Page 128 - RusRPTDec22

9.2 Major corporate news 9.2.1 Oil & gas corporate news
● Gazprom
A Polish court overturned an $8bn fine by the Polish antimonopoly regulator levied on Gazprom and five European companies for participating in the Nord Stream 2 gas pipeline construction project, reports Interfax. The fine was initially levied in 2020, and represented the maximum possible under law, or 10% of revenue of Gazprom and its partners Engie Energy, Uniper, OMV, and Wintershall Dea. A fine that seemed unlikely to stand, but positive regardless. The decision by the Court for the Protection of Competition and Consumer Rights of Poland may be appealed by the Polish regulator (UOKiK), but it seems to us that this may well be the end of the story. The court declared the Nord Stream-2 joint venture was never established, and that the assessment of the consequences for the economy, as well as attempts by project participants to circumvent the legislation, goes beyond the responsibility of UOKiK. We had not put this fine into our Gazprom model, so there is not adjustment for us to make in our valuation, but we nonetheless consider the news to be positive.
Gazprom’s Management Committee has approved a huge initial 2023 investment budget: Per a company press release, the 2023e budget has been set at RUB2.3trn, 15% above the final 2022e of RUB1.98trn and 24% above our forecast of RUB1.85trn.
Gazprom’s 2023 investment budget came in surprisingly large, and on its face is negative for shareholders, being up 15% y/y and almost 25% above BCS GM own forecast.
This unexpectedly large budget could reflect a larger-than-expected slate of inflexible projects (Power of Siberia-1, regional gasification, Baltic LNG, etc.), which would be somewhat negative. However, it could also represent a much more optimistic management assessment of the outlook for the European market – and thus and cash flows – than we are allowing for, which could be a neutral to positive signal. In any event, with a hard dividend policy of 50% of adj. IFRS net income, the CapEx program should no longer have implications for dividends.
In USD terms, the largest investment budget since 2014, and a material increase: Gazprom’s investments over the past 7 years have averaged $27.5bn/yr (2015-2022e), including theRUB1.98trn ($28.7bn) final budget recently approved for 2022e. BCS GM had included an assumed decline to RUB1.85trn ($26bn) in our 2023e forecast, so this budget represents a
128 RUSSIA Country Report December 2022 www.intellinews.com