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. Last Updated: 07/27/2016

Gazprom, Coal Firm Team Up

Gazprom on Thursday agreed to form a power company with Siberian Coal Energy, the country's biggest coal miner.

State-run Gazprom will hold the controlling stake, 50 percent plus one share, in the new venture, the companies said in a statement Thursday.

"Gazprom is entering a whole new niche," said Dmitry Skvortsov, a utilities analyst at Bank of Moscow. "Gazprom will be Russia's largest energy company, present in gas, oil, electricity and now coal."

Gazprom's deal with SUEK, as the miner is also known, will be completed in the first half of 2007 once a list of joint assets is agreed on.

The new company "will occupy a leading position in the global power and coal-producing industry," the companies said.

Gazprom's electricity assets include about 12 percent of state utility Unified Energy Systems and 30 percent in Mosenergo, the country's biggest power producer, which will give a controlling stake to Gazprom in April.

In December, Gazprom made other inroads into the electricity sector by forming its own power distributor, Mezhregionenergosbyt, costing Italian-led power distributor Rusenergosbyt an estimated $100 million per year in business.

The apparent run on power assets falls in line with Gazprom CEO Alexei Miller's recent statement that electricity is part of his company's "core business," and with the long-term strategy, stated on its web site, of becoming "the global energy company with full vertical integration."

On Tuesday, President Vladimir Putin said coal should become the main fuel for Russian power plants. The Russian power industry, the world's largest, is being opened to investors as the state unravels UES.

The generating companies being spun off from UES burn fossil fuels to power their turbines. About 60 percent of the nation's electricity production is gas-based; just less than 30 percent comes from coal and 7 percent from fuel oil, according to Alfa Bank figures.

(Bloomberg, MT)