Poles drop out as bid deadline for Czech gas pipelines passes

By bne IntelliNews July 30, 2012

Tim Gosling in Prague -

As the deadline for bids arrived, Czech financial group KKCG confirmed on July 27 plans to make an offer for the country's gas pipeline network. Meanwhile, Polish network operator Gaz-System dropped out, while true to form, closely-held Czech group Energeticky a Prumyslovy Holding (EPH) kept its own council.

"We are interested," KKCG spokesman Dan Plovajko said, according to Reuters. "We will be or we are presenting or proposing an offer from our side. Today is the deadline for the indicative offers." Meanwhile, despite several suggestions from Gaz-System when the planned sale emerged in May, a spokeswoman said the state-owned Polish group would not now bid. "We want to focus on projects that are part of our investment plans," Malgorzata Polkowska said.

A link on the mainline Bratstvo gas pipeline, through which most of the Russian gas destined to the EU is currently transported via Ukraine, German energy giant RWE said earlier this year that it would sell operator Net4Gas as part of a global divestment drive. Analysts have estimated the value of the 2,500km of Czech pipelines at €1.4bn-2.4bn.

That, however, depends crucially on the volume of Russian gas flows on the route. Gazprom put the giant Nord Stream pipeline running under the Baltic Sea to Germany into operation earlier this year, and has threatened to cut all supplies routed through Ukraine once it builds a second Nord Stream branch and get its southern twin - South Stream - up and running.

However, those are remote and hugely expensive projects, and Gazprom would clearly benefit if it take control of the existing Bratstvo export route. It has been pressing Ukraine over its pipelines for some time now, and may yet gain some control of its network. Meanwhile, European energy giants E.ON and GdF are looking to offload the 49% stake they jointly own in SPP, the operator of the Slovak stretch.

However, any sale to Russia in both the Czech Republic and Slovakia would be hugely problematic politically. That has led many to view the other company to profess interest in both Net4Gas and SPP - the Czech firm EPH, owned by closely-held financial groups PPF Group and J&T Group - as a possible front for Russian interests. Analysts suggest that a bid for the two companies would make little sense without a full understanding of the forecast gas flows.

EPH could not be reached for comment on the day of the deadline, Reuters reported.

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