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The Times: Gazprom aims for a slice of E.ON’s British power plants

EXTRACT: British politicians would face calls to resist a deal, given the pressure from Russian regulators that has forced both BP and Shell to cede control of key projects in Russia in the past year.

THE ARTICLE

August 10, 2007
Steve Hawkes

Gazprom, the Kremlin-backed Russian gas group, is negotiating a deal under which it could take a stake in up to five British gas-fired power stations, it emerged yesterday.

The move would be Gazprom’s biggest step in the UK market so far and would fuel fears about the security of future energy supplies.

The Russian newspaper Vedomosti reported that Gazprom was hoping to seal an asset swap with E.ON, its German rival, which owns Powergen and has about 10 per cent of electricity sales in the UK.

Under the deal E.ON would take a 25 per cent stake in the huge Yuzhno Russkoye gasfield run by Gazprom. The Russian field is expected to be the main source of gas for the new Nord Stream continental pipeline. In exchange, Gazprom wants a stake in E.ON’s UK power stations, which include the plants of Killingholme, in Lincolnshire; Taylor’s Lane, in Willesden, London; Cottam Development Centre, in Nottinghamshire; Enfield, in London; and Connah’s Quay, in Flintshire.

E.ON is understood to have offered Gazprom a share of its gas and power operations in Hungary. Gazprom is believed to want more, given the value of the Yuzhno Russkoye project. Gazprom and E.ON refused to comment.

Gazprom has made little secret of its desire to break into the UK power market and has continually been linked with a possible takeover of Centrica, the owner of British Gas. The Russian group supplies a few thousand businesses, including Sir Philip Green’s Bhs retailing chain, with energy through the Cheshire-based Gazprom Marketing & Trading arm that it set up three years ago.

British politicians would face calls to resist a deal, given the pressure from Russian regulators that has forced both BP and Shell to cede control of key projects in Russia in the past year.

The reports in Vedomosti came as RWE, E.ON’s German rival, confirmed plans to press ahead with a new £800 million gas power station at Pembroke. The group, which owns npower in the UK, also raised its profit forecasts for the year after operating profits in the first half rose by 18 per cent to €4.4 billion (£2.9 billion). RWE said that for the full year it is expecting earnings growth of between 10 per cent and 15 per cent, against earlier estimates of a 10 per cent increase. The group said that it had benefited from higher power prices and from increased profits from trading commodities. International Power is paying its first interim dividend after a spate of acquisitions lifted half-year pretax profits 6.1 per cent to £416 million. Investors will receive 2.77p a share, equivalent to 35 per cent of the full-year dividend. Profits in North America rose by 50 per cent after last year’s £640 million takeover of the coal-fired Coleto Creek plant in Texas.

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article2231246.ece

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