NEWS

[RUSSIA] Dutch Gasunie becomes a Nord Stream AG shareholder

2008-06-21T03:02:00.002+02:00

On June 10, 2008, N.V. Nederlandse Gasunie was added into the Nord Stream AG shareholders register as a new shareholder.

Pursuant to the Umbrella Agreement entered into by Gazprom and Gasunie, the Dutch company obtained a 9 per cent stake in Nord Stream AG owing to a reduction in E.ON Ruhrgas and Wintershall Holding stakes by 4.5 per cent each.

The Gasunie’s entry into the Nord Stream project deal was clinched upon receipt of approvals from Nord Stream AG shareholders’ regulatory bodies and signing of a number of documents set out in the Umbrella Agreement.

As a result, Nord Stream AG shareholdings are now split in the following way: Gazprom – 51 per cent, Wintershall Holding and E.ON AG – 20 per cent each, N.V. Nederlandse Gasunie – 9 per cent.

The deal is a crucial event for deeper cooperation between Gazprom and Gasunie. The participation of a new partner in Nord Stream will raise its status of an international project aimed at ensuring reliable gas supply to European consumers and fostering energy security of the continent.

Background:

N.V. Nederlandse Gasunie is a state owned gas infrastructure and transmission company based in the Netherlands. The company owns one of the largest gas distribution networks in Europe with a total length exceeding 12,000 km. The network annually supplies up to 100 bcm of gas, which is a significant part of the total European gas consumption.

In June 2006, the Nord Stream project partners selected Gasunie as the fourth shareholder.

In October 2006, Gazprom and N.V. Nederlandse Gasunie inked the Memorandum of Understanding to cooperate in the Nord Stream and BBL projects.

In November 2007, Gazprom and Gasunie entered into the Umbrella Agreement to partner in the Nord Stream and BBL gas pipeline projects and to utilize Gasunie’s gas transmission capacities on the territory of the Netherlands.

The Umbrella Agreement provides for Gasunie to obtain a 9 per cent stake in Nord Stream AG and for Gazprom – an option for purchasing a 9 per cent stake in BBL Company.

Dutch BBL Company (Balgzand Bacton Line) is responsible for constructing and operating the recently built BBL interconnector between the Netherlands and the United Kingdom.

Nord Stream AG (initially named as North European Gas Pipeline Company) was established in 2005 for engineering, constructing and operating the Nord Stream gas pipeline.

The gas pipeline length is 1,200 km. Nord Stream’s first line with the throughput of 27.5 bcm per year will be commissioned in 2010. Upon construction of the second line the throughput will double to 55 bcm per year. Nord Stream will be fed with gas from the Unified Gas Supply System.

Source: Information Directorate|OAO Gazprom

EUROASIA: Privatization of Russia's electricity company enters home stretch

2008-04-21T19:56:00.005+02:00

A plan to privatize the world's largest electricity company is entering the home stretch, successfully it seems, in spite of its Rube Goldberg-like complexity and the general hostility toward privatization in Russia today. The plan's architects say they have raised $33.9 billion by creating a simple and obvious investment opportunity - the chance to sell heat and light to one of the world's coldest and darkest countries. The Russians say they have learned how to privatize their electricity market by watching the best example of failure: the Americans and Enron.

The Russian state electricity monopoly, Unified Energy Systems, will be disbanded June 30 after spinning off dozens of subsidiaries and floating a portion of shares in those companies on the Russian stock market, then selling the balance at auctions.

To attract buyers and investors, Russian officials promise they will also liberalize electricity tariffs for industrial consumers by next January.

"From a market point of view, it's very sexy," said James Fenkner, chairman of Red Star Management, a hedge fund based in Russia. "You are going, all of a sudden, from a system of government controlled inputs and outputs to a market based system with more potential for profit."

Red Star Management has invested in hydroelectric plants in Russia.

By Tuesday, Unified Energy had raised 797 billion rubles, or more than $33.9 billion, in spite of glum market conditions, according to the company spokesman, Stas Degtyarev. Though the company sells mainly to other utilities rather than portfolio investors, shares in newly privatized Russian electricity companies are now popping up in portfolios and on the books of hedge funds around the world.

To be sure, enthusiasm has been dampened not only by the complexity of the securities, but by memories of President Vladimir Putin's reversal of some oil industry privatizations, and concerns the same fate could await electricity investors. Also, many Russian power plants co-generate heat for residential buildings - a market whose rates will not be liberalized.

Generally, electricity privatization is fiendishly complex, and it has failed spectacularly before. But the Russians say they have learned from others' misfortune, especially the case of Enron.

"What happened in California, though it was unfortunate, helped us design restructuring," said Sergei Dubinin, the chief financial officer of Unified Energy Systems and a former Russian central banker. "We said, 'We can't do it that way.' "

The case for investing rests on a scarcity of electricity as Russia's economy grows and the belief that prices will explode after liberalization. Russia is the fourth-largest electricity market in the world, behind the United States of America, China and Japan.

