OAO Gazprom, the world’s biggest gas producer, is seeking electricity generating assets from Japan to the U.K. as the closure of nuclear reactors raises demand for gas-fired power stations.
Gazprom may pick three to four projects in Europe to submit for board approval by year-end and will hire an adviser on entering Asian power generation, said Denis Fedorov, head of the OOO Gazprom Energoholding electricity unit. The Moscow-based company wants controlling stakes.
“‘We shouldn’t be feared but looked at as a partner,” Fedorov said. “Nothing will happen other than an increase in competition in the power market, there will be no monopoly.”
European Union antitrust regulators raided Gazprom’s gas trading ventures last month as part of a competition probe. The 27-nation bloc is backing a gas link bypassing Russia, and some members had considered expanding nuclear power, to weaken dependence on Gazprom after winter gas flows across Ukraine were disrupted at least twice since 2006.
The Europe Union, Gazprom’s biggest gas market by revenue, is now revising plans for nuclear power after the March earthquake and tsunami in Japan lead to a reactor meltdown. Germany, the biggest economy in the bloc, has decided to shut its atomic plants by 2022.
Alexei Miller, the Russian gas exporter’s chief executive officer, has made electricity a priority to bolster corporate cash flows and expand internationally to compete with companies such as EON AG, Electricite de France SA and Endesa SA.
About 10 potential assets in Europe have been identified, Fedorov told reporters in his Moscow office late on Oct. 5, without naming any projects.
Gazprom and RWE AG are holding exclusive talks on forming a power-generation joint venture with new or existing, gas or coal-fired plants in Germany, the U.K., and the Benelux countries. The work will continue “intensively” until the end of the year, the two companies said yesterday.
Any acquisitions will be financed with cash, Fedorov said, declining to elaborate on the accord.
The Russian producer is also considering several projects in Bulgaria and is looking at Turkey and Romania, Fedorov said. With no budget or capacity targets, the division is open for any interesting projects, he said.
At home, Gazprom Energoholding controls four generators with a combined capacity of 37 gigawatts, which is about 17 percent of Russia’s total. The utility agreed to buy billionaire Viktor Vekselberg’s electricity assets in July in a deal that may boost its market share to 25 percent. That has met resistance from the antitrust watchdog, which has called it “undesirable.”
The board may vote on the deal by the end of the year, Fedorov said. Vekselberg’s Renova Group, one of the biggest investors in Russia’s power market through its IES Holding unit, will have at least 25 percent plus one share in the combined utility, and Gazprom will hold no more than 75 percent, according to the July accord.
Gazprom is ready to meet requirements set by the antitrust regulator, including selling assets in some regions, Fedorov said. The Federal Anti-Monopoly Agency is reviewing the deal.
The utility, which is merging its OGK-2 and OGK-6 wholesale generators, targets an initial public offering in 2014 or 2015, Fedorov said, without giving details. Management may consider Asian exchanges, visiting them this year or next.
“There will be colossal investments,’” Fedorov said, referring to investor interest in Gazprom Energoholding. “No one in Russia has raised such major foreign investment in recent years.”
Banks have approached Fedorov over the past three months with unidentified international investors expressing interest in controlling stakes in Gazprom Energoholding’s generators even before an IPO, the executive said.
As Gazprom seeks to diversify its supply markets, Gazprom may build Asian gas-fired power plants, Fedorov said. The company is starting talks and may identify the first projects in no less than a year, he said.
“Japan, South Korea and China are the three countries where we will focus the most attention,” Fedorov said. “If we supply gas to China, we are interested in building a vertical chain to the consumer.”
Gazprom is negotiating a gas sales contract with China, the world’s biggest energy consumer, and aims to build a pipeline across Siberia to carry the fuel. Plans to build another link across the Korean peninsula advanced after Russia helped broker between the North and South.
Asian demand for gas may increase as the economy grows and Japan’s nuclear disaster in March shut down reactors. China plans to move to gas, which burns cleaner than traditional coal-fired plants, while Korea, which buys liquefied natural gas, seeks to cut import costs.
Gazprom wants to supply as much gas to Asia as it does to Europe, Miller has said.
Talks with Asian partners may be “no less difficult than with European partners,” Fedorov said.