RWE joins forces with Gazprom for power play

Russian gas giant Gazprom and Germany's number two utilities group RWE said on Thursday they are looking to form a strategic partnership to jointly construct power plants in Europe.

RWE joins forces with Gazprom for power play
Photo: DPA

“The power industry is one of the priorities of Gazprom in Europe,” Gazprom chief executive officer Alexei Miller said in a statement after inking a provisional agreement in Rome with RWE boss Jürgen Großmann.

“The signed memorandum provides RWE with exclusive rights for negotiations with Gazprom on the implementation of energy projects in Germany, UK and the Benelux countries for a period of three months,” Miller said.

The announcement comes ahead of talks in Hannover, northern Germany, on Monday and Tuesday between the Russian and German cabinets led by President Dmitry Medvedev and Chancellor Angela Merkel.

Commercial ties between the two countries have grown strongly in recent years despite criticism of Russia’s human rights record and accusations that Moscow uses state-controlled Gazprom for political purposes.

Miller said that Gazprom hopes to profit from Germany’s decision in late May to abandon nuclear power by 2022 in the wake of Japan’s Fukushima plant disaster, with the result that more fossil fuel power stations will be built.

The nuclear exit is a blow to RWE, which also faces the prospect of having to pay for EU emission permits – at present they are partly free – from 2013.

Standard & Poor’s cut its credit rating for RWE last month, despite its intention to raise cash by selling some €8 billion ($11.4 billion) of assets. On Wednesday, RWE sold a €974-million stake in a transmission firm.

There have been rumours and press reports for some days suggesting a tie-up between the firms, possibly involving Gazprom taking a strategic stake in RWE. An RWE spokesman told news agency AFP this was not in the memorandum, however.

“It makes sense that they’re taking action fast because otherwise they could get beat out of a deal but it surprised me that this came together so fast,” Alexander Rahr from the German Council on Foreign Relations in Berlin said.

Any deal is likely to catch the attention of competition regulators, however, with the head of the German cartel office Andreas Mundt warning this week he would “look very closely” at what the firms intend to do.

Gazprom also owns 51 percent in the Nord Stream joint venture building a pipeline due to start bringing huge volumes of Russian gas under the Baltic Sea to the European Union via northern Germany from the end of the year.

Gazprom is also playing a key role in the ambitious South Stream pipeline project to pump gas to Black Sea countries by avoiding Ukraine, a scheme it regards as crucial for the security of Russia’s future energy exports.

Yet Gazprom is also trying to diversify exports beyond Europe and the former Soviet Union and is seeking to sell more gas to Asia, with the firm busy negotiating contracts with South Korea as well as China and India.

Germany will send nine cabinet members and two state secretaries as well as a major business delegation to meet their Russian counterparts at the talks in Hannover, in what will be the 13th such get-together.

More than a dozen agreements on economic and environmental cooperation will also be signed, German government spokeswoman Sabine Heimbach said Wednesday.

Germany is Russia’s most important single trade partner. Russian exports to Germany reached €31.8 billion ($44.7 billion dollars) last year – primarily gas and oil – while €26.4 billion in goods went the other way.


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German government announces fresh relief package for high energy costs

With Russia's invasion in Ukraine exacerbating high energy and petrol prices, Germany is set to introduce a second relief package to limit the impact on consumers.

German government announces fresh relief package for high energy costs

The additional package of measures was announced by Economy and Climate Protection Minister Robert Habeck (Greens) on Sunday.

Speaking to DPA, Habeck said the wave of price increases throughout the energy sector were becoming increasingly difficult for households to bear.

“Extremely high heating costs, extremely high electricity prices, and extremely high fuel prices are putting a strain on households, and the lower the income, the more so,” he said. “The German government will therefore launch another relief package.”

The costs of heating and electricity have hit record highs in the past few months due to post-pandemic supply issues. 

This dramatic rise in prices has already prompted the government to introduce a range of measures to ease the burden on households, including abolishing the Renewable Energy Act (EEG) levy earlier than planned, offering grants to low-income households and increasing the commuter allowance. 

READ ALSO: EXPLAINED: What Germany’s relief package against rising prices means for you

But since Russia invaded neighbouring Ukraine on February 24th, the attack has been driving up energy prices further, Habeck explained.

He added that fears of supply shortages and speculation on the market were currently making the situation worse. 

How will the package work?

When defining the new relief measures, the Economics Ministry will use three criteria, Habeck revealed. 

Firstly, the measures must span all areas of the energy market, including heating costs, electricity and mobility. 

Heating is the area where households are under the most pressure. The ministry estimates that the gas bill for an average family in an unrenovated one-family house will rise by about €2,000 this year. 

Secondly, the package should include measures to help save energy, such as reducing car emissions or replacing gas heating systems.

Thirdly, market-based incentives should be used to ensure that people who use less energy also have lower costs. 

“The government will now put together the entire package quickly and constructively in a working process,” said Habeck.

Fuel subsidy

The three-point plan outlined by the Green Party politician are not the only relief proposals being considered by the government.

According to reports in German daily Bild, Finance Minister Christian Lindner (FPD) is allegedly considering introducing a state fuel subsidy for car drivers.

The amount of the subsidy – which hasn’t yet been defined – would be deducted from a driver’s bill when paying at the petrol station. 

The operator of the petrol station would then have to submit the receipts to the tax authorities later in order to claim the money back. 

Since the start of the war in Ukraine, fuel prices have risen dramatically in Germany: diesel has gone up by around 66 cents per litre, while a litre of E10 has gone up by around 45 cents.

READ ALSO: EXPLAINED: The everyday products getting more expensive in Germany

As well as support for consumers, the government is currently working on a credit assistance programme to assist German companies that have been hit hard by the EU sanctions against Russia.

As reported by Bild on Saturday, bridging aid is also being discussed for companies that can no longer manage the sharp rise in raw material prices.

In addition, an extension of the shorter working hours (Kurzarbeit) scheme beyond June 30th is allegedly being examined, as well as a further increase in the commuter allowance.