The deals are low profile, but high-priced. OGK-1, for example, which owns power plants in western Russia and the Ural Mountain region, is expected to fetch about $7 billion at auction on April 17. On Monday, the Russian billionaire Mikhail Prokhorov bought 32 percent of TGK-4, with plants in smaller cities near Moscow, for $500 million at auction.

The gas-powered electricity plants have become acquisition targets for the European utilities like Enel of Italy and E.On of Germany; both have bought plants with intentions to invest money and expertise in energy savings in order to balance a projected rise in the price of natural gas in Russia.

For their part, portfolio investors have tended to bid up the price of power plants before large sales, then exit the stocks, making these shares more volatile than the average equity in the Russian stock market. Shares in the power and heat company TGK-5, for example, dropped 40 percent since its spin-off from Unified Energy.

Some investors have bought Russian hydroelectric capacity that taps the currents of the wide northern rivers. The cost of production, of course, will not rise with the price of gas. This was the approach taken by Red Star, Fenkner's hedge fund. But the government may increase a water tax for these plants .

Controversially, one outcome of Russian electricity privatization is likely to be a shift from natural gas to the relatively cheaper, but less clean-burning coal as plants seek savings - indeed, a Citigroup investor note has even recommended investors buy coal-fired plants.

One looming risk, however, is that Gazprom, the gas monopoly, will raise domestic prices for natural gas before the electricity market is fully liberalized, squeezing the profits of the electricity companies and their new owners. And, as one investor who did not want to be identified because his company deals with Gazprom, noted, "Gazprom is far more powerful than Enron ever was."

Source: International Herald Tribune| By Andrew E. Kramer

GERMANY: E.ON proposes to increase competition in German electricity market

2008-03-01T01:37:00.004+01:00

E.ON has offered structural remedies to the European Commission to settle ongoing antitrust cases in the electricity sector. E.ON proposes to commit to sell its electricity transmission system network to an operator which would have no interest in the electricity generation and/or supply businesses and to commit to divest 4,800 MW of generation capacity to competitors.

The Commission intends to market test E.ON’s proposals, with a view to adopting a decision under Article 9 of regulation 1/2003. Under this procedure, the commitments would be made legally binding by al decision of the Commission and the Commission would not pursue the current antitrust cases.

The Commission has conducted a number of antitrust investigations into energy companies as a consequence of the energy sector inquiry. Inter alis, the commission has been investigating two cases against E.ON in the electricity sector.

The European Commission welcomes these proposed commitments in so far as they could remedy the concerns that it has regards E.ON. These proposals, if adopted, would structurally change the electricity sector in Germany and could spur competition in the sector to the benefit of domestic and industrial customers.

SOURCE: Scandoil

EUROPEAN UNION: The industry shelving investments over greenhouse gas emissions plans

2008-02-07T18:06:00.000+01:00

A growing number of European industrial groups are scrapping investments because of European Union plans to make them pay for the right to emit greenhouse gases, an energy industry association said Wednesday.

"Every week a project is being cancelled," said Johannes Teyssen, vice chairman of the World Energy Council, which represents groups in 96 countries.

Teyssen, who said he had lost count of the number of projects that had been called off, cited in particular the cancellation in recent weeks of plans for several coal-fired power plants in Germany.

While the shelving of the projects was "probably a reflection of increased costs," it was also a a result of the European Commission's "rigid and tough" stance on emissions, he said.

The European Commission proposed last month that industrial polluters should have to bid for currently free quotas to emit greenhouse gases as part of a broad strategy to fight global warming.

"Full auctioning could lead to more vulnerability" for European Union companies, warned Teyssen, a senior executive at German energy giant EON.

While power companies would have to pay for their pollution quotas from 2013 under the Commission's proposals, other industries would gradually be phased in to the programme afterwards.

Source: Agence France Pressee

EUROASIA: Gazprom, new lord of the dance

2008-01-27T18:27:00.001+01:00

They say that energy is Russia's new weapon of diplomacy. And as Russia's state-owned gas giant, Gazprom is never far from the front line. But now, it seems, Gazprom's grip extends even to the art world. The group has been credited with brokering the deal to ensure that From Russia, the controversial exhibition of Russian and French paintings which features Matisse's Dance, went ahead at London's Royal Academy.

The exhibition, which opened yesterday, was almost scrapped amid a backdrop of worsening diplomatic relations between Russia and the United Kingdom. But Gazprom persuaded officials to authorise the transfer of the paintings to London. The show is sponsored by E.ON, which owns a stake in Gazprom.

