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E.ON says to raise contractual gas prices in April

Utility E.ON’s German wholesale gas arm is to raise prices as from April as a result of record high oil, CEO Wulf Bernotat said during the annual news conference on Thursday.

“We will follow the formula for index-linking to oil and raise prices in April,” he said in reply to questions. He declined to give specific figures, saying these dependent on individual arrangements with customers, and also declined to comment beyond April. Increases were already made in October and January, when global oil started posting new highs, E.ON has said. Continental European gas prices follow those of heating oil with a certain time lag.

E.ON Ruhrgas, which leads E.ON’s pan-Europe gas unit, sells most of its gas to long-distance shippers, local utilities and power stations. In 2007, it sold a total 713 billion kilowatt hours of gas, 3 billion kWh more, than in 2006, the annual report showed. It continued to expand its presence in 14 foreign marketplaces, which now account for a quarter of total sales, including Britain, Denmark, the Netherlands, Italy and France. The pan-Europe gas unit in addition groups gas exploration, transport and storage across the region. Adjusted earnings before interest and tax at the unit, which is a significant contributor to overall profitability of the E.ON group, rose by 10% last year to €2.6 billion ($3.99 billion).

This was largely due to the inclusion of contributions from new Hungarian gas subsidiaries, E.ON said. But progress in talks with Russian partner Gazprom about access to the giant Yuzhno Russkoye gas field has slowed. E.ON’s future success in gas procurement depends on increased flows from Siberian fields through new pipeline links. Competitors Wintershall and Dutch Gasunie have already secured themselves access. Bernotat said the presidential elections in Russia had recently disrupted the negotiations but he was confident they would gather momentum again. (Reuters)