Wednesday, July 17, 2024
 
 

Gazprom to the Rescue!

Russian state gas giant to plug budget shortfall

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Russian gas monopoly Gazprom said full-year profit increased almost five-fold in 2015, which means the government might rely on the state energy giant to plug a hole in the state budget.

Russian Prime Minister Dmitry Medvedev two weeks ordered state companies to pay 50% of their 2015 net profits under Russian or international accounting standards in dividends.

“Gazprom, the company, doesn’t look to be willing to ask for any exemptions so it seems Gazprom will pay,” Natalya Orlova, chief economist at Russia’s Alfa Bank, told New Europe by phone on April 29. “Basically this year they will approve the dividend payout ratio. I think it’s 50 percent of their profits and the state as a major shareholder will receive a proportion.”

Gazprom will make its dividend decision based on the government’s directive, Bloomberg quoted Igor Shatalov, first deputy head of the company’s finance department, as saying on April 28 on a conference call, adding that the board will review its dividend recommendation on May 19. Dividend policies should “balance the interests” of a company and its shareholders, Shatalov said.

Gazprom said in a statement on April 28 net income rose to 787 billion rubles ($12.2 billion) in 2015 from 159 billion rubles in 2014.

Total sales (net of excise tax, VAT and customs duties) increased by 483,507 million rubles, or 9%, to 6,073,318 million rubles for the year ended December 31, 2015 compared to the year ended December 31, 2014. The increase in sales is mainly driven by the increase in sales of gas to Europe and other countries, Gazprom said.

The Russian energy giant meets about 30% of Europe’s gas demand. Europe remains one of Gazprom’s most lucrative markets. Gazprom Management Committee Deputy Chairman Alexander Medvedev said earlier in April that Gazprom’s export to Europe would stay above 160 billion cubic metres in 2016.

Orlova said the two companies that will refurbish the budget are Gazprom and Rosneft, Russia’s biggest oil producer. “This is just one of the instruments to resolve the budget problem but the dividends per se will not be enough,” she said.

On April 22, Gazprom’s domestic rival, state-run Rosneft said its board had recommended paying a dividend of 11.75 rubles per share on its profits last year, up from the 8.21 rubles paid for 2014. The dividend payout will total 124.5 billion rubles ($1.87 billion), or 35% of Rosneft’s net profit under the international financial reporting standard (IFRS), the company said in a statement. The payout is less than the dividend rate of 50% of net profits that the government has ordered state-owned companies to pay. Orlova noted that Rosneft has a higher debt burden and plans to boost capital expenditure.

The Russian economy has plunged into recession since 2014 amid the drop of global oil prices and Western sanctions imposed over Moscow’s annexation of Crimea and involvement in Eastern Ukraine. “If oil will keep climbing and oil will go to 50 dollars per barrel the budget is balanced,” Orlova said. “So if oil will keep continue to climb and reach 50, then all problems solved for this year.”

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Co-founder / Director of Energy & Climate Policy and Security at NE Global Media

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