MIDDLE EAST: Europeans Love Iran

2007-11-28T08:18:00.000+01:00

“Iran LNG Company” Managing Director Ali Kheir-Andish yesterday said four European companies had voiced their readiness to participate in Iran’s LNG project and to purchase the commodity.

European states would need 100 million cubic meters of gas per day by 2010, said Kheir-Andish, adding four international companies from Germany, Spain, and Austria had expressed their preparedness to help implement LNG project and to buy liquefied natural gas from Iran.

“They are eager to make investments in gas producing projects in an attempt to meet their energy need,” said the official.

According to the plan, the LNG output would double every 3.5 years, said the managing director, adding the country would produce some 22 million tons of natural liquefied gas in 2015, 44 million tons in 2018, and about 88 million tons in 2022.

Kheir-Andish predicted that the first LNG package would be injected into market in 2010.

He said negotiations on the finding a financier for the “Iran LNG” project would continue until Dec. of the current year, adding some Asian and European groups had expressed their willingness to finance the project.

Iran has already signed a $585-million contract with an engineering consortium comprising of two Iranian companies and an Italian company to build a treatment or gas sweetening plant for the Iran LNG project.

APS Engineering, a small, private Italian engineering company that has worked for a variety of clients including Eni, the Italian oil and gas multinational, told the Financial Times it was the Italian company in the consortium.

This contract was awarded just days after the design plans for the plant were submitted to Iranian officials by another consortium, made up of a German company, Linde, Hyundai of South Korea, and Snamprogetti, an Eni subsidiary. The design contract was initially agreed as far back as 2002.

Royal Dutch Shell, French giant Total, and Spain’s Repsol have stakes in Iran’s other two main LNG projects, as well.

Oil Minister Gholamhossein Nozari said U.S. sanctions against Iran would have no impact on the country’s crude oil and natural gas production plans.

He added the signing of e-LNG contract conveyed the important message that the country was determined to carry out projects by domestic contractors.

Addressing French President Nicolas Sarkozy, the official warned if the contract of Pars LNG project were not finalized with France’s Total, Iran would implement the project.

He said the Pars LNG contract had not been yet finalized as Iran had not accepted Total’s final investment decision (FID), adding the French company had not voiced its unwillingness to make investment in the project.

“Total, in its proposed FID, has announced that it will invest some 11.2 billion dollars in Phase 11 of South Pars gas field and Iran has dismissed the amount as unacceptable,” said the top official.

He ruled out the news that Total had reached an impasse in Iran’s Pars LNG project.

“Total is keen to implement the project,” said the minister, adding Iran had proposed the French giant to divide the project into smaller packages in a bid to slash costs.

Pointing to huge oil and gas reserves of Iran, the ranking official said the world was in dire need of energy and no company could ignore Iran.

Manager of Total Christophe de Margerie said the giant energy group would press on with talks on Pars LNG, Iran’s first liquefied natural gas export terminal, a project which requires a $15 billion investment, adding Total would look at the political situation only once a deal is ready.

Paulo Scaroni, Eni’s chief executive, told the Financial Times that Eni had ‘no intention’ of pulling out of Iran.

Other companies are, however, taking a bolder stance when it comes to Iran LNG. Union Fenosa, the Spanish energy company, says its subsidiary, Socoin, was awarded a 32.5-million-euro engineering contract for Iran LNG in August.

OMV, the Austrian oil and gas company, in April signed a preliminary agreement with Tehran for a stake in Iran LNG, but this is yet to be finalized.

“Our interest in the Iran LNG project lies on the table,” it said.

E.ON, the world’s largest utility, seeks to buy liquefied natural gas from Nigeria, an E.ON manager told Westdeutsche Allgemeine Zeitung in a story published last Friday.

Dietrich Gerstein, head of E.ON’s LNG purchasing unit, said E.ON was interested in natural gas from Iran.

LNG policies

Kheir-Andish said the LNG output in the years to come would depend on Petroleum Ministry’s policies.

Packages 2 and 3 of “Iran LNG” project were signed last Feb., recalled the official, adding a contractor was to be hired for the first package, but the attempt failed and Package 1 was divided into four smaller packages.

He expressed hope that LNG export would be a suitable replacement for oil export through the implementation of “Iran LNG” project.

Kheir-Andish said Package 1 comprised four sections and Iran Power Plant Projects Management Co. (MAPNA) took the responsibility of power plant and electro compressor sections after several sessions and negotiations.

He added e-LNG section constituted 30 percent of “Iran LNG” project and “Iran LNG” project made a 50 percent progress after the signing of contract with MAPNA and the related operations’ progress would soar to some 70 percent when the contract on gas sweetening was inked.

He expressed hope that “Iran LNG” project, due to support from Petroleum Ministry, contractors, and advisors, would become operational by the end of 2010 and the first LNG carrier would ship the first liquefied natural gas cargo at that time.

