Page 135 - RusRPTDec21

production areas – Yamal, Yakutsk and Irkutsk – the Power of Siberia gas pipeline, the creation of gas processing plants in the east and northwest of Russia, the reconstruction of a gas transmission system for supplying ethane-containing gas through specially allocated gas pipelines to the Baltic Sea coast, and projects ensuring peak gas balance.
Translating the budget into cash flow capex. As we mentioned in our Gazprom – Gazprom's Eleven, of 20 November 2013, there are multiple numbers (we counted 11 at one point) for Gazprom’s investment programme and capex, which are not always easy to reconcile with one another. The announced investment programme is for Gazprom’s parent company (the gas business) alone, without Gazprom Neft and GEH, and includes VAT. The ‘implementation’ capex number of RUB 1.427tn means that in 2022 Gazprom expects to commission RUB 1.427tn worth of constructed fixed assets.
At the same time, the ‘financing’ (cash) investment programme is lower than the ‘implementation’ programme by RUB 0.3tn. This likely puts Gazprom’s gas business ‘financing’, or cash, capex at RUB 1.1-1.2tn. If we add some RUB 0.45tn of Gazprom Neft’s guided capex and RUB 0.15tn of GEH and other subsidiary capex, we arrive at a forecast of RUB 1.8-1.9tn cash capex for Gazprom in 2022. This although is slightly higher, the number still broadly corresponds with our consolidated capex forecast of RUB 1.8tn. However, the scale of the ‘implementation’ capex is unprecedented, and is to translate into cash capex at some point. Using the ‘implementation’ capex number puts annual capex over the RUB 2.0tn mark (even before accounting for M&A). For this reason, we think this news might be negatively perceived by investors – although the presently elevated gas price levels are likely to soften the overall reaction to the announcement.
Gazprom’s management made a number of comments at the start of November. I
It reconfirmed the guidance of 183bcm for exports to Europe and Turkey this year.
Supplies to Turkey might be at 24-25bcm in 2021.
The management did not provide any guidance for sales volumes on Gazprom’s electronic trading platform. In October the liquidity there dried up, with the last transaction taking place on 13 October.
In 2022, Gazprom’s European export volumes will be determined by weather and LNG supplies to Europe.
The reiterated 183bcm export guidance is below our expectation of some 190bcm for 2021. We believe it cuts against the message of President Vladimir Putin, who said that Gazprom might deliver record volumes to Europe this year (the all-time high export level was reached in 2018 at 200.7 bcm). We calculate that if the export volume will finally amount 183bcm this year, it would create a $2bn (5%) downside to our EBITDA forecast. We note, however, that our
135 RUSSIA Country Report December 2021 www.intellinews.com