Nabucco exit could torpedo RWE's Net4Gas sale plan

FRANKFURT Mon Dec 3, 2012 7:11am EST

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FRANKFURT Dec 3 (Reuters) - RWE AG could face further headwinds in the planned sale of its Czech gas network should it choose to exit the Nabucco pipeline project.

Germany's second-biggest utility may quit Nabucco - designed to transport Caspian gas into Austria - a source told Reuters on Sunday, raising fears the project may be stopped after already having been scaled back earlier this year.

Such a decision could make sense given Nabucco faces competition from rival projects and has been widely criticised for escalating costs. Yet without the prospect of input from Nabucco, RWE's Czech gas pipeline unit Net4Gas could become less viable.

"It is bad news for investors in eastern Europe if a company such as RWE pulls out of a project like Nabucco. This can also have an impact on assets in the region," said Heino Hammann, analyst at NordLB.

RWE is planning to sell up to 7 billion euros ($9.1 billion) in assets by the end of 2013 in a move to keep its credit rating, lower its debt after years of pricey acquisitions and increase investments following Germany's decision to exit nuclear power.

Net4Gas, which sources said could fetch between 1.4 billion euros and 2 billion, is the biggest item on RWE's list and has proven difficult to sell, with sources saying a deadline for final bids had been pushed back to February from November.

Analysts have noted that prices for the assets could be depressed by the opening of the two Nord Stream pipelines that offer an alternative route to transport Russian gas to western Europe.

Privately-held Czech oil and gas group KKCG and Czech energy investment firm EPH have both said they are among the bidders for Net4Gas and are seen as the most likely to succeed.

Net4Gas, which accounted for 11 percent of RWE's 2011 net profit, operates 3,600 km of pipeline transporting Russian gas from Slovakia to Germany while also supplying the Czech market.

Other bidders include Global Infrastructure Partners (GIP), Macquarie, and Allianz with Borealis Infrastructure Management, sources have said.

Nabucco West foresees the construction of a 1,300 kilometre pipeline that will run from the Bulgarian/Turkish border to Austria.

Original plans were for a 4,000 km pipeline, but critics warned that estimated costs of more than $12 billion would make it too pricey. Azerbaijan and Turkey joined forces earlier this year to own and operate the main export pipeline via Turkey, TANAP, shrinking the Nabucco plan to its western part only. ($1 = 0.7689 euros) (Additional reporting by Jan Lopatka in Prague; Editing by David Holmes)

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