Gazprom unit wins $3 billion auction for Moscow heat supplier

MOSCOW Tue Aug 13, 2013 7:51am EDT

The company logo of Russian natural gas producer Gazprom is seen on an advertisement in front of the White House in Moscow February 8, 2013. REUTERS/Maxim Shemetov

The company logo of Russian natural gas producer Gazprom is seen on an advertisement in front of the White House in Moscow February 8, 2013.

Credit: Reuters/Maxim Shemetov

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MOSCOW (Reuters) - A unit of state-run gas export monopoly Gazprom (GAZP.MM) has won an auction to buy 90 percent of Moscow power generation company MOEK, with a bid of 98.6 billion roubles ($3 billion), according to results of the auction seen by a Reuters reporter.

The deal may help Gazprom defend its share of the domestic gas market, which fell to 73 percent last year from 80 percent in 2008, reflecting rising output of low-cost gas from independent producer Novatek (NVTK.MM) and increased sales by oil companies with associated gas. Gazprom controls electricity provider Mosenergo (MSNG.MM).

The deal, which sees a state-owned asset sold to a state-controlled corporation, drew skepticism from analysts.

"This deal is net negative for Gazprom," said Sergey Vakhramayev, a senior analyst with Ankorinvest investment company. "MOEK is a business with low profitability. This acquisition will hit Gazprom's profitability, but on the other hand, Gazprom gets access to the heating network of the Moscow market where MOEK enjoys a strategic position."

MOEK incurred losses in 2011 and 2012.

"For the utility sector as a whole this deal is a bad signal," said chief trader at Renaissance Capital, Alexei Bachurin, as it means a concentration of the power sector rather than an increase in competition.

Moscow's department for competition policy in May said it would auction its shares in the Moscow United Energy Company (MOEK), as part of plans to privatize some of the city's assets. Bidding for the asset, which provides heating and hot water to Moscow and its regions, was scheduled for August 13 at a starting price of 98.6 billion roubles.

Two applications to bid were filed in July, by Gazprom's power subsidiary Gazpromenergoholding and Sberenergodevelopment, Moscow's city said at the time.

Sberenergodevelopment is a structure controlled by Sberbank (SBER.MM), previous reports have said.

Sberbank and MOEK were not immediately available for comment.

(Reporting by Anastasia Lyrchikova; additional reporting by Megan Davies, Vladimir Soldatkin and Zlata Garasyuta; writing by Megan Davies; editing by Tim Heritage and Louise Heavens)

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