* To exclusively negotiate energy projects with Gazprom
* Agreement applies to Germany, UK, Benelux countries
* Pact might secure natural gas supplies to RWE
* Sells German long-distance grid for 1.3 bln eur
* Shares reverse losses, trade 0.4 pct higher
By Peter Dinkloh
FRANKFURT, July 14 German utility RWE
agreed to sell its high-voltage power grid and teamed up with
Gazprom for power projects, trying to overcome severe
hits to its profit from the economic crisis and a German tax.
RWE, Europe's fifth-largest utility, secured exclusive talks
with Russian gas monopoly Gazprom that could lead to a
gas and coal power joint venture in Germany, Britain and the
The Essen, western Germany, based utility also agreed to
sell a 75 percent stake in its long-distance power grid Amprion
to a group of financial investors, RWE said on Thursday.
Commerzbank , which helped arrange the buyers'
consortium, said the purchase price was 700 million euros ($998
RWE has been hit by loss-making gas contracts and weak power
prices, and is under threat from a German tax on nuclear fuel
that came into effect this year.
Ratings agency Standard & Poor's lowered the credit rating
of Germany's biggest producer of power in June to "A-", its
lowest rating in the A category, and predicted the company's
finances would weaken further as RWE faces falling profits over
the next three years.
As part of its deal with Gazprom, the world's largest
natural-gas company, RWE has for three months exclusive rights
to explore energy projects in the five countries under a
memorandum of understanding signed on Thursday.
"This memorandum of understanding could secure a safe and
competitive natural gas supply to RWE," the company said.
"It can furthermore provide for potential partnerships in
coal and gas fired power plants in and outside of Germany."
RWE, Europe's fifth-largest utility, is sticking to its
participation in the Nabucco gas pipeline, a project competing
with Gazprom's South Stream gas pipeline, it said.
The shares reversed earlier losses and were up 0.3 percent
at 35.99 euros at 1414 GMT.
"The news so far released should be positive especially
(because) the talks regarding a joint venture for Germany, UK
and Benelux might lead to competitive gas supply which has been
a major problem for RWE so far," said Markus Huber, the head of
German sales trading at ETX Capital.
"It can be assumed that Gazprom might still be interested in
taking a stake in RWE and that further JV will be agreed on."
German magazine Der Spiegel reported on the weekend that
RWE's CEO is considering bringing Gazprom on board as an
investor as it seeks ways to bolster its balance sheet.
POWER GRID SALE
The utility is the third German utility to sell its power
grid as regulation diminishes returns from the networks.
Chief Executive Juergen Grossmann has said he plans to sell
8 billion euros of assets, but people with knowledge of the
matter told Reuters that he had also considered giving up
control of the utility and merging it with Spanish peer
The sale of RWE's power transmission unit Amprion values the
whole business including debt at 1.3 billion euros, slightly
higher than the so-called regulatory asset value, which is what
the grid regulator uses to calculate the permitted returns for
The buyer consortium for the the 11,000 kilometre grid
network consists of Munich Re (MUVGn.DE), Swisslife ,
Talanx and a German pension fund for doctors, RWE
Commerzbank's Commerz Real unit will temporarily
take a 13 percent stake in the Amprion grid to sell it on to
Even though it is selling a majority, the German utility
wants to retain operational control of the network after the
sale, sources familiar with the matter told Reuters.
Germany is revamping its power supply after the nuclear
meltdowns in Fukushima. Within months of the disaster, the
country decided to phase out nuclear power by 2022, reversing
last year's decision to let nuclear plants run decades longer.
It might cost as much as 80 billion euros to expand the
German power grid to connect new power generation facilities to
replace its 17 nuclear power plants faster than planned, the
German grid regulator said in April.
($1 = 0.702 Euros)
(Reporting by Peter Dinkloh; Editing by Jon Loades-Carter)