Yesterday, Gazprom Management Committee reviewed the issue of privatizing 51% equity stake in Distrigaz Sud S.A. and Distrigaz Nord S.A. gas distribution companies.

Gazprom will make a conclusive decision regarding tender participation on the basis of these companies’ economic efficiency analysis.

Reference:

The government of Romania announced its decision to privatize the companies on December 5, 2003. Potential investors are offered 51% equity stake in either Distrigaz Sud S.A. or Distrigaz Nord S.A. A 30% stake is to be purchased from the government, and the remainder is to be paid by investors in the form of additional equity issue purchase.

Distrigaz Sud S.A. and Distrigaz Nord S.A. will be held in three stages. The first pre-qualifying stage requires the potential investors to send an expression of interest (EOI) to the tenders’ organizers. The second stage requires the investors to prepare a non-obligatory proposal (excluding the price to be offered). The third stage includes negotiations with the seller and a final obligatory proposal to purchase shares of either company mentioned.

Gazprom expressed its interest in the tender participation on January 14, 2004.

Distrigaz Sud S.A. is the largest gas distribution company in Romania in terms of volumes (5.3bcm/year). The company comprises of 11 gas distribution branches, servicing 20 regions in the south of Romania, including Bucharest. The company owns and operates 13,600 km of gas pipelines. Currently the company services 792,000 consumers directly, and is wholly-owned by the government.

Distrigaz Nord S.A. is Romania’s largest gas distribution company in terms of directly served number of customers, and the second largest in terms of gas distribution (4.1bcm/year). The company comprises of 12 gas distribution branches, servicing 20 regions in the north of Romania. The company owns and operates 17,100 km of gas pipelines. Currently Distrigaz Nord S.A. is wholly owned by the government.

Total natural gas consumption in Romania amounts to 17bcm a year, 5bcm/year is imported, and the rest is produced domestically. Russia accounts for more than 82% of Romanian natural gas imports.

Romanian geographical position is strategically important in terms of Russian natural gas transit bound for the Balkan region countries and Turkey. Romanian national gas transmission system comprises of 11,000 km of trunk pipelines, and is connected to the Ukrainian gas transmission system. Transgaz, a state owned company, operates natural gas trunk pipelines in Romania. Romanian gas transmission system has an annual natural gas import capacity of around 14bcm, and a transit capacity of 28bcm for deliveries to Bulgaria, Macedonia, Turkey and Greece.

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