at least £2bn from disposals by early 2022.

The company has been hit hard by the collapse in air travel because of the coronavirus pandemic and was forced to shore up its balance sheet with £7.3bn of new equity and debt last year.

Rolls-Royce is still in the process of the much larger disposal of its Spanish engines and turbines subsidiary ITP Aero. 

Shares in the FTSE 100 group fell 5 per cent to 106.7p by early afternoon in London trade. 

Norway’s centre-right government was slow to react, only intervening after local media uncovered the sale of the company, which maintains the motors of the country’s spy ship.

Norway’s leftwing opposition accused the government of a “last-minute U-turn” with centre party MP Emilie Enger Mehl saying it had created “confusion and downplayed the affair”.

The government stopped the sale not just because the technology would have “great military strategic significance” for Russia and potentially help it circumvent sanctions and export restrictions, but also because the main factory lies close to a naval base.

Norway has been strengthening its military presence in recent years in response to the growing aggression of Russia in Georgia and Ukraine.

Its focus has been on defence in the Arctic, and Norway is close to reopening a cold war submarine base carved into the cliffs in the north of the country as well as hosting US troops and planes to enable them to train in Nordic climes.

Rolls-Royce on Tuesday made clear it did not intend to retain the business, saying that the “manufacture of medium-speed gas and diesel engines is not core to our long-term strategy”.

It warned that news of the sales process being halted would cause “significant uncertainty” at Bergen, which employs more than 900 people worldwide, including 650 at the main factory in Norway. Bergen had revenues of £239m in 2019.