German EON offloads 'milestone' Gazprom stake

1st December 2010, Comments 0 comments

Germany's EON said Wednesday it had sold its 3.5-percent stake in Russian gas giant Gazprom, a holding once hailed as a "milestone" in Moscow and Berlin's growing commercial ties.

EON, the world's largest private utilities group, said it would raise 3.4 billion euros (4.4 billion dollars) from selling 2.7 percent in Gazprom to state-owned Vnesheconombank (VEB) and 0.8 percent on the stock market.

The stake in the world's largest gas firm was held by EON's subsidiary EON Ruhrgas, which built up a 6.4-percent interest between 1998 and 2003 before exchanging 2.9 percent for a stake in the Yuzhno-Russkoye gas field in Russia.

Gerhard Schroeder, chancellor between 1998 and 2005, had called cooperation in energy the "core" of Russian-German relations, and EON's stake in Gazprom a "milestone."

Gazprom owns 51 percent -- and EON Ruhrgas 15.5 percent -- in the Nord Stream joint venture building a pipeline that will bring Russian gas under the Baltic Sea to northern Germany.

Controversially, Schroeder joined the Nord Stream board for Gazprom weeks after leaving office.

But relations between Moscow and Schroeder's successor Angela Merkel are seen as less cosy. When Putin visited Berlin last week he had dinner with Schroeder before meeting Merkel, who took office in 2005.

"Times have changed quickly," the Frankfurter Rundschau daily said last week.

"Since 2005, the Merkel government has put a lot less value on the Berlin-Moscow axis. Russia is seen as an important but an unpredictable partner. Excessively close commercial ties are seen critically."

The stake was "very symbolic," Theo Kitz, analyst at private German bank Merck Finck, told AFP. "I expect that this was agreed very closely politically."

"The purchase of Gazprom shares more than 10 years ago served to further solidify the partnership between Gazprom and Ruhrgas and to expand the two companies' scope for collaboration," Ruhrgas head Klaus Schaefer said.

"The sale will in no way alter the continued solid partnership," he said.

"In the future, we will continue to procure considerable amounts of Russian natural gas for the German and European markets and to work together closely on a number of joint projects."

Gazprom, founded in 1989, grew out of the USSR's Gas Industry Ministry and was part-privatised from 1993 in the much-criticised sale of state assets in post-Soviet Russia.

The state has retained a controlling stake of just over 50 percent, according to the company's website.

It has ramped up its ambitions in recent years and is expecting to sign a potentially huge deal to supply natural gas to China by mid-2011.

Gazprom last month reported first-half net profits of 508.2 billion rubles (16.5 billion dollars), a rise of more than 66 percent, on sales 1.7 trillion rubles.

EON said it will book a gain of 2.5 billion euros from the sale, which will be used to reduce debt and invest in other areas. The sale forms part of plans to offload 15 billion euros in assets by 2013.

Last month EON announced a major strategy shift, deciding to turn its focus away from Europe in favor of what it sees as more lucrative emerging markets in Asia and South America.

© 2010 AFP

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