RWE AG (RWE), the second-largest utility in Germany, has pushed back the deadline for final bids for its natural gas pipeline unit in the Czech Republic as a dispute with its biggest supplier, OAO Gazprom (OGZD), complicates the process, according to people familiar with the matter.
Binding offers for Net4Gas are now due by February instead of the end of November, said the people, who asked not to be identified because talks are private. They have been asked to reconfirm this month their interest in the asset, which may struggle to fetch about 1.4 billion euros ($1.8 billion), said one of the people.
The German utility is selling the Czech operator of about 2,500 kilometers of gas pipelines as part of a disposal plan aimed at raising as much as 7 billion euros by the end of next year. RWE is hoping to cut debt by cashing in on interest from investors in infrastructure assets. EON (EOAN) AG, RWE’s larger German competitor that is also selling assets, agreed in May to sell a network of natural-gas pipelines for 3.2 billion euros.
RWE spokeswoman Annett Urbaczka declined to comment. RWE said in February that it hired JPMorgan Chase & Co. (JPM:US) to advise it with the sale.
The remaining bidders include KKCG Group, a Prague-based private equity company, a group led by Czech utility Energeticky a Prumyslovy Holding AS, Global Infrastructure Partners in New York, Australia’s Macquarie Group Ltd. (MQG) and a consortium of the German insurer Allianz SE (ALV) and Borealis Infrastructure, said one of the people. Gaz-System SA, the state-controlled operator of Polish gas pipelines, has dropped out, they said.
RWE’s Czech unit, RWE Transgas AS, last month won an arbitration hearing against Gazprom over the volumes of natural gas it has to buy under a supply contract with the Russian gas exporter. Still, the main arbitration over oil-linked pricing in Stockholm hasn’t yet been resolved. The current contract, under which Gazprom supplies as much as 9 billion cubic meters of gas to RWE Transgas a year, runs until 2035.
European customers, including EON and Eni SpA (ENI), have sought to review gas contracts with Gazprom after being forced to buy gas at prices linked to oil and selling at lower spot-market rates. A global production boom led by U.S. shale gas has led to an increase in cheaper supply. Still, Gazprom’s natural gas customers in Europe pay about three times the U.S. price. European utilities are demanding and winning price concessions that are weighing on Gazprom’s profit.
The Net4Gas transaction faces competition for a similar asset in France. Total SA (FP), Europe’s third-largest oil producer, plans to sell its TIGF natural-gas network in France in a transaction that may fetch about 2.5 billion euros, two people familiar with the process said in July.
The French company has sent out initial information to buyers, who are seeking to team up with French partners to improve their chances of winning the bidding, two people said this week. Macquarie, Borealis, AXA SA (CS)’s private equity arm and CDC Infrastructure may consider offers for TIGF, said the people.
Total’s Chief Financial Officer Patrick de la Chevardiere said Oct. 31 that the process would take “several months.” The oil company set a deadline of mid-November for indications of interest, he said. Enagas SA (ENG), the operator of Spain’s gas delivery network, said on Oct. 30 that it may team up with partners to bid for TIGF.
Spokesmen at Macquarie, Allianz, EP Holding, AXA and GIP declined to comment. Officials at Borealis and CDC Infrastructure couldn’t be immediately reached for comment.
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