Russian government split on Gazprom coal deal

KODE PPC ANDA

Russia's cabinet remains divided over the planned merger of gas monopoly Gazprom and coal major SUEK after three months of hot debate over its impact on coal and power industries, a top regulator said on Tuesday.

Gazprom is seeking to acquire 50 percent plus one share in the joint venture, which would combine the gas firm's power assets with SUEK's coal and power business.

Russia's Antimonopoly Agency chief Igor Artemyev, Economy Minister German Gref and the head of electricity giant UES Anatoly Chubais have strongly opposed the idea, saying Gazprom's acquisition of power and coal assets would undermine Russia's power sector reforms.

The idea to set up the joint venture is strongly supported by First Deputy Prime Minister and Gazprom's chairman, Dmitry Medvedev, seen as one of the top candidates to succeed President Vladimir Putin after national elections in March 2008.

On Tuesday, Artemyev said the government was still far from reaching a compromise.

"The situation in the government is quite hot -- they have our report, a number of other agencies have also expressed doubts about whether the deal makes sense. But the law says the government can take any decision," Artemyev told a briefing.


He added that his agency had yet to receive a formal request from Gazprom for the deal's clearance.

"If the merger is declared necessary by the government, the antimonopoly service will have to obey," said Artemyev, whose agency has so far failed to stop any big merger from happening.

Gazprom and SUEK announced the plan in February and said they hoped to complete the deal in the first half of this year.

The power sector reforms aim to liberalise the sector by breaking it up into separate generating firms and distributors. A union of SUEK and Gazprom, which already has assets in the power sector, could leave one entity dominant in the sector.

Gazprom already owns some assets in the power sector, including 10 percent in UES and over a quarter of stock in Moscow city utility Mosenergo .

SUEK, which has stakes in a number of regional energy companies, accounts for about 30 percent of coal supplies to the domestic market and 20 percent of Russia's coal exports.

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