Austria to have national energy champion

11 May 2006 - Austria has joined the list of European country trying to develop a national energy supplier capable of competing across the continent after markets open next year to full competition after an agreement was announced Tuesday for the merger of power utility Verbund with fellow the Austrian oil and gas group OMV Aktiengesellschaft (OMV). Both companies are state-controlled.

The two companies plan to merge in proportion to their respective market capitalizations (60 per cent OMV, 40 per cent Verbund) to create a leading integrated energy group in central Europe. OMV will pay a "minor premium" for Verbund, the national utility valued at €12.1bn ($15.4bn).

The new group will combine the production, transport and trading of several forms of energy (oil, gas and electricity), will supplement finite resources with renewable hydroelectric power, allow electricity generation from gas and ensure greater sustainability and security of supply.

Completion of the merger is expected towards the end of 2006 but will be subject principally to the agreement of the Austrian parliament, OMV's shareholders' meeting and the relevant competition authorities.

Following the announcement, rating agency Standard & Poor's placed its 'A' long-term corporate credit rating on Austria-based electricity generation utility. "The CreditWatch placement reflects the riskier nature of OMV's business profile compared with that of Verbund, and a growth strategy focused on central and eastern Europe," said Standard & Poor's credit analyst Amrit Gescher.

OMV CEO Wolfgang Ruttenstorfer: "This agreement is a great success. A merger of OMV and Verbund, two strong companies headquartered in Vienna and with complementary business areas, is extremely forward looking. The profitable operations of both companies will be put on a strong common foundation to form an integrated energy group with greater competitive strength, sustainability and security of supply."

Hans Haider, Chairman of Verbund's Managing Board, also sees significant benefits in the joint plans: "The new energy solution, integrating electricity, oil and gas, brings the greatest possible security of supply for customers. This will make a decisive contribution to strengthening Austria as a business location over the long term, especially as energy is one of the critical development factors of the future."

In a statement, Ruttenstorfer and Haider said that, particularly in times when security and environmental-friendliness are gaining in importance, a new energy group linking environmentally friendly gas and electricity generated mainly from hydroelectric plants is strategically the best solution to the energy issues of the future. _

OMV is the leading oil and gas group in Central Europe; its refineries, filling stations and commercial business serve around 100 million people and benefit from oil and gas production nearly all round the world. OMV also has a strong position in another business with significant future potential: gas transit and storage, and also in gas sales through its 50 per cent subsidiary EconGas as well as its Romanian activities.

Verbund is the largest generator and transporter of electricity in Austria. It runs the Austrian interregional high-voltage network, with important links to other countries. It is the most environmentally friendly large electricity generator in the EU: over 80 per cent of its output comes from the group's hydroelectric stations. At a European level, Verbund is highly successful in electricity trading, which accounts for around 60 per cent of its sales.

Joining the two companies together will create a leading integrated energy group in Central Europe. Verbund and OMV already have strong positions in growth markets and their business operations are complementary. OMV's strong position in Central Europe will provide the new company with opportunities for expansion in the electricity business in those countries where Verbund has so far not been present. The construction of joint gas power stations in Central Europe is under consideration, which would help to meet the rising demand for electricity in this growth region. In this case OMV's own gas and the additional gas that should be flowing through the Nabucco pipeline from 2011 will provide a secure supply for electricity generation.

Standard & Poor's said in a press release, "We may refine our view of the likely rating outcome for Verbund, although we will resolve the CreditWatch status only on completion of the transaction, pending regulatory approvals and the necessary change in constitutional law that currently prevents privatization of more than 49 per cent of Verbund."

The Austrian government owns 32 per cent of OMV, which has about 50 000 workers. It holds 51 per cent of Verbund, with 2436 employees. A takeover of Verbund would require an amendment to a law that requires the government to own 51 per cent of the company.

Sponsored by FLSmidth

Related Articles

EPA releases coal ash rule

The U.S. Environmental Protection Agency (EPA) Administrator Gina McCarthy announced the agency will now consider coal ash on the same level as household waste as opposed to hazardous waste. Household garbage and coal ash are both listed in the solid waste category, a stretch from the hazardous waste classification.

Fuel Tech receives air pollution control contracts worth $3.6Mn

Fuel Tech Inc. has received multiple air pollution control (APC) contracts, worth approximately $3.6 million, from customers in China, Europe and the U.S.

Follow Power Engineering on Twitter
Latest News

S. Africa court dismisses Westinghouse nuclear generator replacement dispute

A South African court dismissed a filing from Westinghouse Electric Co. asking to reopen bidd...

IAEA urges India to tighten nuclear safety regulations

The International Atomic Energy Agency (IAEA) is pressing India to tighten its nuclear safety...

Caterpillar's C280 Genset enters China offshore market

Caterpillar Oil & Gas will supply six of its Cat C280-16 offshore generator sets (gensets...

Justices divided over EPA mercury limits

The Supreme Court's conservative justices cast doubt on the Obama administration's first-ever...

Report: Global wind power installations increased by 42% in 2014

Global wind power installations grew 42 percent year-over-year, according to a new report con...

Low carbon standard passes Ill. Senate committee

An Illinois Senate committee passed a bill that would establish a low carbon standard that wo...

Russia to build two nuclear power reactors in Jordan for $10bn

Russia signed a $10 billion deal to build Jordan’s first nuclear power plant.

Iowa top officials on opposites sides in EPA lawsuit

Iowa's governor and attorney general were on opposite sides of a case argued Wednesday at the...

Power Engineering Current Issue

03/01/2014
Volume 118, Issue 3
1403PE-cover
Products Showcase
Dynamic Fluoride Ion cleaning DFIC of industrial natural gas turbines Hi-Tech Furnace Systems

Dynamic Fluoride Ion Cleaning of IGT Parts

The Dynamic Fluoride Ion Cleaning (DFIC) Process from Hi-Tech Furnace Systems is able to clean deep, narrow cracks of oxides by cycling between negative, atmospheric, and positive pressure.

Archived Articles

2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013

Buyers Guide Categories

Power Industry Wire News

Earthstone Energy, Inc. Reports Fourth Quarter and Full Year 2014 Results

Earthstone Energy, Inc. Reports Fourth Quarter and Full Year 2014 Results

Chicago's Lakeshore Recycling Systems Helps Change a Life on March 27 Airing of the Steve Harvey Show

Chicago's Lakeshore Recycling Systems Helps Change a Life on March 27 Airing of the Ste...

East West Petroleum Corp.'s CEO David Sidoo Interviewed by The Energy Report

East West Petroleum Corp.'s CEO David Sidoo Interviewed by The Energy Report

Perma-Fix Schedules Fourth Quarter 2014 Earnings Conference Call

Perma-Fix Schedules Fourth Quarter 2014 Earnings Conference Call

Murray Energy's Controlling Interest of Foresight Creates U.S. Coal Mining Giant, an Industrial Info News Alert

Murray Energy's Controlling Interest of Foresight Creates U.S. Coal Mining Giant, an In...

Power Engineering

Article Archives for Power Engineering Magazine

Continuing Education

Professional Development Hours

To access a course listing associated to a specific topic listed below, click on the topic of choice from the list below.

Latest Energy Jobs

View more Job Listings >>