* RWE in exclusive talks with Gazprom
* EnBW in talks with Novatek - sources
* Both seek funding, access to natural gas
* German nuclear phase-out hits earnings, raises emissions
* Gas-fired power production low on carbon emissions
(Adds details, source on EnBW-Novatek talks)
By Peter Dinkloh
FRANKFURT, July 20 Germany's nuclear phase-out
has prompted the country's largest utilities to look to energy
heavyweight Russia for investments and for natural gas for
low-carbon power production.
RWE , Germany's largest power producer, last week
revealed it had begun exclusive talks with Russian gas monopoly
Gazprom , the world's largest gas producer, about gas
and power joint-ventures.
State-owned Energie Baden-Wuerttemberg on
Wednesday said it is in talks with Novatek , Russia's
largest independent natural gas producer, according to two
people with knowledge of the matter.
The faster-than-planned nuclear phase-out in Germany
together with a tax on nuclear power is eating away earnings at
the power companies, with RWE forecasting three years of falling
It has also put limits on a source of power that has lower
carbon emissions than coal-fired plants. This has hit RWE as
Germany's largest emitter of the greenhouse gas and also EnBW as
it relies more heavily on nuclear power than competitors.
The German cartel office has said it would closely examine
Gazprom's venture in Germany. The German government has said it
would not oppose Gazprom taking a stake in a German company,
referring to a newspaper report Gazprom might take a stake in
State-owned EnBW, based in Karlsruhe in southern Germany,
has offered Novatek a stake in VNG, eastern Germany's largest
gas supplier, hoping to get access to cheap gas, one of VNG's
shareholders, who declined to be identified, told Reuters.
"It's a sign of desperation," the person said.
EnBW declined to comment.
EnBW does not yet own a stake in VNG, but has an option to
buy 48 percent subject to approval by a majority of VNG
shareholders. Another complication is that only state-controlled
Gazprom is allowed to export natural gas from Russia.
Other parties in the negotiations between Russian and German
companies instead want to look for partners in the west.
"We should not ignore the interest of (EU Energy
Commissioner Guenther) Oettinger" and talk to potential
investors in the west, which are also interested in VNG, said
the VNG shareholder.
Oettinger supports the Nabucco pipeline, which aims to bring
gas to Europe from the Caspian region and Middle East from 2017
and reduce dependence on Russian gas.
RWE Chief Executive Juergen Grossmann had been prepared to
give up the group's independence to solve its troubles via a
merger with Spanish peer Iberdrola .
But the talks failed in February and RWE has turned to
Gazprom as a partner that could lead to a gas and coal power
joint venture in Germany, Britain and the Benelux countries.
EnBW's and RWE's desire for cooperation has strengthened the
hand of Russian President Dmitry Medvedev in talks with the
German government this week to secure its aim of better access
to consumers in the biggest market for Russian gas.
Medvedev offered Germany all the gas it needed, while German
Chancellor Angela Merkel stressed that it would be market forces
that would determine how much Russian gas would flow to Germany.
Market forces have become a contentious topic as several
major western European utilities have been negotiating for more
than a year with Gazprom to lower the price of the fuel in
Gas on the open market has fallen in price to below contract
prices, making those contracts loss-making.
In addition, the European Commission, the executive arm of
the 27-nation European Union, is aiming to reduce the EU's
dependence on Russian gas, of which Germany buys more than any
other EU nation. Instead, the EU is attempting to strengthen
projects such as the Nabucco gas pipeline.
But future demand for gas from the Nabucco pipeline could
become even more uncertain with Nabucco partner RWE teaming up
with the main Russian exporter.
(Additional reporting by Vladimir Soldatkin in Moscow, Tom
Kaeckenhoff in Duesseldorf and Hendrick Sackmann in Stuttgart;
Writing by Peter Dinkloh. Editing by Jane Merriman)