Gazprom, Germany's RWE eye power plant tie-up

14th July 2011, Comments 0 comments

Russian gas giant Gazprom and Germany's number two utilities group RWE said on Thursday they are looking to form a strategic partnership to construct jointly gas and coal power plants in Europe.

"The power industry is one of the priorities of Gazprom in Europe," Gazprom's chief executive officer Alexei Miller said in a statement after inking a provisional agreement in Rome with RWE boss Juergen Grossmann.

"The signed memorandum provides RWE with exclusive rights for negotiations with Gazprom on the implementation of energy projects in Germany, UK and the Benelux countries for a period of three months," Miller said.

"This MoU (memorandum of understanding), when put into commercial reality, could secure a safe and competitive natural gas supply to RWE," Grossmann said.

"It can furthermore provide for potential partnerships in coal and gas fired power plants in and outside of Germany and thus lead to mutually fruitful common growth opportunities," he said.

The announcement comes ahead of talks in Hanover, northern Germany on Monday and Tuesday between Russian President Dmitry Medvedev and Chancellor Angela Merkel.

Commercial ties between the two counties have grown strongly in recent years despite criticism of Russia's human rights record and accusations that Moscow uses state-controlled Gazprom for political purposes.

Miller said that Gazprom hopes to profit from Germany's decision in late May to exit nuclear power by 2022, with the result that more fossil fuel power stations will be built. Berlin also wants to boost solar and wind power.

There have been rumours and press reports for some days suggesting a tie-up between RWE and the world's biggest gas company, possibly involving Gazprom taking a strategic stake in the German giant.

Any deal is likely to catch the attention of competition regulators, however, with the head of the German cartel office Andreas Mundt warning this week he would "look very closely" at what the firms intend to do.

Gazprom also owns 51 percent in the Nord Stream joint venture building a pipeline due to start bringing huge volumes of Russian gas under the Baltic Sea to the European Union via northern Germany from the end of the year.

The multi-billion-euro project has annoyed countries such as Ukraine and Poland that lie on the lucrative route of pipelines bringing Russian gas to the EU and which will be bypassed.

Gazprom is also playing a key role in the ambitious South Stream pipeline project to pump gas to Black Sea countries by avoiding Ukraine, a scheme it regards as crucial for the security of Russia's future energy exports.

Yet Gazprom is also trying to diversify exports beyond Europe and the former Soviet Union and is seeking to sell more gas to Asia, with the firm busy negotiating contracts with South Korea as well as China and India.

Germany will send nine cabinet members and two state secretaries as well as a major business delegation to meet with their Russian counterparts at the talks in Hanover, in what will be the 13th such get-together.

More than a dozen agreements on economic and environmental cooperation will also be signed, German government spokeswoman Sabine Heimbach said Wednesday.

Germany is Russia's most important trade partner. Russian exports to Germany reached 31.8 billion euros ($44.7 billion dollars) last year -- primarily gas and oil -- while 26.4 billion euros' worth of goods went the other way.

© 2011 AFP

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