Gazprom Board of Directors approves investment program and budget for 2020

  • Gazprom’s overall amount of investments for 2020: RUB 1,104.7 billion.
  • This budget will provide full coverage of Gazprom’s liabilities without deficit.

The Gazprom Board of Directors took note of the Company’s preliminary operating results for 2019 and the projected investment program and budget (financial plan) for 2021–2022.

In addition, the Board of Directors approved the investment program and budget (financial plan) of Gazprom for 2020. The figures of the investment program did not change compared to the version endorsed by the Gazprom Management Committee in December this year.

As per the investment program for 2020, the overall amount of investments will be RUB 1,104.724 billion, which is RUB 217.858 billion less than was envisaged in the revised investment program for 2019. Of the amount earmarked for 2020, RUB 933.403 billion is intended for capital investments, RUB 89.972 billion for the acquisition of non-current assets, and RUB 81.349 billion for long-term financial investments.

Pursuant to the approved budget (financial plan) of Gazprom for 2020, the financial borrowings (without intra-Group borrowings) will total RUB 557.769 billion. The newly-adopted financial plan will provide for a full coverage of the Company’s liabilities without a deficit. Decisions on debt financing under the Borrowing Program will be made on the basis of the market conditions, liquidity and Gazprom’s financing needs.

It was noted at the meeting that the Company remains committed to a well-balanced financial strategy. Gazprom’s budget for 2020 was drafted on the basis of conservative macroeconomic indicators. Funds were set aside to cover additional costs in case of unfavorable developments in the global gas market and international capital markets. Particular attention was paid to reducing operating and investment costs at Gazprom and its subsidiaries. The decision on the scope of the Borrowing Program took into account the need to keep the debt burden at a comfortable level.

This approach allows Gazprom to maintain a high level of financial sustainability.

Background

The main investments under Gazprom’s investment program for 2020 cover the Company’s priority projects of strategic importance, including the development of the gas production centers in the Yamal Peninsula and eastern Russia, the gas transmission system in the northwest of the country, further construction of the Power of Siberia gas pipeline, and projects securing gas balance in peak periods.

 

Board of Directors approves Gazprom’s new Dividend Policy

  • Dividends will be calculated based on adjusted net profit under IFRS.
  • Target level of payouts – at least 50 per cent – is to be reached in three years.
  • Dividend calculation mechanism was made as transparent as possible.

The Gazprom Board of Directors approved the new revision of the Company’s Dividend Policy.

The document, which was developed as part of the effort to streamline the financial strategy of Gazprom, takes into account best practices in the area of corporate governance. The new Dividend Policy aims to make the dividend calculation mechanism as transparent as possible and to create the conditions for increasing shareholder income while maintaining the Company’s financial sustainability at a high level.

From now on, dividends will be calculated on the basis of adjusted profit attributable to the shareholders of Gazprom in accordance with International Financial Reporting Standards (net profit under IFRS). In the past, dividend calculation was carried out based on the net profit of the head company in line with the Russian Accounting Standards.

According to the new version of the Dividend Policy, net profit will be adjusted with regard to a number of non-monetary items (income and expenditure items unrelated to cash flows in the reporting period). The document includes a full list of adjustments. The dividend calculation principles and procedure are outlined very clearly, providing investors and analysts with a framework for more precise and better-quality forecasting in relation to the Company’s payouts.

The target level of dividend payouts is at least 50 per cent of the adjusted net profit under IFRS. It is planned to reach that level gradually: no less than 30 per cent based on the results for 2019; no less than 40 per cent for 2020; and no less than 50 per cent for 2021 and subsequent years.

If the net debt (adjusted)/EBITDA indicator for the full year exceeds 2.5, the Board of Directors may resolve to reduce the amount of dividends recommended for approval by the General Shareholders Meeting. If necessary, this will allow the Company to keep its debt burden at a comfortable level.

Gazprom is going to enact its dividend policy at its subsidiaries and affiliates as well.

