Gazprom’s Financial and Economic Policy Andrey KRUGLOV Deputy Chairman of the Management Committee, Head of the Finance and Economics Department 1
Market Environment Gas Demand Recovery Gas Production Billion cubic meters 55 45 35 25 January February March April May June July August September October November December 2009 2010 Gas sales in Russia Gas export to Europe Gas export to CIS and Baltic states billion cubic meters billion cubic meters billion cubic meters 80 80 150 138.1 129.1 61.7 120 60 60 49.0 90 40 40 25.6 60 17.6 20 20 30 0 0 0 Janurary-May '09 January-May '10 January-May '09 January-May '10 January-May '09 January-May '10 Source: Company data 2 2
2009 Financial Performance (9%) – Sales fell 9% YoY due to a drop in global gas demand, which resulted in the 3 290 decreased supply volume and gas price on 2 999 Proceeds (1) the key markets in 2009. (RUB billion) – Starting from 2009, the financial result of the trading activity is given separately as net income in the consolidated statement of total income . 2008 2009 13% – An increase in 2009 operating expenses is (26%) provoked by higher expenditures for 59% Adjusted purchased oil and gas, as well as for their 343 334 1 464 292 transit. EBITDA (2) 1 090 202 211 – The growth of these expenditures is ( RUB billion ) caused by an increase in the Central Asian suppliers’ gas purchase prices and in the rates for gas transit across Kazakhstan 4Q08 1Q09 2Q09 3Q09 4Q09 2008 2009 and Uzbekistan. 723% 5% 77% – The 2009 decline in the operating profit 308.7 780.0 was offset by non-recurring income and Profit (3) 743.0 positive financial activity of associated 192.6 174.6 ( RUB billion ) companies. 103.7 37.5 – As a result the income attributable to the Gazprom shareholders showed a 5% increase in 2009. 4Q08 1Q09 2Q09 3Q09 4Q09 2008 2009 The exchange rate is applied as of the end of the appropriate period. 1. The proceeds are calculated as a sum of sales proceeds and net trading profit excluding actual deliveries. 2. EBITDA is calculated as operating profit plus depreciation and provisions for assets impairment (excluding provisions for accounts receivable and prepayment). 3. The profit for the period attributable to the shareholders of Gazprom. 3
Gas Sales Proceeds Net proceeds from gas sales in and beyond Europe RUB billion (13%) 1500 Proceeds decreased due to a drop in demand and a significant decline in gas 1000 prices on the European market 1 260.6 1 103.0 500 0 2008 2009 Net proceeds from gas sales in the former Soviet Union RUB billion 1500 Proceeds decreased due to a drop in sales 1000 (13%) volume, which was partially offset by an increase in gas prices within the FSU states 500 356.5 309.9 0 2008 2009 4
Gas Sales in Russia Net proceeds from gas sales RUB billion + 5% 600 Proceeds grew due to a rise in the average regulated gas price, which was partially 400 evened by the sales drop 503.1 479.4 200 0 2008 2009 Annual average gas price for industrial consumers and population (1) RUB per 1 000 m 3 5 000 +15% 4 000 +15% +15% 3 000 +27% +16% +15% +26% 2 000 +15% +19.2% +11% +17% +27% 1 000 +15% +25% +15% +16% 0 2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E Industrial consumers Population 1. Starting from 2009 the gas price growth rates are brought in line with the Scenario Conditions and Forecast for Russia’s Soci al and Economic Development in 2010 – 2012 published by the Russian Ministry of Economic Development in June 2010. 2. The actual price was changed by 5% on January 1, 2010; and by 15% on April 1, 2010. It is planned to increase the price by 5% on January 1, 2011 and by 9.5% on April 1, 2011. 5
Gazprom’s Budget (1) 2009 2010 Budget parameters Actual Estimated (2) 61 58 Oil price, USD per barrel 31.69 33.90 RUB/USD exchange rate Investment program , RUB billion 803.7 802.4 Borrowing program, RUB billion 304.9 90.0 Weighted average price for the gas sold beyond FSU, USD per 1,000 cubic meters 298.4 280.0 Net profit, RUB million 624,613 (3) 554,504 The parent company . 1. 2. The plan approved by the resolution of the Gazprom Board of Directors No.1511 dated November 24, 2009. 3. With the adjusted amount of financial investment (RUB 301,561 million). 6
Gas Production and Transportation Costs (Specific Indicators) Gas production cost Gas transportation cost RUB per 1,000 cubic meters RUB * per 1,000 cubic meters/100 kilometers 45 600 450 30 300 535.2 528.5 39.1 38.6 38.7 516.3 459.2 33.6 15 150 0 0 2008 Actual 2009 Estimated 2009 Actual 2010 Estimated 2008 Actual 2009 Estimated 2009 Actual 2010 Estimated 7
