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Home / Issue Archive / 2007 / June #6 / Gazprom – E.ON Asset Swap Could Hand Russians British Power Stations

№ 6 (June 2007)

Gazprom – E.ON Asset Swap Could Hand Russians British Power Stations

A deal between Gazprom and German company E.ON to swap 25 percent of Gazprom's Yuzhno Russkoye gas field for E.ON British power station assets is on the table, according to a Russian newspaper.

Gazprom, long rumored to be eyeing a stake in the UK energy market, could land British power assets as part of a swap deal with German company, E.ON.  According to Russian newspaper Vedomosti, the two companies have been engaged in asset swap negotiations centered on E.ON’s desire to buy a 25 percent stake in the Gazprom owned Yuzhno Russkoye field, provider of gas for the Nord Stream pipeline.

Nord Stream is due to come online between 2010 and 2012, and will take gas directly from Russia to Germany via a route through the Baltic Sea.  The pipeline is being built jointly by Gazprom, E.ON and BASF and Vedomosti claims that E.ON has been attempting to negotiate the purchase of a 25 percent share in Yuzhno Russkoye for over a year.

Although E.ON has offered its Hungarian power generation operations to Gazprom, the Russian state owned gas leviathan thinks a stake in Yuzhno is worth more than E.ON’s Hungarian power stations and is instead seeking British E.ON assets as part of any deal.  The German company currently accounts for 10 percent of British power generation and owns the Killingholme, Taylor's Lane, Cottam Development Centre, Enfield and Connah's Quay in Wales, according to Vedomosti.

This news comes as little surprise to our analysts. They point out that for some time it has been Gazprom’s policy to seek to trade foreign involvement in Russian based Gazprom projects for Gazprom involvement in foreign based concerns.  Most recently, a theory emerged that French company Total had been handed it’s partnership status in the Shtokman LNG project as part of a secret deal between Mr. Putin and new French president Nicolas Sarkozy to hand Gazprom major French energy assets.  And earlier in the year a rumor spread that Gazprom was about to launch a takeover bid from British giant Centrica.

Although Gazprom has denied all such talk, it is clear the Russian firm wishes to expand its operations beyond Eastern Europe and Asia and is keen to take a more active role in Western Europe, one of its key markets.

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