The Board of Directors’ resolution dated 2010 for the approval of the previous revision of the Dividend Policy is considered no longer valid. The full text of the new document will be made available in the Investors section of Gazprom’s official website.

Project finance documentation signed for Amur Gas Processing Plant

  • Total amount borrowed: EUR 11.4 billion.
  • Financing is provided by 22 banks from Europe, Asia, and Russia.
  • Unprecedented deal in Gazprom’s history and one of Europe’s largest in last few years.

Gazprom Pererabotka Blagoveshchensk and Gazprom completed the signing of project finance documentation for the construction of the Amur Gas Processing Plant (GPP).

The total amount of debt financing is EUR 11.4 billion. The funds are provided by 22 European, Asian and Russian banks, with Gazprom Pererabotka Blagoveshchensk acting as the borrower.

Fourteen banks from Europe and Japan are participating in the deal. These banks are to provide up to EUR 3.66 billion under the insurance coverage provided by Western export credit agencies for a tenor of 17 years. Gazprom Pererabotka Blagoveshchensk is the first Russian company to raise project financing under ECAs’ cover for such a long tenor. An additional EUR 1 billion for 15 years will be provided on an uncovered basis.

Financing on the part of Chinese banks is arranged by Bank of China, China Construction Bank Corporation, and China Development Bank, with the latter serving as the largest lender. These financing institutions are providing a loan facility of EUR 3.4 billion for a tenor of 15 years.

The Russian banks – Gazprombank, Sberbank, VTB Bank, Otkritie Bank, and VEB.RF –are to provide multi-currency credit lines of EUR 1.08 billion and RUB 170 billion. About one third of the total amount will be covered by the Russian Agency for Export Credit and Investment Insurance (EXIAR).

In terms of size, this deal has no precedence in the history of Gazprom and is among the largest project financing deals in Europe over the last few years.

“The Amur GPP will become one of the largest gas processing plants in the world. Its construction is well underway: as of today, the project is 54 per cent complete.

The signing of project finance documentation is a landmark event for this project. Now, the project enjoys support from our long-standing and reliable partners from Europe, Asia, and Russia. Remarkably, for the first time in our history we have raised project financing from Chinese banks.

I am convinced that this transaction will become the foundation for the strengthening and development of mutually beneficial cooperation in Gazprom’s key financial markets over the long term,” said Alexey Miller, Chairman of the Gazprom Management Committee.

Background

The construction site of the Amur GPP is located near the town of Svobodny in the Amur Region.

The plant will have a design capacity of 42 billion cubic meters of gas per year. The GPP will include the world’s largest helium production facilities.

The plant comprises six production lines, with the first two lines slated for commissioning in 2021. The remaining lines will be consecutively put in operation before the end of 2024. The GPP is expected to reach its design capacity by 2025.

In addition to sales gas and helium, the GPP will produce ethane, propane, butane, and pentane-hexane fraction.

Gazprom Pererabotka Blagoveshchensk (part of the Gazprom Group) is the project company for the Amur GPP project. Construction management is carried out by NIPIGAZ (part of the SIBUR Group), general contractor.

 

Alexey Miller lays out details of Protocol on gas cooperation with Ukraine, effective January 1, 2020

Alexey Miller, Chairman of the Gazprom Management Committee:

“In line with the Protocol on gas cooperation, Gazprom and Naftogaz will sign an agreement to settle their mutual claims under the existing contracts, thereby restoring the balance between the interests of the parties.

According to the settlement agreement, no new claims shall be filed, the pending arbitration and legal claims shall be withdrawn, and a payment shall be made under the final ruling of the Stockholm Arbitration Court.

Gazprom and the Ukrainian Government will sign an amicable agreement on canceling the claim filed by the Antimonopoly Committee of Ukraine.

The European Commission will ensure compliance with the EU regulations governing gas transportation in Ukraine.

On its part, Ukraine will guarantee that the regulator will be independent, the transit customer’s interests will be protected, and the tariff setting will be economically feasible.