Given the recent contracts signed for the “Iran LNG” project, the country would export 12 billion dollars worth of LNG per annum and the figure would reduce to 5 or 6 billion dollars in case next contracts were not desirable.

Kheir-Andish said “Iran LNG” project needed a four billion dollar fund and its turnover would amount to six billion dollars.

According to him, e-LNG project was comprised of a combined cycle power plant with a 840 megawatt capacity, subsidiary installations, and six 70MW electro compressors.

LNG carriers

National Iranian Tanker Co. (NITC) managing director said the country would produce over 80 million tons of liquefied natural gas per annum in the upcoming years and 40 LNG carriers would be required to transport some of the product.

Mohammad Suri told PIN that Iran would sign a trilateral contract on the building of LNG vessels and exports.

“Concurrent with the signing of the contract on gas production, LNG plant, and export docks, the contract on the building of LNG carriers should be inked and the issue demands the finalization of LNG contracts,” said the NITC head.

According to Suri, the first cargo of Iran’s LNG would be shipped in 2011 and a 150 thousand cubic meter LNG carrier is needed to transport one million tons of liquefied natural gas.

“Given the plan on production of more than 80 million tons of LNG annually, we have to build at least 40 vessels to carry 50 percent of the product,” reiterated the official.

He added South Korea, Japan, and China were the builders of 90 percent of LNG carriers in the world and Spain and France constructed a limited number of the vessels.

Via: Islamic Republic News Agency
Tags: Gholamhossein Nozari, Repsol, Geopolitic, OMV, Total, South Korea, Christophe de Margerie, Paulo Scaroni, ENI, Japan, China, National Iranian Tanker, LNG policies, EON, LNG, European Union, Iran

FINLAND: Nord Stream Bid Will Come After Ecological Assessment

2007-11-19T21:24:00.000+01:00

Applications for building the Russia-Germany Nord Stream gas pipeline under the Baltic Sea will be filed after the environmental impact assessment is finished next spring, a senior official at Nord Stream said Friday.

The participants confirmed last week that the project would enter service by the end of 2010, but the environmental impact assessment has taken longer than expected.

"We have the environmental impact evaluation ongoing and this will be finished during the spring," Nord Stream permitting manager Sebastian Sass said Friday in Helsinki. "After that we will submit the applications."

He said Nord Stream took additional investigation requests from the authorities very seriously, and added that the schedule for a start-up had not been changed.

Finnish Foreign Minister Ilkka Kanerva said Thursday after meeting his Russian counterpart Sergei Lavrov that Finland was not against the pipe plan, but wanted to study its impact on the environment. "If the result shows that it has environmental consequences, I am sure that it will impact our permission and the final decision process."

Sass said the tendering process relating to the building of the pipe would be finished as well during the upcoming spring.

The project is led by gas export monopoly Gazprom and involves German firms BASF and E.On. Last week the Dutch state pipeline operator Gasunie became the fourth partner in the 5 billion euro ($7.3 billion) project.

Via: Reuters
Tags: Ilkka Kanerva, environment, Sergei Lavrov, Finland, Gazprom, BASF, EON

RUSSIA: Siemens, Rosneft and Gazprom

2007-11-14T01:07:00.000+01:00

Siemens in Atomic Venture

German engineering conglomerate Siemens signed an agreement Tuesday with Russia to help the country boost nuclear power generation.

The Federal Atomic Energy Agency said its chief, Sergei Kiriyenko, had signed the memorandum in Moscow with Rudi Lamprecht, a member of Siemens' managing board.

The agency said Siemens would help Russia boost nuclear power generation capacity at home and abroad and to reconstruct reactors. (Reuters)

Rosneft May Issue Bond

Rosneft is considering a convertible offering as it looks to issue $2 billion in eurobonds by the end of this year, vice-president for finance and investments Peter O'Brien said Tuesday.

"We are looking at different refinancing options and do not rule out a $2 billion eurobond issue … a convertible bond is one possible option," O'Brien said. (Reuters)

E.On, Gazprom Project

E.On, Germany's largest utility, and Gazprom may build natural gas-fired power stations together in Germany, Hungary or Britain, E.On CEO Wulf Bernotat said Tuesday

The companies are currently in talks about possible cooperation, Bernotat said. (Bloomberg)

Gazprombank Plans Bonds

Gazprombank, the country's No. 3 bank, plans to issue ruble bonds worth a combined 40 billion rubles ($1.6 billion) at the end of November at a yield of 7.0 to 7.5 percent to a one-year put option, a market source said Tuesday.

Gazprombank, a banking arm of gas export monopoly Gazprom, will issue the bonds in two tranches, the source said. (Reuters)

Gazprom Stake Not for Sale

The government "has no plans" to reduce its majority stake in Gazprom, nor does it intend to break up the gas export monopoly, Industry and Energy Minister Viktor Khristenko said Tuesday.

