Page 6 - FSUOGM Week 30 2019

FSUOGM COMMENTARY FSUOGM
Gazprom sheds shares
The Russian gas major is taking advantage of a recent rally in its share price
RUSSIA
WHAT:
Gazprom has sold more than 2.9% of shares held by its subsidiaries.
WHY:
The company is exploiting high share prices to earn cash.
WHAT NEXT:
Despite positive steps, several factors continue to drag down the company’s stock value.
GAZPROM has sold more than 2.9% of its shares on the Moscow Exchange, taking advan- tage of a recent boost in its share price to earn an estimated $2.44bn.
e package of over 693.6mn ordinary shares in the state gas giant had been held by two of its wholly owned subsidiaries, Netherlands-reg- istered Gazprom Gerosgaz Holdings and Cyprus-registered Rosingaz. Based on the close- of-trade price of the shares on July 25, the stock sold for RUB154.3bn ($2.44bn), or RUB211.5 per share.
A total of 494 bids for the shares were received, according to Gazprom, with the o er being oversubscribed by 30%. e identity of the buyers has not been disclosed.
Gazprombank, Gazprom’s financial arm, served as lead arranger for the o ering.
e Russian state and its entities controlled 50.2% of shares in Gazprom at the end of last year, with the rest of its stock held by other inves- tors, including some Gazprom units.
Share price drag
Gazprom has traditionally struggled to compete with private Russian rivals Novatek and Lukoil on share price, for several reasons.
First, investors have been deterred by the
company’s typically high level of capital expend- iture, which has made its management reluctant to share pro ts. In recent years, this spending has largely gone towards three major international gas pipeline projects: the 38bn cubic metre per year Power of Siberia line to China, the 55 bcm per year Nord Stream 2 duct to Germany and the 32.5 bcm per year TurkStream pipe to Turkey.
Another drag on Gazprom’s share price has been its heavy reliance on outside contractors owned by businessmen and close Kremlin allies Arkady Rotenburg and Gennady Timchenko.
Moscow’s perceived use of Gazprom as a geo- political tool in Europe has also sapped interest. A long-standing legal dispute with Ukraine’s
Na ogaz has not helped matters. e company was ordered by a Stockholm arbitration tribunal to pay Na ogaz $2.6bn in compensation for vio- lating their gas transit contract.
Reform
Moscow has taken several steps to bolster Gaz- prom’s share price this year.
In late May, its management revealed plans to jack up dividends to 50% of net pro ts within a few years. e e ect was instant, with Gaz- prom’s share price soaring to a 10-year high of RUB251.65, li ing its valuation by $20bn within
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w w w . N E W S B A S E . c o m Week 30 31•July•2019