Gazprom and Germany's E.On snap up energy assets

Two of the world's leading energy companies have expanded into Russia's power sector. Germany's E.On snapped up electricity network OGK-4, while Gazprom bought St. Petersburg supplier TGK-1. Russia's power generating sector is being spun off into competin

E.On and Gazprom have invested a combined $US 8.6 billion dollars to seal the most prized electricity- and heat- generating companies in Russia.

The purchase of OGK-4 by E.On marks the entry of the world’s biggest utility firm into the Russian electricity market.

Sole bidder Gazprom entrenched itself as number one in the sector by snapping up a majority stake in St. Petersburg’s TGK-1. Foreign conglomerate Fortum was banned from controlling the supplier to Russia’s second city, as it's considered a strategic object.

The gas giant paid $US 2.8 billion dollars. Valery Rodin, TGK-1 CEO, says the company plans to raise a similar sum from investors in two years' time. “We set this target sum but the share price subsequently jumped so much, we only had to issue half the shares originally planned. In 2009 we will hold another public offering to raise the same amount,” Mr Rodin announced.

Meanwhile RAO UES Chairman Anatoly Chubais says he’s introducing a law to prevent Gazprom from using its pipeline monopoly to give preferential supplies to its new generators: “We need to take some important steps to grant equal access to the gas pipeline for third-parties. That’s what we discussed with Gazprom, and I believe that we will find a common approach on how to reach a legal decision to make it possible. We will discuss it by the beginning of January next year,” he said.

Mr Chubais has now launched a European roadshow to attract investors to the remaining power firms by July next year, when UES will formally cease operations.