RWE and Gazprom consider gas-fired power plant joint venture

Germany’s utility RWE (XETRA: RWE.DE) and Gazprom (Other OTC: OGZPY.PK) of Russia are extending exclusive talks about forming a joint venture to build and operate gas-fired power plants in Germany, the UK and the Benelux until the end of the year, reports the Financial Times.

The two companies are considering building a portfolio that includes RWE’s existing gas- and coal-fired power stations in Germany, the UK and the Benelux countries as well as building new such plants together.

Talks began in July with RWE CEO Jürgen Grossmann saying Gazprom was the “strong partner” his company needed. RWE not only has large debts, but has also been significantly affected by the country’s exit from nuclear power.

For Gazprom it would be a means to transform its business in western Europe from a gas supplier to downstream power generation.

However, any such move by Gazprom could be seen as increasing the region’s fears of being overly dependent on Russian natural gas, and consequently, leaving it vulnerable to political pressure from Moscow.

In addition, several German electricity suppliers have warned that the new plants could prove uneconomical as they will need to be rolled back once renewable resources account for an increasing share of power provision.