Page 7 - FSUOGM Week 39 2019
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FSUOGM INVESTMENT FSUOGM
Gazprom set to buy large subcontractors
RUSSIA
Rotenberg’s assets are among the largest beneficiaries of state construction and infrastructure projects.
RUSSIA’S natural gas giant Gazprom will close a deal to buy out 100% of the company’s largest subcontractor Stroygazmontazh controlled by oligarch Arkady Rotenberg for RUB70bn-95bn ($1.1bn-$1.5bn) within the next month, accord- ing to reports by RBC business portal and Vedo- mosti daily citing unnamed sources.
As reported by bne IntelliNews, Gazprom also considered buying out another major sub- contractor controlled by Rotenberg Gazprom Burenie (Gazprom Drilling), estimated to be worth $0.7bn-$0.9bn.
Assets of sanctioned oligarch Rotenberg are one of the largest beneficiaries of state construc- tion and infrastructure contracts, and two deals with Gazprom could bring a shift in how Krem- lin oversees mega-construction projects.
Another asset of Rotenberg StroyProyek- tHolding has recently teamed up with the state development bank VEB.RF (former Vne- sheconombank). In 2018 the bank was entrusted to Igor Shuvalov, a ex-deputy prime minister and trusted Kremlin bureaucrat who revamped the bank into the main hub of state investment spending in the economy.
VEB and Gazprom have in effect been vying for a chance to buy Rotenberg’s assets and in the end the two entities have walked off with one each.
This represents a change in the way
mega-projects have been overseen. In the past president Vladimir Putin personally supervised these projects by maintaining close contact with the owners, who are regular guests at his dacha. But selling the companies to VEB and Gazprom, Putin is institutionalising the control of the way state funds are spent on mega-projects – a role that VEB in particularly is supposed to play.
As far as Gazprom’s investment case is con- cerned, commenting on the Stroygazmontazh deal, Sberbank CIB said that “the key factor is that the newly acquired subcontractor would be off Gazprom’s balance sheet, as it would be con- solidated by an affiliated entity.”
The entity to reportedly absorb Roten- berg’s assets is Gazstroyprom, a construction company that had RUB310bn in assets and RUB178bn in liabilities as of end-1H19 and gen- erated RUB40bn in revenues and RUB9bn in net income in 1H19.
Based on Interfax reports, Gazstroyprom was created based on the assets of former major Gazprom subcontractor Stroygazconsulting. The company is already working on Gazprom’s projects in Yamal and in East Siberia.
BCS Global Markets on September 26 warned that “technical completion of the ear- lier appeared information of the deal may indi- cate impending changes in the policy of capital expenditures.”
VEB gets $3bn from Russian gov, potentially for Baltic gas hub
RUSSIA
Gazprom has approved development of an integrated LNG and gas processing hub on the Baltic Sea.
RUSSIAN state development bank (VEB.RF) will get RUB200bn ($3.1bn) of federal budget funds as a five-year deposit from the Finance Ministry, Reuters reported on September 30 cit- ing an announcement by the government.
The interest rate to be paid by VEB will amount to the key interest rate of the Cen- tral Bank of Russia (7%) minus 0.5pp. The announcement did not disclose how the funds will be used.
As reported by bne IntelliNews, VEB pre- viously backed the idea to support to develop major gas processing and petrochemical projects on the Baltic Sea by natural gas giant Gazprom and RusGazDobycha.
The Finance Minister Anton Siluanov said that his ministry could place some of the free budget funds with VEB to finance the Ust-Luga gas-chemical complex.
Gazprom previously argued that at least
RUB700bn-900bn investment is needed in Ust-Luga, while other official statements lim- ited VEB’s potential participation in the project at RUB111bn. Siluanov also previously argued that Ust-Luga was worth the investment from the National Welfare Fund.
Gazprom had been working with Royal Dutch Shell to develop a 10mn tonne per year (tpy) LNG export terminal at the Baltic port of Ust-Luga, but abandoned this plan earlier this year in favour of a larger integrated processing complex.
Partnered with RusGazDobycha, a company affiliated with Kremlin ally Arkady Rotenburg, Gazprom took a final investment decision (FID) on constructing a hub at Ust-Luga capable of annually processing 45bn cubic metres of natu- ral gas into 20 bcm of treated gas, 13mn tonnes of LNG, 4mn tonnes of ethane and more than 2.2mn tonnes of LPG.
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