Khristenko, speaking at a news conference in Rome, was responding to Italian media speculation that oil company Eni might buy into Gazprom. (Reuters)

TGK-12 Starts Share Sale to Raise $350M

Regional power producer TGK-12 has launched its secondary offering of shares in Moscow through which it intends to raise 8.6 billion rubles ($350 million), a company source said Tuesday.

The sale will be priced and completed in the first five days of December, the source said.

For the next 20 days, TGK-12's existing shareholders will be able to use their pre-emptive rights to buy more of the stock.

The source said new investors would then be able to buy the remaining shares, which should account for at least 49 million shares, or about 7 percent of the firm's expanded capital.

A total of 100 million shares is being placed, accounting for 14.16 percent of the firm's capital after the sale and 16.5 percent before.

The shares will not be sold directly on Russian stock exchanges but through an open tender at which potential investors will be able to bid, the source said.

Siberian Coal and Energy Company, known as SUEK, already owns 44 percent of TGK-12, also known as Kuzbassenergo, and it plans to maintain this stake by using its pre-emptive rights.

TGK-12's parent company, state-owned utility Unified Energy System, which owns 49 percent of the company, will sell the government's 22 percent stake in TGK-12 in the first half of next year.

UES intends for the rest of the issue to go to a diverse range of investors, the source said.

"If UES does not use its pre-emptive rights to more shares, then a broad circle of investors will be able to buy at least 49 million shares of Kuzbassenergo," the company source said.

TGK-12 serves the coal-mining region of southern Siberia, a strategic part of the country for SUEK, whose mining operations are electricity intensive.

RusHydro Capacity to Soar

Hydro OGK plans to invest more than 1.6 trillion rubles ($70 billion) by 2020 in order to double capacity, the company's head of strategy Yevgeny Miroshnichenko said, Vedomosti reported Tuesday.

Hydro OGK wants to operate 45,900 megawatts of installed capacity, surpassing the 31,000 megawatts held by the world's current leader in hydropower, Hydro-Quebec, the paper reported. (Bloomberg)

INTERVIEW: Wulf Bernotat. EON is Russia's Biggest Investor

2007-11-13T02:59:00.000+01:00

by Natalia Grib

Experts estimate that the German concern E.ON holds gas and electricity assets in Russia worth $25-26 billion. It plans to expand its presence in those sectors as well. The concern still does not have an agreement with Gazprom on an asset exchange for the Yuzhno-Russkoe deposit in the Yamal-Nenets Autonomous Area. E.On chairman of the board Wulf Bernotat, in his first interview with the Russian press in two years, talks about the companies main Russian projects.

What is your company's strategy in Russia? What are your goals and the deadlines you have set for them?

Out strategy is based on long-term partnership relations with Russian companies, especially Gazprom, planned for more than 30 years. About two years ago, we made a decision to enter the electricity sector, which has been successful. About 70 percent of the stock in OGK-4 (Wholesale Generating Co. 4) has been acquired. And I emphasize that it was not a spontaneous step arising from a sudden desire to enter the Russian electricity market. Rather, it was the logical conclusion of long-term relations that existed in the sphere of natural gas. We own 6.5 percent of the stock in Gazprom, our interests are represented on the board of directors of the Russian gas monopoly and we are the largest importer of Russian gas. If the value of our shareholders equity packages in Gazprom and OGK-4 were added up [the capitalization of 6.43 percent of Gazprom stock was $19 billion as of November 5], as well as the share we plan to acquire in the Yuzhno-Russkoe deposit, we are the largest foreign investor in Russia. Deadlines are meaningless, because we plan to invest logically and gradually as the business develops. The development of our relations can be seen in the fact that we own a quarter of Nord Stream AG, which is building the North European Gas Pipeline.

E.On's electricity business is developing most successfully. What are your long-term plans for OGK-4. What will you do with that asset?

We plan to increase our share in OGK-4 and will make the appropriate offers to the company's minority shareholders. The 23 percent of shares in OGK-4 that RAO UES of Russia owns will be distributed among the minority shareholders in connection with its dissolution in 2008. But the 70 percent that we already own allows us to manage the company successfully. Our task at the moment is to integrate that company smoothly into our concern. That is a matter of setting up a team of representatives of E.On and OGK-4 that will prepare for the annual account taking, since we want to include data from OGK-4 in the E.On annual report. Last week, we had the first meeting with the management and employees of OGK-4 and we acquainted them with our plans.

Do you intend to replace OGK-4 executives?

In the long term, we will have a team of managers in which Germans and Russians work together. We take that approach no only in Russia, but in all countries where we have assets, whether it is Great Britain, Scandinavia, Italy or Spain. We have always decided what positions local workers can be kept in and in what positions representatives of our concern would be especially strong in. But every time it was a mix.

