Page 8 - FSUOGM Week 25 2021

FSUOGM COMMENTARY FSUOGM

Gazprom's financing in focus

The Russian gas supplier is looking to rein in its debt while financing a

number of key new projects

RUSSIA RUSSIAN gas supply giant Gazprom is targeting
a 50% upswing in EBITDA in 2021 on the back
of soaring demand for gas in Europe.
Gas prices on European spot markets recently
exceeded $360 per 1,000 cubic metres accord-
ing to Gazprom, which is unusually high for
any time of year but especially summer, when
demand is typically low. Demand has picked
up this year as a result of the post-coronavirus
(COVID-19) economy recovery, but supply
remains tight following reductions made during
the pandemic.
Thanks to these conditions, Gazprom expects
to generate $30bn in EBITDA in 2021, compared
with $20.4bn in 2020, the company’s deputy
chairman, Famil Sadygov, said at a press confer-
ence on June 16. Gazprom is planning to raise financing for
The company suffered a 29% decline in the development of its joint project with Germa-
EBITDA last year as the pandemic took its toll ny’s Wintershall Dea by the end of 2022, Sadygov
on gas demand in Europe. But this year has been said. The pair are developing deep Achimov lay-
quite different for Gazprom, with the company ers of the Urengoiskoye field in Western Siberia
producing RUB701bn ($9.6bn) in the first quar- together, having recently commissioned new
ter, up 38% year on year. phases.
Sadygov also said Gazprom was planning
Financing plans to raise financing in 2020 for the Ust-Luga
Gazprom is also looking to attract project financ- gas processing complex in north-west Russia.
ing to ease its debt burden, Sadygov continued. The company held a formal ground-breaking
The company’s net debt to EBITDA ratio ceremony for the project in late May, despite
grew to 2.6 in 2020, up from 1.4 in the previous cancelling an engineering, procurement and
year and 0.8 in 2018. But the ratio would have construction (EPC) contract three months ear-
exceeded 3 if not for the measures Gazprom lier that had been awarded to Russia’s Nipigaz.
undertook to improve its financial position amid It is considering hiring Germany’s Linde as a
the pandemic, according to Sadygov. replacement.
The target for this year is a ratio of 1.6-1.7, the “Financial consultants – VEB and Gazprom-
executive continued. Gazprom has reduced its bank – are preparing models and final options
initial borrowing plan for the year by RUB100bn for financing opportunities,” Sadygov said, add-
($1.4bn) to RUB411bn, he said, but the company ing that the most likely option was a 30:70 split
is aiming to issue Eurobonds soon, possibly in between equity financing and borrowed funds.
euros, US dollars and Swiss francs. It also intends News that funding will not be finalised until
to issue RUB150bn in perpetual bonds before next year casts doubt on whether the project will
the end of the year. be realised on schedule. Gazprom had originally
The Nord Stream 2 project is fully funded, envisaged bringing the facility on stream in 2023.
Sadygov added. Gazprom had originally sought Gazprom is also considering financing
to form a consortium with European partners options for the Tambeyskoye, Layavozhskoye
Engie, OMV, Royal Dutch Shell, Uniper and and Urengoyskoye fields in Western Siberia.
Wintershall Dea to share the pipeline’s €9.5bn Tambeyskoye will eventually supply gas to the
($11.3bn) equally. Instead, Gazprom covered Ust-Luga complex.
half of cost itself and its European partners sup- Despite the focus on debt management, Gaz-
plied it with loans for the rest. prom officials did not discuss any divestments
Nord Stream 2 is now nearing completion, and Sadygov ruled out the company undertak-
with Russian President Vladimir Putin hailing ing a secondary public offering or an additional
the completion on June 4 of one of the pipeline’s share issue. He also said the company was not
two strings. But there is a lot of uncertainty currently intending to reduce its 9.99% stake in
about when Nord Stream 2 will start pumping Russia’s biggest LNG exporter Novatek, but said
gas commercially and when it will reach its 55bn the option could be on the table when market
cubic metre per year capacity. conditions became more favourable. ™

P8 www. NEWSBASE .com Week 25 23•June•2021