Verbund Seeks to Dump Power Assets Eyed by Russia’s Gazprom

Apr 25, 2014 8:59 am ET

(Updates with French plants in eighth paragraph.)

April 25 (Bloomberg) -- Verbund AG, Austria’s biggest utility, is weighing bids from natural-gas suppliers and private equity firms for its unprofitable European power plants.

Austrian and French gas-fired plants with a combined capacity of about 1,600 megawatts may be bundled or sold separately, Verbund Chief Executive Officer Wolfgang Anzengruber said yesterday in an interview at a Vienna hydropower station. Russia’s OAO Gazprom, the world’s biggest gas producer, said it’s interested in Verbund’s assets.

“We’re evaluating interested bidders, including candidates outside of the EU,” Anzengruber said. “The correlation between oil and gas prices has been lost. Under these conditions, gas plants have lost profitability.”

Verbund has retrenched since Anzengruber, 58, took over in May 2010. The company exited Turkey in a 1.5 billion-euro ($2.1 billion) asset swap with Germany’s EON SE. Verbund wants to focus on central Europe and boost hydropower resources, which already provide about 65 percent of the electricity it sells.

Anzengruber confirmed reports that the company is seeking to buy Kelag Kaerntner Elektrizitaet’s 10 percent stake in Verbund’s hydropower unit, which would boost ownership to 90 percent.

“We’re gladly ready to buy that 10 percent,” Anzengruber said. “We haven’t named a price, but it fits in our strategy.’

Verbund’s share price has fallen 14 percent in 12 months following impairments and profit warnings. Last year the company wrote off 396 million euros resulting from its 45 percent stake in Italy’s Sorgenia SpA.

Gazprom Interest

A decision to sell, mothball or close Verbund’s Mellach gas-fired facility in southern Austria, with a book value of 144 million euros, could be taken in ‘‘weeks or months,” said Anzengruber. Verbund’s two plants in Pont-Sur-Sambre, France, with a 135 million-euro book value, could also be mothballed rather than sold, the company said.

Gazprom said Feb. 6 that it would bid for Verbund’s French plants alone or in partnership with Vitol Group SA, the world’s largest independent oil trader. The company is also targeting Austrian power assets that could run on Gazprom gas, Deputy CEO Alexander Medvedev said in November.

Vienna hosted a visit by Gazprom CEO Alexey Miller on April 22 to discuss the political situation in Ukraine and future supply agreements. At the meeting, Austria sought a connection to Russia’s South Stream pipeline, Gazprom said.

Verbund’s Anzengruber, who has met Miller in the past, said it was unlikely that Russian gas supplies to Europe would be disrupted over Ukraine tensions.

Emissions Trading

Rising gas prices in Europe have led utilities from RWE AG to EON to shut generators fired by the fuel as the falling cost of pollution makes coal plants more profitable to operate, even though they produce twice as much greenhouse gas.

The cost of emitting a metric ton of carbon dioxide in Europe has slid 82 percent since 2008 to 5.59 euros at the ICE Futures Europe exchange in London today. EU benchmark permits slumped to a record low of 2.46 euros in April last year.

“The emission-trading system doesn’t work,” Anzengruber said. “We’ve had an energy revolution, except we’re producing more rather than less carbon dioxide.”

Europe should introduce an emissions-permit price floor or raise their carbon-reduction goals to 40 percent from 20 percent, Anzengruber said.

“To have a technological effect, certificates would have to trade at 50 euros,” the CEO said.

--With assistance from Ewa Krukowska in Warsaw.