Posts Tagged ‘serbia’

Serbia seeks to liberalise fixed line market in 2009

Lack of competition for fixed line monopoly Telekom Srbija has left Serbs complaining of a poor quality service, which is partly analogue, partly digital, with many households still sharing lines, so that only one can use the phone at the same time.  According to the regulator’s figures, landline penetration was around 38 percent in 2007, while GSM penetration was almost 112 percent, a discrepancy explained by long waiting times for landlines to be installed.

Presently, only the mobile sector in Serbia is fully liberalised , earning an estimated €1.8 billion in turnover. Norway’s Telenor bought local operator Mobi 63 in 2006 for €1.5 billion euros & currently services approximately 39% (3 million users) of the market, while Mobilkom, the mobile telephony arm of Telekom Austria , paid €320 million to acquire the third mobile licence bringing an approximate market share of 5% . The remainder is controlled by Telekom Srbjia’s mobile arm MTS which claims more than 5.6 million subscribers, as of November 2008, Telekom is a joint venture 80% owned by the government, with the remainder held by Greco-German OTE Net (Deutsche Telecom recently acquired a 25% in the Greek carrier for €3.2 billion)

Serbia made the first moves towards opening the telecoms market in 2005, by establishing an independent regulatory body, but the process has been stalled by political turmoil caused by frequent elections and long periods without a government. The projected opening of the landline market in 2009,  will come a year before the government launches an expected initial public offering for Telekom Srbija. With the IPO having been postponed postponed to 2010 due to the global financial turmoil, Telekom Srbija raised prices in November, in all too familiar bid to attempt to expand its network before competition arrives. Telekom, who are being advised by Morgan Stanley on the offering,  is currently estimated to be worth €2 billion, based on 2006 accounts. On completion, the new Telekom will be dual listed on the Belgrade & London Stock Exchanges.

Minister of Telecoms Jasna Matic has said to local press that she expects ‘several’ companies to participate in the tender for the second fixed line telephony licence, scheduled for the summer. In a statement Matic said that the introduction of competition to the fixed line telephony scene would lead to ‘expedient improvement’ of the market. She added that a tender for fixed wireless telephony concessions covering rural areas was also in the pipeline. At present no companies have expressly come forward to state participation, however a roll of contenders is not difficult to imagine.

Deutsche Telecom has a track record of buying into Balkan operators, with branded operations already running in Hungary, Croatia, Montenegro, Macedonia & Greece (via OTE). Greek operators Cosmote has also been making inroads, having picked up licences in Romania & Bulgaria, however they may be put off by the level of capital expenditure required to compete effectively. Telekom Austria are also a likely competitor for a fixed line licence, as they are already active in country via Mobilkom & have ongoing operations in Slovenia, Croatia, Macedonia & Bulgaria. More interesting to me is the opportunity to roll out fixed wireless broadband services in to rural areas, something that has been ongoing in recent EU entrants such as Slovakia, Croatia & Slovenia, independent telcos such as Swiss based  WiMAX Telecom, which operates rural infrastructure in Austria as well as the aforementioned, could form part of a larger bid with Telekom Austria. As ever, a watching brief.

Gazprom turns off taps on Ukraine’s gas supply (again)

gazpromjsc-header1In what is becoming an all too familiar show of “transparent” hubris, Russian gas giant Gazprom (one of MSV’s favourite corporate bullies) has once again wished Ukraine a Happy New Year by turning off gas supplies to the former Russian sattelite, as reported this morning by BBC News, prompting fears that European supplies will also be affected.

Gazprom had reduced natural gas deliveries to Ukraine by 25%Monday, saying the country has failed to pay $600 million in gas bills for the year. Gazprom also said that Ukraine’s state energy company, Naftogaz Ukrainy, failed to sign contracts for the supply of gas this year. Gazprom has refuted accusations from Naftogaz that the reduction of natural gas supply from Russia was closer to 35%.

