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RWE Looks to Build on Gazprom Deal at Contract Talks

Posted by March 10, 2015

RWE will look to build on its current deal with Russian gas exporter Gazprom when the two sides sit down at mid-year for contract negotiations, the German utility said on Tuesday.

"Our goal is a long-term solution that guarantees that a contract beyond the expiry of current agreements will no longer burden our results," RWE said.

"It would be wise to base future talks with Gazprom on the existing deal," Chief Executive Peter Terium said in reply to questions.

A sharp fall in oil prices since mid-2014 should strengthen RWE's hand in negotiating index-linked gas contracts.

RWE's Supply & Trading unit is a major player in European gas markets and a big buyer of Russian gas.

In 2013, it received $1.5 billion from Gazprom to settle years of disagreement with the Russian supplier and agreed gas shipments to mid-2016.

Like other German utilities RWE has been hurt by low wholesale power prices and rising competition from subsidised wind and solar power.

A mild winter also softened demand last year. RWE bought 35 billion cubic metres (bcm) of gas, down from 37 bcm a year earlier, RWE said.

Apart from Russia, RWE buys gas from Norway, Netherlands and domestic German producers.

Supply and Trading on Tuesday reported a 2014 operating result of 274 million euros ($295 million), down from 831 million.

The year-earlier result benefited from the $1.5 billion payment from Gazprom.

Reporting by Vera Eckert

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