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Germany eyes aid payment for Gazprom Germania - sources

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A cyclist passes the headquarters of Gazprom Germania in Berlin
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FRANKFURT (Reuters) -Germany is preparing a multi-billion euro package for Gazprom Germania, an energy group abandoned by Gazprom, to help it cover higher procurement costs in the wake of Russia's invasion of Ukraine, two people familiar with the matter said.

Talks are at an advanced stage and a deal involving between 5 to 10 billion euros ($5.22-$10.44 billion) could materialise as soon as this week with state-owned lender KfW acting as lender, the people said.

One German government source told Reuters that KfW credits appeared to be "an obvious tool" to help Gazprom Germania, given the company's importance and current difficulties, but their scale could not yet be communicated as talks are ongoing.

Spokespeople for the German government and the KfW declined to comment. A spokesperson for Germany's network regulator, which took over operations of Gazprom Germania earlier this year after it was ditched by Gazprom, also declined to comment on the aid package, which was first reported by Bloomberg.

German firms grappling with the impact of war in Ukraine face soaring energy costs, causing the government to open the purse strings and come up with a list of measures to provide financial support.

Gazprom Germania, which operates across a number of countries but focuses its trading, storage and transmission activities on Germany, continental Europe's biggest gas market, needs a financial boost to ensure it can uphold a crucial role in the region's gas market.

The company's biggest problem, in addition to having to retain customers, business partners and smooth operations, is the high price of gas.

Gazprom Germania has to buy gas in the spot markets for some of its contractual obligations after Gazprom quit its gas business in Germany, apart from some export activities.

The regulator said everyone at the authority had been working to ensure that business operations at Gazprom Germania are continuing since it stepped in on April 4.

Spot market prices of gas in Germany are three times their level of a year ago.

This results from a combination of a sharp global demand recovery and dwindling supplies out of Russia since last autumn, preceding the disruptions seen since the war.

($1 = 0.9577 euros)

(Reporting by Christoph Steitz, Christian Kraemer, Andreas Rinke and Frank Siebelt; Writing by Vera Eckert; Editing by Bernadette Baum and Jane Merriman)

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