Will you replace the general director and the deputy director for finance?

We have delegated a number of the top executives of our concern to speed up integration. A decision on replacing managers in key positions has to be made much later.

E.On had set its sights on Mosenergo as part of an exchange of electricity assets with Gazprom. Have you reconsidered or are you still counting on receiving a share in that company?

I will be happy to elucidate that situation, since a direct exchange of electricity assets involving Mosenergo was never in our plans. Four years ago, we discussed questions connected with our cooperation on the Russian electricity market with [Gazprom CEO] Alexey Miller. It was assumed that Gazprom would participate in it because of the positions it has here and we would bring our experience and know-how to it, which are useful to Gazprom when entering new market. Nothing came of it in the end, however, because Gazprom decided to act without us and we turned our attention to other objects, particularly OGK-4.

Are there other electricity assets in Russia that interest E.On? How soon do you intend to acquire or build them? Are you interested exclusively in gas generation, or are you interested in coal generation and hydro-generation as well?

At this stage, we are most interested in issues of integration of OGK-4, which has 5500 employees and facilities throughout the country. The distance between the farthest electric plants is 4000 km. Since there are electric plants in OGK-4 that run on gas, as well as coal, it fits E.On's development strategy well. Parallel to the process of integration, we plan to make investments to increase capacity, in order to meet the demand for electricity. There is no time to wait. Our total expenses for the purchase of OGK-4 were $5.7 billion, of which $1.8 billion will go to increase the authorized capital, which will be used to finance the projected new capacity. We think that OGK-4 is an excellent platform for the expansion of capacity.

As for other assets, we will turn our attention to them when the time is right. No final decision has been made yet and we will consider it by analyzing the conditions of specific objects. I cannot answer your question at the moment yes or no, and all the more so since we are competing with other companies and should not reveal our plans to them.

So we can expect you to buy another share in a territorial generating company at any time?

We will attentively analyze the appropriate objects before making a decision on their acquisition.

What does your cooperation with Gazprom in the area of electricity consist of? At one time, you refused to allow the Russian gas monopoly access to E.On electricity assets in Germany. Are you afraid that the Russians will practice dumping on your domestic market?

Nothing of the sort. We never blocked Gazprom's access to the German electricity market. We always conducted negotiations about it, including on the exchange of assets. The negotiations came down to a discussion of the Hungarian assets E.On acquired from MOL during privatization, also in the electricity sphere. Some time later, however, Gazprom decided to concentrate on gas-powered electricity plants in Western Europe. Therefore, now we are talking about a share gas plants E.On has in Europe, including in Germany, and about the joint construction of new plants.

Did Gazprom reject the Hungarian assets completely?

I can't talk about the details of the negotiations until we reach an agreement with Gazprom, but its interests shifted in the direction of gas-powered electric plants in the EU.

Is E.On prepared to provide Gazprom a share in its British electric plant? Would it be a blocking package or a controlling package?

Gazprom is interested in shares in the electric plant in Britain, but not in our E.On UK subsidiary. Now is not the time to discuss the details in the press, since they are still in the active stage.

The deadline for completing talks on the development of the Yuzhno-Russkoe deposit has been extended more than once and now a new deadline has been announced – the end of November. What has prevented you from reaching an agreement on Gazprom's conditions for two years?

Most of all, it has to be said that Gazprom itself, for a number of reasons, asked for the deadlines to be moved. And [Gazprom deputy chairman] Alexander Medvedev said that the was working on a number of projects at the same time and negotiating with BP and Shell and there was no chance to hold final negotiations on Yuzhno-Russkoe. Today we should divide the issues into two blocks. That is the package of assets, and here an agreement had more or less been reached, and the assessment of the share in Yuzhno-Russkoe. There is not yet an agreement on that block, but I can suggest how we will reach it.

The Russian press has stated that the cost of the assets in the deal between Gazprom and BASF, which has a share in Yuzhno-Russkoe that is analogical to yours, is $1.3 billion. Please comment on that sum.

I don't know how accurately the package was assessed, but they used a different formula for asset estimation. As far as I understand it, it was a matter of the companies' joint activities in Libya. There the logic is completely understandable. The price of gas rises along with the price of oil, and that influences the market assessment of assets and, in this case, the package has no primary importance. We have a formula for the exchange of assets that assumes a difference between the cost of the assets in one sector, gas, for instance, where prices rise or fall along with prices on world markets, and the cost of gas-powered electricity generation. That complicates assessment.

Last year, $800 million was mentioned in the press as the total value of the exchange b between Gazprom and E.On. Do I recall correctly that you provided a share in the electric plants in Great Britain or Italy for exchange with an additional cash payment?

Yes. From the very beginning, we proposed a large part of the payment in assets ad the rest in money. Nothing has changed in that issue.

When will the negotiations be completed and whose court is the ball in now?

