Dusseldorf, Germany - German utility E.ON entered the
Russian electricity business Thursday, establishing a joint venture
in the western Siberian area of Tyumen with Russian partner STS.
The venture indicates E.ON chief executive Wulf Bernotat has
shifted his gaze eastwards after a vain takeover struggle for Spanish
utility Endesa.
The venture, E.ON-STS Energia, is the Dusseldorf-based giant's
first electricity operation on Russian soil, but it has extensive
experience with Russia through its gas wholesaling subsidiary E.ON
Ruhrgas.
Ruhrgas is closely linked to Russian gas monopolist Gazprom. E.ON
is Germany's biggest utility group.
Bernotat clearly hopes that the liberalized Russian electricity
market offers an investor good returns.
E.ON's brief announcement said, 'Russia's market is growing 5 to 6
per cent annually, making it one of the biggest and strongest growing
markets in Europe.'
Bernotat has often voiced interest in the past in entering the
Russian electricity business and this week said Russia provided
'attractive framework conditions' for an investor.
Analysts have suggested more than 20 billion dollars must be
invested in the next 15 years in new power-generating capacity,
modernizing existing stations and upgrading the Russian distribution
grid.
E.ON has not disclosed how much it is investing in the Tyumen
venture.
However experts on the sector said the outlay would probably come
to about 1 billion euros (1.3 billion dollars) with STS providing
assets for the joint venture.
TGK-10, a generating company, will be purchased as part of the
deal.
That outlay represents a considerable saving compared to the 40
billion euros E.ON contemplated spending on Endesa.
Bernotat is set to brief the public next week on E.ON's strategy,
expansion plans and investment budget, and Russia is now likely to
play a big role in the blueprint.
'Our objective is to make E.ON the most effective company in the
European energy business,' he said several weeks ago as he unveiled
quarterly figures.
Experts on Russia warn that expansion into that country is not
risk-free.
The Kremlin is sensitive about foreign business entering the key
energy sector as Shell discovered to its cost: the oil company had to
abandon a project under Russian pressure.
E.ON may have a defter touch, thanks to experience gained from its
E.ON Ruhrgas link.
Ruhrgas is a minority shareholder in Gazprom and has a seat on the
Gazprom board, occupied by Ruhrgas chief executive Burckhard
Bergmann. That business tie-up has not always been plain sailing.
It took arduous negotiations for E.ON to win a stake in the
Yuzhno-Russkoye gas field in the Tyumen area of western Siberia under
a deal in which Gazprom gained former E.ON assets in Hungary.
Even now, Gazprom wants to pick apart the deal.
Sources close to E.ON said Gazprom was demanding to renegotiate
the contract, with the Germans providing more collateral for the
Siberian assets.
E.ON may have to oblige to ensure itself a trouble-free entry into
the power sector.
© 2007 dpa - Deutsche Presse-Agentur 
USA
Your Talkback on this Story