RWE Czech Republic announced on Wednesday that due to the German government’s resolution to phase out nuclear power, EU unbundling legislation, and challenging economic conditions, the German energy giant had decided to sell off more assets than previously planned including daughter company Net4Gas, which owns and operates the Czech gas pipeline network. A spokesman for RWE Group, however, said the sale was only being considered and no definite decision had been made.
Option or plan?
“The decision by the German government to speed up the phase out of nuclear power plants has completely changed the economic ‘To be more precise, the decision was taken to look into the possibilities for the sale of the Net4Gas’conditions for RWE’s business. This political decision, together with the difficult conditions in the European energy market and EU pressure for ownership unbundling, are the main reasons why RWE is preparing to sell off several of the concerns assets, including its stake in Net4Gas,” RWE’s spokesman in the Czech Republic, Martin Chalupský, was cited as saying by the Czech news agency ČTK on Wednesday.
However, RWE’s head of group communications, Volker Heck, told Czech Position that Net4Gas, previously named RWE Transgas, is among assets the energy group is considering selling. “No definite decision has been made,” Heck stressed.
Chalupský later confirmed his earlier statement that RWE had indeed decided to sell Net4Gas. However, when informed about the response to the same question from the group’s headquarters in Germany, he revised the wording.
“To be more precise, the decision was taken to look into the possibilities for the sale of the Net4Gas,” he said, adding that the sale would probably not take place before 2013 after the completion of the transformation of Net4Gas into an independent transmission operator (ITO) in line with EU energy regulations.
Pressure to unbundle
As part of the EU’s initiative to liberalize the European energy market, energy producers are obliged to relinquish their majority stakes in the distribution networks they currently own so as to allow multiple producers to use the same networks — a process known as unbundling.
Both RWE spokesmen refused to say what percentage of its 100 percent stake in Net4Gas RWE is considering on selling. Chalupský said that as far as he is aware, the EU energy regulator has not set any deadlines for RWE to relinquish its majority stakes in European energy distribution networks, including Net4Gas.
On Tuesday, RWE reported that its trading and gas midstream division recorded an operating loss of €598 million in the first half of 2011, compared with a profit of €278 million a year earlier. The company says the disadvantageous long-term fixed-price contracts for gas deliveries from Gazprom were a major reason behind the loss. The company announced in April that it intends to launch arbitration proceedings against the Russian state-controlled gas giant over the pricing issue, but at the same time stressed negotiations were continuing.
The RWE Group reported total revenue for the first half of 2011 revenue at €27 billion, almost the same level as in H1 2010, but EBITDA fell by 25 percent to €4.6 billion. The company says this was caused by almost €900 million expenses incurred as a result of inspections of all German nuclear facilities ordered by the government following the Fukishima disaster in Japan.
In addition to the potential sale of Net4Gas, the company said this week that it is considering the sale or partial sale of its gas and oil exploration operation RWE Dea, and stakes in water company Berlinwasser and several coal and gas-fired power plants.
On July 14, RWE and Gazprom’s CEOs, Jürgen Großmann and Alexei Miller, signed a memorandum of understanding on a RWE Group spokesman categorically dismissed the suggestion that the two companies may be discussing the sale of Net4Gas to Gazprom.partnership to develop joint coal and gas fired electricity generation in Western Europe, suggesting that an agreement on gas prices may be in sight.
RWE spokesman Volker Heck categorically dismissed the suggestion that the two companies may be discussing the sale of Net4Gas to Gazprom. “This is definitely not a subject of the negotiations with Gazprom,” Heck told Czech Position.
Net4Gas owns and operates 2,640 kilometers of trunk and branch gas pipelines in the Czech Republic, which are also major routes for transit shipments of gas from the CIS to Western Europe. The company is also building the Gazela pipeline from Hora Svaté Kateřiny in the Czech Republic to join up with the OPAL pipeline in Germany to connect the Czech gas network with supplies from Russia delivered by the partially completed submarine Nord Stream pipeline.
One of the major contractors constructing the Gazela pipeline is the Russian firm Stroytransgaz, which is 80 percent owned by Gennady Timchenko, a close and long-time associate of Russian Prime Minister Vladimir Putin. Timchenko, who made his fortune in oil trading, co-founded the company Gunvor, which is now the fourth-largest crude oil trading company in the world. Rumors persist that Putin and top officials in his government have stakes in the private company.