Page 133 - RusRPTApr21

gas production in Eastern Siberia gradually grows, Chinese exports are expected to grow to close to 35bn cubic meters. The majority of exports of both conventional pipeline gas and liquefied natural gas will continue to go to EU markets.
The government continues to discuss the social gasification of the Russian regions. Given that there are already quite a few options on the table and no final decision has been made yet, we believe that the market is unlikely to react to the news. The social gasification programme through 2030 envisages that end retail consumers will not have to finance the connection of their residences to the gas transportation system themselves. Vedomosti has cited a government report prepared for the Russian president that discusses the different options for the ‘gas manoeuvre’ to finance social gasification. The key points are as follows.
§ The first option for the manoeuvre is financing the social gasification with Gazprom’s investment programme. This could lead to the loss of government budget revenues, through lower dividends, the provision of tax reliefs or low-cost debt financing from the National Wellbeing Fund. Another path being considered is issuing new shares of Gazprom to finance the investment programme (with the government’s stake in the company increasing).
§ A further option is a speedier indexation of wholesale gas prices, coupled with higher gas transport prices for independent gas producers (Novatek, Rosneft) that use Gazprom’s pipeline infrastructure.
§ Last-mile connections of retail consumers to the gas grid might be financed by shifting these expenses to the large industrial buyers of gas. A one-off tariff rise of 1-2% could bring an additional RUB 20-40bn/a per year.
§ Other (already published) suggestions include creating a single operator for social gasification, raising RUB 13-15/bn per year from regional budgets, adding to the gas transportation tariffs and Gazprom issuing perpetual bonds.
§ The final option is introducing a gas excise or a special surcharge on gas for wholesale consumers. After the gasification is complete, the excise or surcharge could be removed.
Raising equity requires a premium, but still results in the dilution of minority owners. Increasing the government’s stake in Gazprom would inevitably lead to the dilution of minority shareholders and therefore could be negatively perceived by the market, unless a tangible premium to the existing valuation were offered (which is unlikely, in our view). However, this option is potentially
133 RUSSIA Country Report April 2021 www.intellinews.com