The ball is now in the center of the field. There is no sense in naming a new date every two weeks. The negotiations will be completed the moment when the agreement is signed.

Talk, please, about how the Nord Stream project is going. What is the main source of disagreement between the participants in the project?

There is a shareholders board that decides principle issues connected with the company's activities. Managers decide technical issues. We are maintaining the planned schedule. There are no disputed points among the partners.

Has financing been found for Nord Stream? How much does it cost – €5 billion or $12 billion? How much is planned in the E.On budget for it?

I am completely unfamiliar with the figure of $12 billion. I operate on the sum of expenses of €5 billion for the two lines of the gas pipeline. If the need arises to raise expenses, the shareholders will consider it. We definitely envisaged a certain sum in our budget in case of unforeseen expenses.

Comment, please, on the EU initiative to liberalize the gas market that would divide the business into transport and sales to the final consumer.

We have repeatedly stated from the podium of the European Union and to individual commissioners that we do not consider the division between production and transport companies the right move and that implementation of that initiative will not lead to increased competition or decreased energy prices. I know that BASF, Total and Gazprom will oppose those initiatives. But each of them is formulating its position separately.

What advantage does your concern have over other strategic investors in Russia on the gas and electricity market? Should we expect E.On projects in other spheres of business?

We will continue to concentrate our efforts on the production and sale of natural gas and electricity, and on renewable energy sources that will eventually also be usable to produce electric power. Our advantage in comparison with other strategic investors is that we are present on practically all the energy markets of Europe, from Russia to Turkey. That gives us an advantage in the growing tendency to establish a single European energy market. We support that idea and support not so much the elimination of borders in the European U nion energy market as the improvement of physical connections between individual parts of that single market. In my view, that is the strategic advantage of E.On.

Via: Kommersant

Tags: fotolog|fotolog|www.BajaeNergyBLOG.com|

EUROPE: Germans lash out at European Union´s energy plans

2007-10-13T19:26:00.000+02:00

Germany's powerful energy companies got fresh political support Tuesday for a bitter attack on European Union plans to split energy producers from their distribution networks, with accusations that Brussels was destroying property rights and hindering investment.

The criticism, led by Burckhard Bergmann, chief executive officer of E.ON Ruhrgas, amounted to one of the most stinging attacks leveled against Neelie Kroes, the European Union competition commissioner. Kroes has consistently taken a tough stance, particularly against Germany and France, for their refusal to "unbundle" the ownership of energy producers from the supply business.

Kroes argues that breaking up the giants would promote competition and lower prices across the Continent.

But Bergmann took issue with that, insisting that "there was no empirical evidence that unbundling would lead to lower network charges or that it enhances investment cross-border competition."

Speaking at the European Autumn Gas Conference, he added: "The European Commission is completely inconsistent. It says it wants to introduce unbundling and reduce regulation. But what it is doing is unbundling and increasing regulation."

The commission's proposals, detailed last month, envisage an energy company selling its network or supply business to a third party. Alternatively, it could split the integrated company into separate shares for the distribution network on the one hand and the supply and production business on the other, provided that separation is achieved.

Another option is to establish Independent System Operators, in which supply companies would continue to own the networks but all activities related to the network, including investments, would be transferred to an independent operator, which would be subjected to detailed regulation and supervision.

But Bergmann said such measures "would deprive the companies of all ownership rights. They are not justified."

The German and French energy leaders, which over decades have established tightly organized, vertically integrated structures, have so far fended off the commission's attempts - with the backing of their national governments.

Angela Merkel, the German chancellor, has made it clear over the past few months that she would not support any unbundling of the energy sector.

Analysts have said her defensive position reflects broader difficulties within her coalition government of conservatives and Social Democrats, where the momentum for change and commitment to more competition and transparency has almost come to a standstill.

Jens Baganz, state secretary at the economy and energy ministry in North Rhine-Westphalia, where many of the big German energy companies are based, said his government was "not convinced that the commission's focus on unbundling paves the way for greater competition."

Addressing the conference, Baganz, who is a member of Merkel's conservative Christian Democratic Union party, asked "what would happen to investments" if the owners were forced to sell their networks.

Kroes, in a speech last week, rejected claims by the industry that investments would dry up. She said investments have increased in the three European Union countries that have already unbundled - Britain, the Netherlands and Spain.

Baganz went on to criticize the commission's plans for breaking up the large energy companies, claiming the commission was discriminating against private companies, which had to be broken up, but not touching state companies.

Kroes said her measures would not lead to the expropriation of property, nor were they discriminatory. In the case of state-owned companies, she insisted that network operators and supply companies would be entirely separate.

Baganz also criticized the commission "for focusing too much on regulating the internal market instead of looking at the long-term supply of gas for Europe."

