The plan to create an Austrian energy champion to build on expansion opportunities in eastern Europe looks to have been kicked into the long grass after the country’s government was forced to abandon the tie-up between oil and gas player OMV and electricity group Verbund.

Austria’s regional states control three utilities that between them own a quarter of Verbund, and they were worried about the need for the Austrian state to sell off a further portion of its share of the company, the Financial Times reports. In particular, controversy surrounded the future of Verbund’s highly-prized hydroelectric power assets, which politicians and media sources alike feared could fall into foreign hands.

The merger remains sensible and correct, but the conditions are no longer there, the Austrian economy minister Martin Bartenstein was quoted as saying by the Financial Times.

OMV’s share price leapt on the news. Stock market and analyst reaction to the original proposals had been lukewarm at best amid fears that the perceived synergies between the two companies would be difficult to realize given the relative lack of operational overlap between them.