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Financial Times: Eon eyes Gazprom as power plant partner

By Richard Milne in Frankfurt
Published: November 14 2007 02:00 | Last updated: November 14 2007 02:00

Eon, the world’s largest utility by sales, is considering building power stations in the UK, Germany and Hungary with Gazprom, the Russian energy group.

Wulf Bernotat, chief executive of the German group, said a partnership with Gazprom would ensure adequate access to gas for the power plants. People close to Eon said there were already concrete plans for a gaspowered plant in Germany near the Baltic Sea.

Such plans underline the closeness between the Russian group – seen in many parts of Europe as the bogeyman of global energy – and Eon, which is the largest foreign shareholder in Gazprom. Mr Bernotat told the Financial Times earlier this month that the European Commission, which is debating breaking up utilities such as Eon, posed a larger threat than Russia in energy matters.

The possibility of cooperation over power plants is largely linked to negotiations over Eon’s participation in the Gazprom controlled Yushno Russkoye gas field in Siberia.

Eon was also deciding whether to give Gazprom minority stakes in power plants in Italy, Germany, Hungary or the UK, Mr Bernotat said.

He added that the delays in the Siberian negotiations – which started several years ago – were due to Gazprom’s management being distracted by discussions on other matters such as partnerships with Shell or BP. He said that a deal with Eon should be signed “soon”.

The comments came as Eon said it was doubling the amount of money it planned to invest in renewable energy to €6bn ($8.8bn). The original target was set at the end of May but since then Eon has bought almost €3bn in wind assets in the US, Spain and Portugal.

Mr Bernotat told the FT that investing in solar energy was a “possibility” but it needed to be seen how viable the industry was without the current heavy level of subsidies.

Companies such as General Electric and Siemens as well as other energy groups are all eyeing the solar sector but have invested much less than in wind power until now.

Eon yesterday reported stronger-than-expected third- quarter results but stuck to its full-year guidance.

Operating profit rose 12 per cent in the first nine months to €7.1bn on sales up 7 per cent to €49.4bn. Eon said it expected operating profit to rise 5-10 per cent for the full year, a figure some analysts dismissed as too conservative.

Eon’s strong profitability is likely to keep on the boil the debate in Europe and Germany on whether integrated power groups such as Eon – which own both power generation and distribution assets – should be broken up.

Some German state governments are pushing for Eon and RWE, its German rival, to be split up.

But the companies are resisting the move, saying it will do nothing to help competition.

Copyright The Financial Times Limited 2007

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