OAO Gazprom, the world's biggest natural-gas producer, will become Russia's largest coal miner once it completes a deal to pool assets with OAO Siberian Coal Energy Co., also known as SUEK.
The agreement, announced yesterday, makes Gazprom the main supplier of fuels to Russian power plants, as the gas monopoly diversifies into the oil, nuclear and coal industries. „The creation of a new joint venture confirms the fact that SUEK is actually being transferred under the control of state-controlled Gazprom,” Moscow's Trust Investment Bank said in a note to clients today. President Vladimir Putin said earlier this week that coal should replace gas as the main fuel for Russia's power plants. Such a shift will let Gazprom sell gas - still sold domestically at regulated prices - to European customers at a premium. Gazprom's entry into the coal business comes as national utility OAO Unified Energy System is broken up and sold to investors. Over the past few years, Gazprom has accumulated an 11% stake in Unified Energy and is set to take a controlling stake in OAO Mosenergo, Russia's largest generator, in April. Gazprom and SUEK said the deal will be completed in the first half of the year, once a list of joint assets is agreed on. Gazprom will own 50% plus one share in the company. „We think that this announcement is the first sign of a wave of future M&A activities in the sector,” Deutsche UFG said in a note today.
SUEK, a closely-held company owned by billionaires Andrei Melnichenko and Sergei Popov, is valued by Trust and Bank of Moscow at about $5 billion, or close to the worth of Gazprom's stake in Unified Energy. Almost half of SUEK's output last year was bought by Russian power companies. Gazprom, which loses money supplying the regulated domestic market, is keen to free up more gas for exports to Europe. Even though the company commands over the world's largest gas reserves, it is facing shortfalls because of inefficiency and a lack of new fields coming into production. Originally Putin planned to fold OAO Rosneft, the state-owned oil company, into Gazprom. After the merger fell apart in 2005, Gazprom pursued its interest in the oil industry, buying OAO Sibneft from billionaire Roman Abramovich for $13 billion. Gazprom has also shown interest in Putin's nuclear program, which envisions adding at least 42 atomic plants by 2030. ZAO Gazprombank, the gas producer's banking arm, has acquired a 49.8% in ZAO Atomstroyexport, the state builder of nuclear plants, and more than 90% in OAO OMZ Gruppa Uralmash-Izhora, Russia's biggest engineering company, which also makes parts for nuclear reactors. (Bloomberg)