“Due to the lack of progress in negotiations and Naftogaz’s failure to sign gas supply contracts – including for January and February – gas supplies to Ukraine will be reduced by an additional 25% at 1700 GMT [12 p.m. EST],” Gazprom spokesman Sergei Kuprianov said in a statement.

About 80% of Russian gas supplies to Europe pass through the Ukraine, which puts Naftogaz in a position to siphon off supplies intended for other customers throughout Europe. In January 2006, Russia cut supplies to Ukraine completely for a period of three days causing gas volumes across Europe to fall, as Ukraine scrambled to satisfy its demand.

In early December 2008, both parties had agreed Ukraine would pay $1.5 billion in debt accrued this year and last. They also agreed that two controversial middlemen – Swiss based RosUkerEnergo and UkGazEnergo – would be replaced by a 50-50 joint venture between Gazprom and Naftogaz. However, Gazprom insists Ukraine owes another $600 million for 19 billion cubic meters of Russian gas it received without a contract. The oil giant also wants Ukraine to approve the creation of the two new companies set to replace RosUkerEnergo. Yulia Tymoshenko, the Ukrainian prime minister, says the Ukraine has fulfilled its obligations and accused RosUkerEnergo of running up debts for $4 billion cubic meters of gas.

Gazprom chief Alexey Miller in an effort to allay Western fears stated that Gazprom would continue full shipments to the European Union,  through pipelines that cross Ukraine. The Ukrainian president’s energy adviser, Bohdan Sokolovsky, also said Ukraine would guarantee the delivery of gas to Europe.

“Whatever Russia ships we will deliver,” he said. “This is what we have committed to.”

For those readers fresh to the scene, there is a considerable political slant to this measure; relations between Russia and the former Soviet republic have steadily disintegrated since 2005 when Viktor Yushchenko took office following the Orange Revolution. Since then, Yushchenko has angered Moscow by seeking to align Ukraine with the West away from the Kremlin’s influence. Particular bugbears have been Ukraine lobbying to join NATO & also their vocal support for Georgia in the recent “civil unrest” in the Caucasus.

Meanwhile, Russia has more than tripled the price it charges Ukraine for gas. Gazprom had offered a contract with gas set at $250 per 1,000 cubic meters for 2009, which Ukrainian officials said was still too high. As a benchmark, faithful Russian ally Belarus is paying $128 per tcm, whilst European customers are being charged an average $418 per tcm, a hefty premium that Gazprom originally tried to impose on Ukraine late last year.

As previously  reported on MSV in Serbian Standoff, Gazprom is looking at a number of intiatives to pump gas to the West without transitting Ukraine, the primary project being the South Stream Pipeline, which will bypass Ukraine via the Black Sea & land in Bulgaria, transitting Greece & Serbia before going offshore again somewhere on the Adriatic to reach European customers.

UPDATE 1 (04/01/09) from Bloomberg :

Gazprom increased natural-gas supplies to Europe via three routes as Russia and Ukraine courted international support amid a deepening price dispute. Russia’s state-owned gas exporter boosted shipments along two routes through Belarus and one to Turkey, Boris Posyagin, head of Gazprom’s dispatch department, said yesterday in comments broadcast on state television

UPDATE 2 (05/01/09) from Reuters

Croatia, which imports 40 percent of its annual gas needs, most of it from Russia, followed the Czech Republic, Turkey, Poland, Hungary, Romania and Bulgaria in saying deliveries had been affected by the row.

“Imports of Russian gas have been reduced by 7 percent. However, it does not affect supply to consumers as the situation in the system is stable,” Ivana Markovic, a senior official with Croatian pipeline firm Plinacro, told state television.

UPDATE 3 (12.01.09) from BBC News

A statement from the Russian energy giant said Ukraine had signed a deal on the transit of Russian gas to the EU “without any conditions whatsoever”Experts say it will take up to three days for Russian gas to reach some parts of Europe even if Russia agrees in the next few hours to turn the taps back on.