Cost Optimization in 2010 (Parent Company) BUDGET COST REDUCTION RUB 265.5 billion (1) based on the results of project ranking and cost items prioritization including: RUB 83.5 billion operating activity RUB 182.0 billion investment activity RUB 11.7 billion Cost optimization (reduction) program The Company is implementing: Comprehensive Action Plan on the Company’s financial strategy for 2010 Comprehensive Action Plan on the Company’s cost optimization for 2010 Compared to the initial draft version of the Budget compiled in conformity with the requests of the Company’s structural subd ivisions 1. 8 8
Asset Management and Corporate Relations Payouts per share Fixed assets revaluation results (balance sheet value) as of January 1, 2010 RUB RUB billion 3 2.66 70 2.54 2.39 RUB 3,775 billion 60 50 2 1.5 40 1.19 + RUB 482 billion 30 0.69 0.36 1 20 0.4 RUB 3,293 billion 10 0 0 Before After 2002 2003 2004 2005 2006 2007 2008 2009 revaluation revaluation Amount of dividends Payouts per share Gazprom’s fixed assets revaluation was carried out The Gazprom Board of Directors proposed RUB 2.39 as of January 1, 2010 : dividend payout per share payout grew 664% versus 2008 assets value increased by RUB 482 billion maximum payout level of 2006-2007 reached 27 subsidiaries of Gazprom Group simultaneously carried out revaluation of their fixed assets 9
Debt and Liquidity Management Relative debt indicators (1) Total and net debt RUB billion 1.7x 1.7x 1.5x 1.4x 1.4x 293 1.3x 254 1.2x 291 1.0x 348 0.9x 0.7x 1469 1372 1219 1018 2007 2008 9M09 2009 2007 2008 9M09 2009 2010E Net debt Monetary assets and their equivalents Total debt / Adjusted EBITDA Net debt / Adjusted EBITDA Financial instruments diversification Export financing Export financing for construction of the Portovaya compressor station – some USD 940 million Project financing Phase II financing of Sakhalin II, Gazprom Group cost recovery – up to USD 700 million Signing documents to raise EUR 3.9 billion in project finance for Phase I of the Nord Stream project European commercial paper program Issue I – September 18, 2009 worth USD 600 million with a 3.4% interest rate was repaid on December 18, 2009 Issue II – October 9, 2009 worth USD 600 million with a 3.2% interest rate was repaid on December 18, 2009 1. Calculated as of the end of the respective period. 10 10
Shaping Centralized Cash Flow Management System Russian notional pool shaping Liquidity management projects in foreign subsidiaries Gazprombank Deutsche Bank AG Zero Balancing Pool Centralized cash flow control system Companies of Gazprom Germania group Current participants : Promising participants: BNP Paribas 56 subsidiaries and subdivisions of the 20 more subsidiaries and subdivisions Company of the Company Notional Pool Gazprom E.P. International B.V., Gazprom Capital gain from the temporarily disposable cash assets placed by Gazprom Group on a Sakhalin Holdings B.V., Gazprom Finance short-term basis featured a 40% increase Benefits : creating a multi-bank money flow monitoring and management system improving operational planning in subsidiaries shaping a common payment position of the Group increasing capital gains from the Company’s cash assets placement forming conditions for Gazprom’s short -term concessional lending 11
Gazprom’s Informatization Strategy Integration platform • Automated system for development of management reports on the basis of key performance indicators (KPI) KPI Corporate CORPORATE DATA STORAGE portal Vertically integrated Sectoral data reference bank (SDRB) Information management systems (IMS) Integration platform Gazprom Group IMS MRMB ADCS UGSS IMS ТGGC IMS HCRM AHRMS MRACS IMS ME ABMS ACRS ALMS Types of business IMSI Investment projects Typical information management systems of an enterprise (IMS E) according to the types of activity Types of activity Business processes Processing Gas Production Gas UGS transportation distribution and sale IMS MRMB IMS for replenishment of mineral and raw material base and hydrocarbon production IMS T IMS for transportation of gas and gas condensate Subsidiaries Investment projects Investment projects Subsidiaries IMS HCRM IMS for hydrocarbon refining and marketing ABMS Automated budget management system IMSI IMS for investments ACRS Automated consolidated reporting system ADCS UGSS Automated dispatch control system for UGSS ALMS Asset and liability management system AHRMS Automated human resources management system MRACS Management and repair automated control system IMS ME IMS for materials and equipment
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