Report: Poles to bid for Czech pipelines

May 2, 2012 at 6:30 AM
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PRAGUE, Czech Republic, May 2 (UPI) -- Poland has joined a group of potential bidders interested in buying the Czech Republic's natural gas transit operator, a Prague report indicated this week.

The Polish state-owned gas utility Gaz-System, which is working with the Czech firm Net4Gas on a cross-border interconnector, could submit a bid to purchase the pipeline system from German energy conglomerate RWE, the Prague Internet daily E15 reported.

The publication said Gaz-System has joined the bidding for the profitable Net4Gas system, which is also reported to have attracted offers from a company headed by Czech billionaire Petr Kellner, gas production company KKCG and eight others.

RWE has said it will sell the Czech asset by the end of the year.

Gaz-System is seeking to incorporate Net4Gas into a broader scheme to establish an EU-backed north-south Eastern European transit corridor that would link a new liquefied natural gas hub on Poland's Baltic Sea coast to the proposed Adria LNG terminal in Croatia, E15 said.

RWE, whose earnings have been hit by the German government's decision to phase out all nuclear power by 2022, indicated in February it would put the profitable Czech pipeline and other assets on the sales block in an effort to raise $14.5 billion.

Net4Gas revenues rose to $9.21 billion last year, up from 2010's $7.8 billion and it posted a 2011 after-tax profit of $748 million compared with $486 million the previous year.

But the Czech system is dependent on Russian supplies transited via Ukraine, leaving it vulnerable to disputes, such as the "gas wars" of 2006 and 2009, between its two eastern neighbors.

Its potential to serve as part of a new, EU-backed natural gas route that avoids both Russia and Ukraine, however, has piqued the interest of Poland, which last week opened a 19-mile interconnector into the Czech Republic, Platt's business news service reported.

Its launch was attended by Polish Prime Minister Donald Tusk, who cited the new pipeline's strategic importance.

"This Polish-Czech interconnector is a symbol of hope that our countries will never again have problems with gas supplies. At least not on the same scale as a few years ago," Tusk said.

Gaz-System and Net4Gas were already laying plans for a major gas pipeline stretching from Poland's new LNG hub at Swinoujscie to the northern Moravian city of Ostrava, which would have the ability to transport 8 billion-to-10 billion cubic meters of gas per year.

That effort is being backed by the European Union as part of its efforts to reduce dependence on Russian gas supplies by establishing north-south energy corridors through the continent.

Warsaw is aiming for a 2014 opening for its new LNG terminal.

Meanwhile, the development of the Nord Stream and South Stream gas routes to Europe by Russia's Gazprom -- which bypass Ukraine -- has been seen by analysts as hurting the Czech system's potential value.

Because of that as well as security concerns, Gazprom likely won't be in the running to buy the 2,200-mile Net4Gas network, The Prague Post reported.

"Everybody knows Gazprom wouldn't be an optimal buyer," Prague energy consultant Jiri Gavor told the newspaper. "Dependence on Russian energy imports is a long-term sensitive point in this country, since the Czech Republic is practically 70 percent dependent on Russian gas.

"I don't think it is a real danger but many politicians think it could threaten energy security if Gazprom also owns the transmission route."

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