Gazprom Revises Its Investment Program
// The company did not considered the acquisition of Sibneft
Oil and Gas Vertical Line
Yesterday, the Gazprom’s administration approved confirmed budget of the company for this year, which foresees an additional 171 billion rubles in revenue. The part of this money would be directed for the financing of Northern-European Gas Pipeline (NEGP) construction. However, newly revised budget and investment program of Gazprom might require more changes in the nearest future – Gazprom practically finished negotiations to attract $12 billion to purchase 72 percent of Sibneft’s stock.
Yesterday, the administration of Gazprom reexamined its budgetary figures for this year and approved projected income in the amount of 1, 654 trillion rubles, which is 171 billion rubles less, than it was forecasted in financial plan. The expenses, according to the revised budget, would be 1.792 trillion rubles. Gazprom promises to keep the number of loans without any changes – at 110 billion rubles.
In the first the half a year Gazprom sold 282.8 billion of the cubic meters (c.m.) of natural gas, which is 1.2 billion c.m. more than originally planned. The sales growth was observed mostly in Europe (by 4.9 billions c.m.) and in CIS countries (by 1.8 billion c.m.) This led to reduction of the sales in internal market. The redistribution of sales allowed Gazprom for the same period to increase the revenue from the gas sales by 47.8 billion rubles with the profit of 149 billion rubles. The net profit was doubled compare to the planned one – up to 88.4 billion rubles.
The Gazprom’s press-service also announced that on Sep.16 Chairman Alexei Miller signed the order about the beginning of the investment stage for NEGP project. Also, the company announced the beginning in this fall of the construction for the land part of NEGP – Gryazevets to Vyborg (Leningrad Region). As Kommersant found out, about 50 billion rubles of profit, which was received from the European sales, would be directed for the construction of NEGP.
However, the revised budget and investment program might require soon new corrections, because of the approaching acquisition of Sibneft. Gazprom is buying 72 percent of the oil company stock from the Sibneft’s stakeholders – offshore companies, which are managed by Millhouse Capital. The changes will affect at first the financial borrowing articles (loans and credits) and financial investments, which are usually spent to acquire new assets. According to Reuters report, during another round of negotiations with Gazprom, the syndicate of Western banks decided to advance $12 billion to the gas monopoly. Kommersant already reported, the syndicate consists of ABN Amro, Dresdner Kleinworth Wasserstein, Citigroup, Morgan Stanley, Goldman Sachs and Credit Suisse.
One of the bankers, participating in negotiations, told Reuters that the banks’ credit committees will approve the money advance to Gazprom before the end of this week. That would be done because of the reception of the funds from the state owned Rosneftegas for earlier sold Gazprom’ stocks. This sale allowed the state to bring its share in the gas concern to the controling one. The banks would give the rest of $7 billion as a regular credit, broken into three parts depending on their payout terms (1.5 years, 3 years and 5 years).
Gazprom can get the money for Sibneft purchase already next week, and most likely, the announcement about the acquisition will appear quite soon as well. According to several Kommersant sources, familiar with the course of the negotiations between Gazprom and Subneft stakeholders, both sides already agreed on the price and other conditions of the deal. The sources categorically refused to name these conditions. However, according to some information, Gazprom might be buying the stock for $3.7 per share ($12.6 billion total for 72 percent of Sibneft stocks). However, in reality, Gazprom will be paying only $3.21 per share ($10.9 billion for whole portfolio), because the price of the deal includes the intermediate dividends that Sibneft stakeholders would receive. These dividends were approved during the stockholders meeting last Monday. The representatives of Gazprom and Sibneft refused to comment on this information.
Let’s note that the payout of $2.3 billion in intermediate dividends by Sibneft left the company without cash necessary for the current operations. Sibneft had to ask for $150 million credit from the syndicate of Western banks. Yesterday, it became known that this credit would be given for three years and two months with interest rate LIBOR+1%. The organizer of the credit was Citibank. The agreement with the bank will be signed in the next several days. The export revenues of Sibneft would become a collateral for the loan.
by
Denis Skorobogat’ko, Nataliya Grib
All the Article in Russian as of Sep. 20, 2005
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