Reply #19: Gazprom Stalls on RWE Talks as Germany Falters

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http://www.bloomberg.com/news/2011-12-07/gazprom-said-to-stall-on-rwe-talks-as-german-power-falters.html

OAO Gazprom, the world’s biggest natural-gas exporter, is stalling on talks to create a European power-plant venture with RWE AG because of deteriorating profits in Germany, two people familiar with the matter said.

Gazprom and RWE agreed last week to keep talks going for several more months in a second extension since July, another person said. The companies haven’t yet agreed on the assets and need more time to monitor demand and margins in Germany, the other people said, declining to be identified because the matter is confidential.

“It’s difficult to see the strategic logic for Gazprom to get involved in the German power business,” Derek Weaving, a London-based utilities analyst at Renaissance Capital, said by e-mail. “The European power sector is highly competitive, with even established national champions like EON AG reporting mediocre profitability.”

Gazprom supplies about a quarter of Europe’s gas and the company announced plans to negotiate its first generation venture in western Europe with RWE in July, including coal- and gas-fired plants in Germany, the U.K., Belgium and the Netherlands. RWE is looking at ways to mitigate the costs of Germany’s decision to close all its nuclear reactors by 2022 and has pledged to sell 11 billion euros ($15 billion) of assets. The Essen-based utility raised 2.1 billion euros in a share sale earlier this week.