German energy utilities group, RWE, and the Russian gas giant, Gazprom, have agreed to form a strategic partnership to jointly build gas and coal-fired power plants in Europe.
RWE and Gazprom are looking for opportunities
Germany's largest electric utility, RWE, and the Russian gas company, Gazprom, have signed a memorandum of understanding to form a strategic partnership in the energy sector and jointly construct new, or expand existing, gas and coal power plants in several European countries.
The deal was inked in Rome and comes only days after the German company said it planned to move away from conventional power generation to focus more on renewable energy sources.
"The memorandum of understanding, when put into commercial reality, could secure a safe and competitive natural gas supply to RWE," said Jürgen Grossmann, the head of RWE, adding that it could also "provide for potential partnerships in coal and gas-fired power plants in and outside of Germany and thus lead to mutually fruitful common growth opportunities."
"The signed memorandum provides RWE with exclusive rights for negotiations with Gazprom on the implementation of energy projects in Germany, the UK and the Benelux countries for a period of three months," said Gazprom's chief executive Alexei Miller in Rome.
Cartel Office concerns
RWE is a world leader in combining gas and coal-fired power plants
Gazprom signaled several months ago that it was interested in playing a larger role in the German market as an operator of gas-fire power stations, prompting Germany's Federal Cartel Office to voice its concerns about any such deals.
German Cartel Office President Andreas Mundt warned that when a large producer and a larger provider, like Gazprom and RWE, get together that is not unproblematic for competition in the marketplace.
"A connection between Gazprom and RWE would have to be examined very closely," said Mundt.
RWE, however, is under immense pressure, since the forced end to nuclear energy in Germany by the government, to get a grip on its outstanding debts and find new investors with deep pockets.
Commercial ties between Germany and Russia have grown strongly in recent years, despite criticism of Moscow's human rights record and accusations that the Kremlin uses state-controlled companies, like Gazprom, for political purposes.
The RWE-Gazprom announcement comes ahead of talks in Hanover early next week between Russian President Dmitry Medvedev and Chancellor Angela Merkel.
Author: Gregg Benzow (dpa, AFP, Reuters)
Editor: Andreas Illmer