Don't be afraid of ghosts

E.ON Ruhrgas spoke about the future

The new head of the board of the German gas concern E.ON Ruhrgas, Bernhard Reutersberg (on March 1, he replaced Burkhard Bergmann in this post ), speaking yesterday in Essen at the annual press conference, outlined business development plans for the coming years. They are largely determined by the changing conditions of the European gas market. Mr. Reutersberg made it clear that E.ON Ruhrgas' plans are very ambitious : “We want to be a leader in Europe and therefore must be a leader in change. He emphasized that he intends to make E.ON Ruhrgas the leader of the liberalized gas market in Germany and Europe. To achieve this goal, Mr. Reutersberg is sure, it is necessary to rely on innovations in the field of sales and a significant expansion of activities in the field of gas production.

The economic indicators of E.ON Ruhrgas over the past year indicate the stability of the company’s position in the European gas market. In 2007, pre-tax profits rose by almost 10% to €2.6 billion. At the same time, changes occurred in its structure: in the field of production and wholesale trade, this figure was lower than it was in 2006, but growth was observed in the field of equity participation in gas distribution. The latter, as Mr. Reutersberg noted, is associated, in particular, with the positive dynamics of the E.ON Foeldgaz group, which for the first time was taken into account in the company’s balance sheet throughout the year. However, as the new head of the board of E.ON Ruhrgas especially emphasized, the high level of income in 2007 is not a reason to calm down. After all, the company’s core business, he said, “is undergoing fundamental changes.”

New trends in the activities of E.ON Ruhrgas are largely related to the improvement of the sales structure of the company's main product - natural gas - to consumers in Germany and in Europe in general. “Our customers today require customized products, i.e. supply chains that help them implement their own market strategies,” Mr. Reutersberg said. Therefore, since the end of February, E.ON Ruhrgas has been offering an expanded range of products on the market. And customers will be able to decide for themselves to what extent they would like to participate in short-term gas trading. E.ON Ruhrgas, the head of the company’s board emphasized, will also manage risks.

E.ON Ruhrgas will continue the policy of diversifying sources of natural gas supplies, which it has consistently adhered to over the past decades. The company plans to invest more actively in its own gas production, as well as organizing supplies of liquefied natural gas (LNG). To ensure reliable supply to its customers in the long term, E.ON Ruhrgas will supplement its diversified gas procurement portfolio with supplies from Norway, Russia, Great Britain, the Netherlands, Denmark and Germany.

The head of the board of E.ON Ruhrgas also announced large-scale investment plans. “For the period from 2008 to 2010, we have envisaged investments of 6 billion euros,” said Mr. Reutersberg. “This is a record figure in the entire history of the enterprise.” The lion's share of these funds, he added, will be used to improve the reliability of supply to Europe.

Meanwhile, in the context of market liberalization, foreign investment is becoming very important for traditional players. And this factor is becoming increasingly acute in the business and political spheres of Germany and Europe. This especially concerns Gazprom’s aspirations for independent business in EU countries. As is known, many European politicians and officials see in this the danger of lobbying the Kremlin’s political interests with the help of the Russian gas monopolist.

Essen is not inclined to exaggerate the risks associated with a potential investor whose controlling stake belongs to the Russian state. “You cannot completely deny investment opportunities to a Russian company just on the basis of ephemeral guesses about possible negative political consequences,” Bernhard Reutersberg told a Vremya Novostei correspondent. -- The German gas industry has developed a reliable partnership with Gazprom. For almost four decades, E.ON Ruhrgas and Gazprom have been bound by long-term supply agreements. Of course, the investment process should develop on the basis of mutually beneficial cooperation. In general, we do not believe that barriers should be erected to Russian investment in Europe.”

The same opinion is shared by the “parent” concern E.ON. “For me, the fear of Russian investors is an artificially created “terrible ghost” that has nothing to do with reality,” said Wulf Bernotat, chief executive officer of the E.ON concern, recently speaking at the club of economic journalists in Dusseldorf. The topic of the meeting was defined as follows: “New fear of the Russians - will Russian investors buy up the German economy at the root?” Russia is becoming increasingly important for Germany and, Mr. Bernotat emphasized, a reliable partner. In the course of liberalizing the electricity market, Russia, he said, took “a courageous step and began to open up to foreign investment in sensitive areas such as energy generation.”

The head of E.ON admitted: “Not only the growth prospects of the Russian economy, but also the positive experience of cooperation with Russian partners so far gave us courage in acquiring the generating company OGK-4.” E.ON, represented by its gas division, and Russia have indeed maintained a trusting relationship for over 30 years. E.ON is Russia's largest importing customer in the gas business. “I am convinced that mutual German-Russian investments will strengthen relations between both countries,” said Mr. Bernotat. -- Trade and economics will remain bridges of mutual understanding. Therefore, we should rejoice at the possible participation of Russian investors, and not be afraid of it.”

Yuri Shpakov, Essen-Dusseldorf