* RWE says both companies agreed to end talks by year-end
* Says companies could not agree on co-operation framework
* Gazprom says talks may continue, but no more exclusivity
* Shares in RWE up 3.9 percent, Gazprom up 0.6 percent
By Maria Sheahan and Christoph Steitz
FRANKFURT, Dec 22 RWE AG and
Gazprom have terminated talks about joint power
production ventures, a setback in the German utility's efforts
to seek Russian-funded growth to help make up for its domestic
market's exit from nuclear power.
"Although our discussions were conducted in a very
constructive manner we were unfortunately not able to agree on a
framework for cooperation which would be sustainable for both
parties," RWE Chief Executive Juergen Grossmann said in a
statement on Thursday.
RWE had an exclusivity deal with Gazprom. Sources
close to the matter said that the cooperation partly fell
through because Gazprom struck a deal with Danish utility Dong
earlier this year to explore opportunities for promoting
gas-fired power generation in Europe.
"There seems to be a view of first-come-first-serve here,
and differing price expectations (for gas supplies) also did
their part in derailing the deal," one source at Gazprom said.
In Moscow, Gazprom CEO Alexei
Miller did not rule out further talks with RWE but said the
Russian gas export monopoly was looking at other power
generation opportunities in Germany.
"We can continue talks, but there is no more
exclusivity," Miller told reporters.
Miller signed a 'road map' on power cooperation with
Bavarian state premier Horst Seehofer on Wednesday in Munich. He
said it was possible that Gazprom could participate in three to
five power sector projects in the south German
RWE and Gazprom had announced in mid-July that they had
started exclusive talks on proposals for joint power plants in
Germany, Britain and the Benelux countries, which were
restricted to three months initially.
In October, they gave themselves another three months to
The cancelled cooperation between RWE and Gazprom could
revive hopes for the Nabucco gas pipeline project.
RWE is one of the key companies behind the consortium to
build the pipeline that would transport non-Russian gas from
central Asia through Turkey into Europe. Cooperation between it
and Gazprom could have forced RWE out of the Nabucco consortium.
"If the cooperation had gone ahead, we would have probably
left Nabucco and instead switched to import more Russian gas,"
one source at RWE said.
RWE, GAZPROM SHARES UP
Shares of RWE were up 3.9 percent at 27.27 euros by 1500
GMT, having traded higher all day already. Gazprom shares were
up 0.6 percent.
"RWE's shares did not move much ,
since the failed negotiations over a plant cooperation with
Gazprom have no direct impact on the company's business," a
Germany's decision to exit nuclear power has prompted its
largest utilities to look to Russia for investment and as a
source of natural gas for low-carbon power production.
The government forced RWE to shut down two nuclear power
stations after the Fukushima nuclear disaster in Japan and
levied a nuclear fuel tax on power providers, burdening profits.
RWE, laden with debt after spending more than 10 billion
euros ($13 billion) on takeovers in the past three years, is
selling 11 billion euros worth of assets and raised 2.1 billion
euros selling shares.
Also, lower demand due to the economic crisis suppressed
power prices from all-time highs reached in the middle of 2008,
burdening power companies for years to come as they sell most of
their power as many as three years before it is produced.
RWE had wanted any deal with Gazprom to comprise plants
fired by hard coal and brown coal as well as the gas-fired
plants that would be a natural fit for the Russian company.
Coal-fired plants emit broadly double the carbon dioxide of
gas-fired plants. RWE as a coal-biased producer must uphold a
costly long position in carbon emissions rights, and a joint
venture that included coal would mean that Gazprom would help
share the CO2 burden.