The commission has been looking at ways to diversify the bloc's energy supplies and increase energy security so as to reduce Europe's dependence on Russia. But European Union governments have resisted pooling responsibility, seeing the issue as a matter of national security.

This became more critical after January 2006, when Gazprom, Russia's state-owned energy giant, stopped sending natural gas to Ukraine, a major transit country for Russian gas exports, because of a price dispute. This led to some shortages in Western and Eastern Europe.

More than 60 percent of oil exports from Russia go to the European Union , representing over a quarter of the European Union's oil consumption. And 50 percent of Russian natural gas exports are earmarked for the 27-member bloc, making up a quarter of the European Union's total gas consumption.

Baganz, however, praised E.ON Ruhrgas for diversifying its energy supplies by developing liquefied natural gas and building the Nord Stream pipeline. This German-Russian underwater pipeline will run under the Baltic Sea and reduce Russia's dependence on Ukraine as a major transit country.

Baganz has close ties to German energy companies; he was a member of the supervisory board of RWE, another large German energy company, and former chief of personnel at VEBA, which is now E.ON Ruhrgas.

Stefan Judisch, chief executive officer of RWE Gas Midstream, criticized European Union officials and regulators for not understanding the markets.

Via: Herald Tribune International |By Judy Dempsey
|ALEMANIA|E.ON Ruhrgas,Merkel,EON,European Union,Jens Baganz,France,RWE,VEBA,German-Russian pipeline,Ukraine,Gazprom,Neelie Kroes,Germany,Russia,energyblog

ENERGY POLICY: iT Considers European Energy Market Competition

2007-09-25T08:44:00.001+02:00

The European Commission is set to publish a draft law on energy market competition that will separate the ownership of energy production from the ownership of distribution systems. If adopted, these new rules would have implications for the assets Russian state gas giant Gazprom owns in the European Union.

E.U. Competition Commissioner Neelie Kroes has been campaigning for the "unbundling" of production from distribution systems in E.U. energy markets. Her concern is with gas and electricity:

--The weaker version of the unbundling law involves separating the management of production and distribution activities into separate companies.

--The strong version, preferred by Kroes, entails separating not just management but ownership as well.

The rationale behind this approach is that competition does not function properly in the European electricity and gas markets. The Competition Commission argues these markets are dominated by a small number of vertically integrated companies, often with national monopolies. Furthermore, international competition is weak.

Liberalizing the gas and electricity markets across the E.U., along the lines already followed by the U.K., is seen as the way forward. The lobby group of industrial energy users, the International Federation of Industrial Energy Consumers (IFIEC), supports Kroes, as does the European Council. For advocates of the reform, the aim is to create a single European energy market.

A number of member states will oppose ownership unbundling. The heavyweight opponents are several large national champions, including:

--Italian companies Eni and Enel, both over 31% state-owned;

--Gaz de France, which will be GDF Suez after the merger with utilities company Suez, about 40% state-owned;

--Germany's powerful E.ON group, incluing E.ON Ruhrgas.

--Russia's Gazprom will also strongly resist the initiative.

The E.U. imports about 58% of its gas. Around half of that comes from Gazprom, whose monopoly on the export of Russian gas is entrenched in Russian law.

As a supplier of gas, Gazprom would present no problem for the Kroes strategy. In a speech to the IFIEC General Assembly in June, Kroes said long term supply contracts were not themselves a problem for competition, but they became a problem when they involved a dominant supplier accounting for a large part of the market.

Gazprom already has stakes in distribution businesses in several E.U. countries. It has also formed joint ventures in gas reservoirs and gas distribution hubs in Hungary, Belgium and Germany. The E.U. competition policy, if it followed the Kroes strategy, would require on principle that Gazprom be treated like all other vertically integrated energy businesses in Europe: It would have to divest itself of distribution assets. However, this plan would encounter three major problems:

--E.U. Links: Vertically integrated national champions in several E.U. states are already intertwined with Gazprom. Together, they can successfully resist any unbundling.

--No reciprocation: E.U. Trade Commissioner Peter Mandelson and German Chancellor Angela Merkel have voiced concerns that E.U. companies are being acquired by state-owned entities from non-E.U. countries, which do not open their own economies to acquisitions by E.U.-based firms. These concerns may prompt the commission to propose additional measures aimed at non-E.U. state companies, such as Gazprom.

--Russian sensitivities: The present Russian leadership appears to be highly sensitive to any action that could be interpreted as a threat to Russian interests. Restrictions on Gazprom's activities would be readily interpreted in Moscow as being anti-Russian. This would further spoil the already strained relations between Brussels and Moscow.

Via|OXAN|Oxford Analytica
PROTECCIONISMO|Gazprom,Russia,European Union,EON,Germany,protectionist policy,energy market,Argelia,Hungary,Belgium,Sonatrach,GDF-Suez,ENI,ENEL,Neelie Kroes,energyblog

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