Gas Transmission System Operator of Ukraine will sign an inter-operator agreement with Gazprom and a transport agreement for the booking of the Ukrainian gas transmission system with Naftogaz of Ukraine. Naftogaz will act as the organizer of transit, thus assuming the risks that will arise in the transition period.

The organizing company will book transmission capacities for a period of 5 years to transmit 225 billion cubic meters, including 65 billion cubic meters for 2020 and 40 billion cubic meters for 2021 and the subsequent years, on the condition that the tariff is competitive.

Gazprom and Naftogaz may consider the possibility of supplying gas to Ukraine using NCG-based pricing.”

Russia and Belarus discuss gas cooperation from 2020 onward

A working meeting of Alexey Miller, Chairman of the Gazprom Management Committee, with Vladimir Semashko, Ambassador Extraordinary and Plenipotentiary of the Republic of Belarus to the Russian Federation, and Viktor Karankevich, Belarusian Minister of Energy, took place today in St. Petersburg.

The parties discussed relevant matters of cooperation in the gas sector from 2020 onward. The main focus was on the terms and conditions for supplying Russian gas to consumers in the Republic of Belarus.

It was noted that Gazprom is providing Belarusian consumers with reliable and sufficient gas deliveries. From January through November 2019, the Company supplied about 18.4 billion cubic meters of gas to the country.

Background

In 2018, Gazprom supplied to Belarus 20.3 billion cubic meters of gas, an increase of 6.9 per cent (1.3 billion cubic meters) from 2017 (19 billion cubic meters).

The contracts between Gazprom and Gazprom Transgaz Belarus for gas supplies to and gas transportation across Belarus are valid until the end of 2019.

 

Another round of gas negotiations between Russia and Ukraine held in Vienna

Another round of bilateral negotiations on gas between Russia and Ukraine took place today in Vienna. The negotiations involved Alexey Miller, Chairman of the Gazprom Management Committee, and the heads of Naftogaz of Ukraine, Gas Transmission System Operator of Ukraine and the National Commission for State Regulation of Energy and Public Utilities.

The parties discussed issues related to cooperation in the gas sector from 2020 onward.

Rehabilitative and remedial treatment technology wins top Science and Technology Prize

  • Gazprom is creating cutting-edge hi-tech solutions.
  • Economic benefit of implemented solutions exceeds RUB 60 billion.

The award ceremony for the 2019 edition of the corporate Science and Technology Prize took place at the meeting of the Gazprom Management Committee. It was noted at the event that the total economic benefit of the award-winning solutions and technologies exceeds RUB 60 billion.

The top prize went to the paper by Gazprom Transgaz Moscow entitled “Rehabilitative and remedial treatment technology for employees of Gazprom.” The work was developed in close cooperation with the Industry Clinic and Diagnostic Center and the relevant subdivisions of Gazprom.

The authors of the paper accomplished the task of raising worker productivity. The technology combines early disease detection with rehabilitative and remedial treatment based on a new research and methodological framework involving a purpose-built hardware and software package.

Second place went to Gazprom Transgaz Krasnodar for the project entitled “Domestic adsorption (silica gel) system: Unique gas treatment solution for gas trunklines.”

The authors of the following projects were also awarded:

– “Developing and integrating management information systems to improve technogenic and geo-ecological safety at gas production facilities of Gazprom Dobycha Yamburg” by Gazprom Dobycha Yamburg;

– “Working out a production method and formulation for hydrocarbon base oil in Gazpromneft Drilline drilling fluids” by Gazprom Neft;

– “Developing and implementing a set of sci-tech solutions to support gas production in brownfields” by Gazprom Dobycha Nadym;

– “Developing and implementing a set of sci-tech solutions to optimize geological exploration” by Gazprom Geologorazvedka;

– “Sci-tech complex for fine-tuning of development technologies in vertical, horizontal and directional gas wells” by Gazprom VNIIGAZ;

– “Information analysis system for identifying potentially hazardous sections in gas trunklines due to stress corrosion cracking and for planning major repairs: A case study of Gazprom Transgaz Yugorsk” by Gazprom Gaznadzor;

– “Creating a technological complex to produce hydrocarbons from the Achimov deposits of the Urengoyskoye oil, gas and condensate field” by Gazprom Dobycha Urengoy;

– “Efficient technological innovations for increasing productivity and operational safety in underground storage wells of Gazprom” by SevKavNIPIgaz.