 

Russia had said it could not implement an agreement with Ukraine to resume gas flows to Europe, accusing Ukraine of adding “unacceptable” conditions.

Moscow alleged that Ukraine had added a clause denying it owed Russia for past supplies of gas

UPDATE 4 : (20/01/09) from Bloomberg

Russia’s rouble and the Ukrainian hryvnia strengthened as OAO Gazprom resumed shipments of natural gas to Europe after a two-week shutdown.The ruble snapped a four-day decline against the euro and the hryvnia appreciated to its highest level versus the dollar in six days after Russia’s gas exporter said it will ship about 430 billion cubic meters of gas today. Currencies in eastern Europe pared declines.

“The lack of gas was creating a negative dimension for industry,” said Roderick Ngotho, an emerging markets currency strategist in London at UBS AG. “The resumption of gas means industry can do the best it can given the current downturn in external demand without the added negative of disruptions to energy flow.”

Serbian standoff

oil-refinery-in-chalmette-louisiana-lano159

As previously discussed in Russian Energy Bears, state owned Gazprom is on the prowl for new acquisition targets near to home, the latest potential suitor is Serbian state energy company NIS (Naftna Industrija Srbije). As reported in early December by news agency Novosti, Gazprom is looking to acquire 51% of the Russian sattelites energy reserves & control of its refining & retail operations, for $400M. In return, Gazprom offers to invest up to $500M in developing & building new gas storage infrastructure & also construction of a distributions spur for the South Stream Pipeline.

“An agreement was reached today (5th Dec 08) to sign three deals by the end of the year,” CEO Alexei Miller said, referring to Gazprom Neft’s acquisition of state-owned Naftna Industrija Srbije, Gazprom’s $500 million investment in a gas storage facility in Serbia, and the construction of the Serbian segment of the South Stream pipeline.

The South Stream Pipeline is set to provide a distribution network across SE Europe, allowing Gazprom to distribute up to 30Bln cubic meteres of gas via Greece, Bulgaria & Serbia. The pipeline has attracted some controversy, mainly from the US, as it is seen as being a further attempt by Gazprom to put a stranglehold on EU energy supplies. Russia contends that this is purely diversification, an understandable premise, as soured relations with Ukraine on transit deals & domestic prices caused Gazprom to turn off the Ukrainian supply in 2006. More on the myriad of pipeline deals can be sourced here at The Bridge.

Meanwhile, although the deal is done from a Gazprom point of view, it is causing ructions within the Serbian government itself. Serbia’s Economy Minister Mladjan Dinkic said Serbia should sell its state energy company, NIS, only if Russia signs firm guarantees that the South Stream natural gas pipeline will indeed be built. But Deputy Prime Minister Ivica Dacic said Serbia should sell the company even without Moscow’s guarantees, or risk losing the support of its “strategic” political ally.

Dinkic and other pro-Western ministers in the government fear that Russia’s takeover of the country’s energy sector would dramatically increase Moscow’s political influence in the Balkan country.

Dinkic said that Russia insists on maintaining a monopoly over the sale of oil products in Serbia until 2014, is reneging on its promise to invest €500 million in modernising NIS, and has offered no guarantees that the European Union’s pollution protection standards would be implemented.

so capitalism Russian style.

UPDATE 1 10/02/09 : From OilVoice : Gazprom completes acquisition of 51% in NIS

JSC Gazprom Neft completed the acquisition of 51% of shares in Serbia’s NIS at a price of 400 million euros. The acquisition was made in accordance with the purchase agreement between Gazprom Neft and the Serbian government.

The agreement also provides for the reconstruction and upgrade of NIS process facilities by 2012; investment will amount to at least 500 million euros. As part of the upgrade, measures will be taken to improve the quality of oil products so that they meet European standards (Euro-5).