Page 128 - RusRPTOct22

MinFin may propose to raise income taxes on LNG projects to 32%,
reports Interfax. This follows news earlier in the week of a range of new taxes on oil & gas producers – and mostly on gas producers – including an increase in Gazprom’s gas export duties from 20% to 50% for prices over $300/mcm and an undetermined increase in taxes on LNG producers. MinFin reportedly is targeting up to Rb200bn of additional revenues from higher taxes on LNG. Analysis: Perhaps Rb50bn net loss to Novatek next year. Currently, Yamal LNG pays a special income tax rate of only 15.5%, although that is scheduled to expire in the last years of this decade and revert to Russia’s standard 20% corporate income tax. Novatek’s major LNG project is Yamal LNG, which with 17.4mtpa of capacity is by far Russia’s largest, well ahead of the 11.5mtpa of the only other large-scale project, Gazprom’s Sakhalin-2. In the case of Yamal LNG, we estimate that in 2023 such an increase in taxes might raise an additional cRb100bn for the government’s coffers, roughly in line with MinFin’s estimates for the sector as a whole. For Novatek, which owns 50% of Yamal LNG, this implies a loss of Rb50bn and, thus, lower dividends of Rb25bn, given its 50% payout policy.
Gas tariffs are hiked by 8.5%, grid tariffs – by 9% from Dec 1, 2022 –
Economy Ministry. To recap, gas tariffs were already hiked by 5% from Jul 1, 2022. The final decision rests with Federal Antimonopoly Service. If tariffs again increased by 8.5%, gencos would pass the rising fuel costs onto spot price that should likewise increase. For grids no details besides 9% increase, we do not know whether it applies to all users or only households. Positive for RusHydro, Inter RAO and Unipro. The effect from the change will depend on whether it applies only to residential users or to industrial consumers as well. If it applies to all (including industrial consumers), than a gas tariff hike of 8.5% inevitably will lead to an increase in spot price in European Russia. This will benefit efficient low cost gencos (including RusHydro, Inter RAO and Unipro).
128 RUSSIA Country Report October 2022 www.intellinews.com