Background

Gazprom’s Science and Technology Prize was established in 1998. The Prize is an important component of the corporate scientific and technological policy aimed at promoting innovations in the Company’s businesses and maintaining its technological leadership within the global energy industry.

In 2019, as many as 17 projects were submitted for the Prize, with 148 authors from 26 subsidiaries of Gazprom and 6 third-party entities.

The papers were assessed by a group of experts from Gazprom and its subsidiaries. The assessment criteria included urgency, novelty, scientific and technological level (research intensity), area of application, scope and economic impact with regard to Gazprom, commercial potential and protectability, and use of domestic products, technologies and equipment.

 

Gazprom’s positions to remain stable in long run

The Gazprom Management Committee took note of the information about the impacts of the events of 2019 on the long-term outlook for the global energy market.

It was highlighted that the ongoing growth in natural gas consumption around the world is one of the chief trends of 2019.

China continues to demonstrate significant growth. In 2018, the country’s gas consumption went up by 18 per cent. By the end of 2019, gas consumption in China may rise by 10 per cent, considerably exceeding 300 billion cubic meters. It was noted at the meeting that the launch of the Power of Siberia gas pipeline, which took place on December 2, will allow the Company to provide reliable gas supplies from Russia to China and to strengthen Gazprom’s positions in this promising gas market.

In Europe, indigenous gas production decreased at an accelerated pace throughout 2019, with the largest reductions observed in the Netherlands and Norway. It was noted that Gazprom is a leading supplier of gas to Europe, covering over a third of the region’s demand and capable of taking further steps to enhance energy security in European countries.

The meeting participants pointed out that the events of 2019 had no tangible impact on the long-term outlook for the global energy market. Gazprom’s positions will remain stable in the long run thanks to, inter alia, enormous gas reserves, well-developed production and transmission infrastructure, and the ongoing effort to diversify export areas and routes.

The information regarding the impacts of the events of 2019 on the long-term outlook for the global energy market will be submitted for consideration by the Gazprom Board of Directors.

Gazprom Management Committee endorses drafts of investment program and budget for 2020

  • Gazprom’s overall amount of investments for 2020: RUB 1,104.7 billion.
  • Gazprom’s borrowings for 2020: RUB 557.8 billion.
  • Final investment program and budget to be approved by Gazprom Board of Directors.

The Gazprom Management Committee took note of the Company’s preliminary operating results for 2019 and the projected investment program and budget (financial plan) for 2021–2022.

The Management Committee also endorsed the drafts of the investment program and budget (financial plan) for 2020.

As per the draft investment program for 2020, the overall amount of investments will be RUB 1,104.724 billion, including RUB 933.403 billion for capital investments, RUB 89.972 billion allocated for the acquisition of non-current assets, and RUB 81.349 billion assigned for long-term financial investments.

Pursuant to the draft budget (financial plan) of Gazprom for 2020, the financial borrowings (without intra-Group borrowings) will total RUB 557.769 billion. This financial plan will provide for a full coverage of the Company’s liabilities without a deficit. Decisions on debt financing under the Borrowing Program will be made on the basis of the market conditions, liquidity and Gazprom’s financing needs.

The information on Gazprom’s preliminary operating results for 2019, the drafts of the Company’s investment program and budget (financial plan) for 2020, and the projected investment program and budget (financial plan) for 2021–2022 will be submitted for consideration by the Gazprom Board of Directors.

Background

The main investments under Gazprom’s investment program for 2020 cover the Company’s priority projects of strategic importance, including the development of the gas production centers in the Yamal Peninsula and eastern Russia, the gas transmission system in the northwest of the country, further construction of the Power of Siberia gas pipeline, and projects securing gas balance in peak periods.

 

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