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. Last Updated: 07/27/2016

Miller Sheds Light on His Plan for SPP

Gazprom CEO Alexei Miller broke his silence Tuesday on why the gas monopoly participated in the privatization of a Slovakian gas pipeline -- and how the company would pay for it.

Last month, an international consortium of Gazprom, Germany's Ruhrgas and Gaz de France won Slovak approval to acquire 49 percent of Slovensky Plynarensky Priemysel for $2.7 billion.

"Expenses related to the purchase of this stake weren't included in the 2002 investment program," Miller said in an interview with Interfax. "Our investment in SPP is part of Gazprom's overall strategy to diversify its export routes."

On March 14, the Cabinet approved Gazprom's $4.5 billion investment program for 2002 after forcing it to scale down its expenditures and expectations.

Shortly after the privatization's approval, Slovak officials said Ruhrgas and Gaz de France would initially split the price tag, giving Gazprom two years to finance its share. Even though Gazprom is not a shareholder, it is still an equal member of the buying consortium.

Gazprom intends to pay for the stake in cash, and the payment schedule will be determined during the next two years, Miller said.

SPP owns and operates a pipeline transporting some 90 billion cubic meters of gas annually from Russia to the West. It also sells gas to more than 1.3 million domestic customers.

The consortium was the only bidder for the gas stake, which was one of the largest privatizations ever executed in Eastern Europe. This disappointed most market watchers, who noted that the timing of the sale was to blame.

"The Czech gas system had gone up for sale immediately before [the Slovak tender]," said Jonathan Stern, an expert on natural gas at the Royal Institute of International Affairs in London. "The Americans sniffing around were severely weakened by the Enron scandal and became very averse to risk.

"Gaz de France, Ruhrgas and Gazprom were the only ones left on the ground. Gaz de France and Ruhrgas gave Gazprom some time to pay because they wanted to maintain good relationships. It's a traditional European gas-market deal."