Gazprom gets Vekselberg’s assets with Putin’s blessing

Russian gas monopoly Gazprom on 7 July agreed to combine its power assets with privately held IES Holding Ltd, controlled by tycoon Viktor Vekselberg's Renova Group, to create a Russian electricity behemoth that, according to Gazprom CEO Alexei Miller, would join the group of the world's leading electric power firms and would hold a 25% share on the Russian electricity market. “This deal is good for Gazprom because Gazprom now will be the biggest appropriator of (energy) generation assets, but this deal is extremely good also for Mr Vekselberg,” Konstantin Simonov, the General Director of the National Energy Security Fund in Moscow, told New Europe on 8 July, adding that the Russian oligarch made a profitable deal. Under the Gazprom-Renova deal, the companies will merge their electricity assets in Gazprom Energoholding (GEH), Gazprom’s power subsidiary, which will eventually be restructured and could place its shares on the stock market. Gazprom will hold no more than 75% minus one share in the undertaking.

But FAS Russia's Federal Anti-Monopoly Service (FAS) head Igor Artemyev said on 7 July the merger of Gazprom's and Renova's power assets was undesirable from the viewpoint of anti-trust legislation. The merger also risks overturning Russia’s privatization of the sector. The break-up of state electricity monopoly Unified Energy Systems (UES), had been welcomed by investors as one of the successful efforts at deregulation. It saw the sale of the country’s power-generation assets to a number of key investors, including Germany’s E.ON and Finland’s Fortum. But deregulation has also led to a serious increasing of prices, prompting Russian Prime Minister Vladimir Putin to call in February for electricity tariff increases to be regulated in a sign that the government is worried about inflation in a pre-election year.

Meanwhile, state-owned electricity company Inter RAO and Gazprom have started to consolidate assets. “Now we see that Gazprom will buy these assets of Vekselberg,” Simonov said. “But it’s the second serious example of buying of generation by state companies,” Simonov said, referring to INTER RAO’s purchasing a majority stake of the Third Generating Company (OGK-3) from Norilsk Nickel. “We see that state companies became more and more serious appropriators of assets in this sector. This deal is another example of reconstruction of - maybe not United Energy Systems - but we see the serious return of state to this sector and we will have more and more examples of this policy. It means, of course, the real abolishing of results of our reform,” Simonov said.

A major deal like the one between Gazprom and Vekselberg must have Putin’s approval, Simonov said. “We must ask the question why Putin is so tolerant with Mr Vekselberg,” he said. Vekselberg is one of the shareholders of AAR, which owns 50% of TNK-BP. AAR “destroyed” the deal between Rosneft and BP, which was extremely important for Putin, Simonov said. He opined that the answer is that Vekselberg may be willing to sell more of his assets in Russia. “Maybe Putin agreed to buy assets of Vekselberg for a good price but maybe as payment for this deal Vekselberg will sell his share in TNK-BP to Rosneft or to other companies which are very close to Putin,” Simonov said.

By Kostis Geropoulos

New Europe, 8 Jule, 2011