Aug 22 2002 – Inadequate market access has made life difficult for a new gas service joint venture between Germany’s RWE and Britain’s Lattice Group, its joint chief executives say.

Phil Gilbert, co-head of Dortmund-based Viavera that has just received EU approval, said the company is successful in assisting customers in their gas procurement but lags behind in network-related services.

“In Germany, our commodity product has been on track, but our core business network product has so far been below expectations,” told Reuters.

Gilbert and colleague Frank Peper declined to give figures, but said that Germany’s industry deal (VV II) governing grid access from October for one year also lacks the ingredients to bring more competition and cheaper prices for consumers.

“There is a need for a stricter technical framework in the VVII,” said Peper, former transmission manager at RWE Gas, Germany’s number two in distribution after Ruhrgas.

“Most clauses are optional but they should be mandatory”.

Agreed in May, VVII aims at improving third party access to Europe’s biggest gas grid, where Viavera offers help to grid operators, traders and local utilities with handling contracts, demand forecasts and transmission deals.

Gilbert, former business development manager at British national pipeline operator Transco, also joined the UK government and other market players in describing the E.ON/Ruhrgas merger under current conditions is a threat to liberalisation.

“To push forward liberalisation, more effective conditions need to be imposed on the E.ON/Ruhrgas deal, such as a stricter separation of trading and transportation activities to improve third party access to pipelines,” he said.

Gilbert added that Ruhrgas should further not be allowed to rebid for gas it has to sell as part of the concessions demanded by the government in return for the approval of the deal.

“The gas release programme, which was imposed on Ruhrgas needs to become more effective,” Gilbert said.

According to Peper, the German gas market will need another three years to become attractive for services providers, as there is still only limited willingness to switch suppliers.

“We will not see large numbers of people in the retail market opting for alternative suppliers before 2005, so currently Germany offers only modest business opportunities,” he said.

FOCUS ON THE NETHERLANDS

Due to the current immaturity of the German gas market, the Anglo-German group has shifted its operational focus westwards.

“We are hoping that the shortfall in Germany will be compensated by our operations in the Netherlands,” Gilbert said.

“The Dutch market is currently our main pillar of operation, as liberalisation there is already further advanced,” Peper added.

Dutch industrial customers showed more willingness to change suppliers than their German counterparts, with full market opening due to start in October 2003, he said.

Viavera was also preparing to enter the Austrian market, where market opening will take place in October this year.

“We are talking to various parties in Austria and are monitoring the market,” Peper said, declining to reveal details.

Overall, Viavera targets to service around 40 German clients by the end of 2002 compared with below 30 at present, he said.