Page 15 - FSUOGM Week 39

FSUOGM POLICY FSUOGM

Gazprom prepares a bond to finance

regional gasification

RUSSIA GAZPROM has registered RUB150bn ($2bn) mandate to supply gas to the domestic market
worth of perpetual ruble bonds to finance its several years ago in order to increase the compe-
Russia has launched a regional gasification programme, Kommersant tition and hence efficiency of the services. As fol-
project to connect retail reported on September 29. lowed by bne IntelliNews, Rosneft has reportedly
gas consumers to gas Russia has launched a project to connect retail complained about Gazprom's hegemony over
infrastructure, but the gas consumers to gas infrastructure linked to access to the Gas Transportation System (GTS).
question is who will pay the state-controlled gas giant Gazprom, but the “The bond announcement follows late Friday
for the work. question is who will pay for the work. The ruling news that management had rejected a MinEn-
United Russia party passed the RUB2 trillion ergo proposal to partially pay for the project via
($25bn) cost on to Gazprom, which is trying to lower dividends, proposing just such bonds as
work out where it will find the money. an alternative. The bonds may carry some gov-
In a separate report Interfax said that the ernment guarantee and, per press reports, may
overall spending on the gasification programmes be accounted by Gazprom as equity rather than
in Russia is estimated to be RUB603bn ($8.1bn) debt,” BCS Global Markets said in a note.
over 2021-25, citing the actual Gazprom pres- Investment bankers were buoyed by the news,
entation during a meeting organised by United as it means that Gazprom’s dividends probably
Russia. won’t be cut, which the management of the com-
Reportedly, of this, Gazprom might invest pany is against. Gazprom has been paying about
RUB526bn ($7.1bn), with RUB247bn possibly RUB8 per share in dividends for years but last
allocated to the construction of offshoot pipe- summer caused a huge rally in the company’s
lines and gas distributing plants, and RUB279bn stock after it hiked dividends twice in a week to
to build inter-settlement pipelines. RUB16 as part of a new policy. At the time the
"RUB526bn is equal to 6% of Gazprom’s over- management said the increase was permanent
all capex and 8% of its non-upstream capex over and the company’s stock rallied 30% on the news.
2021-25," VTB Capital (VTBC) estimated on “This is positive news for Gazprom in that
Augusts 25. it provides concrete confirmation of manage-
Another option is to cut Gazprom’s dividend ment’s Friday statement, thus providing comfort
payments. Russian Deputy Minister of Energy to the market that the company’s new dividend
Sorkin said that the Ministry of Energy had said policy – which will move the company to 50%
the government was considering this option too, payouts of IFRS net income no later than next
but the announcement of the perpetual bonds is year – is indeed sacrosanct. As to the effect
a concrete step towards funding the project. on Gazprom’s balance sheet, the total is small
The regional gasification will increase Gaz- enough relative to Gazprom’s $63bn of total debt
prom’s clout on the domestic market, where it (and $39bn of net debt) that it is largely irrele-
has increasingly begun to compete with the state- vant to us whether it is accounted for as debt or
owned oil producer Rosneft, which was given a equity,” BCS said. ™

Week 39 30•September•2020 www. NEWSBASE .com P15