GAS SUPPLY TO DOMESTIC MARKET. EXECUTING RUSSIAN REGIONS GASIFICATION PROGRAM Kirill Seleznev Management Committee Member, Department Head, Gazprom; Director General, Gazprom Mezhregiongaz PRESS CONFERENCE AS PART OF GAZPROM’S ANNUAL GENERAL SHAREHOLDERS MEETING
Natural Gas Sales by Gazprom Group in Russia Gazprom Group’s * domestic gas sales Market environment Climate: higher ambient temperatures versus those in billion m 3 51% previous years. Finance and economics: gas consumption decline in power sector, cement industry, metallurgy and of total gas sales by the Group – 4.8% agrochemistry. in 2014 State regulation: independent producers offer their gas to prominent consumers in high-yield regions at lower Gazprom Group’s earnings from domestic gas sales prices versus regulated ones. RUB billion 27% Market development In October/December 2014 Gazprom in cooperation of total gas sales by the Group +3.1% with SPIMEX and Settlement & Depositary Company in 2014 arranged regulated natural gas trading at SPIMEX: Gazprom sold 429.4 million m 3 of gas at trading Gazprom Group’s average domestic gas price sessions; RUB per 1,000 m 3 Gazprom is involved in improving relevant regulations to promote further development of exchange gas trade. +8.2% * – excluding intra-Group sales GAS SUPPLY TO DOMESTIC MARKET 1 EXECUTING RUSSIAN REGIONS GASIFICATION PROGRAM
Basic Operating Results of Gazprom Mezhregiongaz in Ensuring Reliable Gas Supplies to Russian Consumers in 2014 In 2014 Gazprom Mezhregiongaz was vested with authority of Sales of natural gas produced by Gazprom and other sole executive body of Gazprom Gazoraspredeleniye producers (billion m 3 ): Total 694,200 km ― t otal length of Gazprom 2013 Mezhregiongaz gas grids – 4.4% 2014 232 billion m 3 ― of gas conveyed through Gazprom Mezhregiongaz grids in 2014* Socially significant consumers Gas supplied to: (heat supply companies (HSC), population, budget-financed companies) 25.7 million 30 thousand 2013 apartments and industrial facilities + 4.1% 2014 households Far East 270.1 thousand 6.2 thousand (Kamchatka and Primorye Territories, Sakhalin Region) public utility facilities agricultural facilities 2013 2014 * Gazprom Group’s gas distribution figures do not cover Gazprom Transgaz Kazan 2015 (projected) facilities GAS SUPPLY TO DOMESTIC MARKET 2 EXECUTING RUSSIAN REGIONS GASIFICATION PROGRAM
Consumers’ Debt to Gazprom Mezhregiongaz for Gas Supplied Companies with debts from RUB 10 mln are listed on monthly basis at http://mrg.gazprom.ru Overdue debt fluctuations for all consumer groups Russian Ministry of Defense considerably improved situation with its gas payments RUB billion 04.01.2014 Overdue debts, 2012 RUB billion 04.01.2015 2013 +39.5% KES-Holding considerably impaired situation with its gas payments 2014 +9.4% 01.04.2014 Overdue debts, RUB billion +28.9% 04.01.2015 04.01.2015 Shares of relevant consumer groups Overdue debts % Payments made in gas supplies by Gazprom Mezhregiongaz in total debt (as of 04.01.2015) (as of 04.01.2015) in 2014 As of 04.01.2014 As of 04.01.2015 % 105.2% RUB 22.1 billion Generating companies 95.8% 33% Heat supply companies (HSC) % 13% 78.3% RUB 50.3 billion 77.7% 63.1% RUB 2.4 billion Budget-financed consumers 1.4% 84.9% % RUB 62.4 billion Population 89.1% 88.1% 18% % RUB 26.0 billion 34.6% % 95.4% 96.3% Other consumers GAS SUPPLY TO DOMESTIC MARKET 3 EXECUTING RUSSIAN REGIONS GASIFICATION PROGRAM
Power Generators’ Debt for Gas Supplied by Gazprom Mezhregiongaz Share of TGC-2 and KES-Holding in Total Debt of Power Power generators’ overdue debts (as of 04.01.2015) Generators exceeds 75% RUB billion Total debt, 22.1 including: KES-Holding debt structure (as of 04.01.2015) TGC-2 Debt Debt KES-Holding Region (RUB billion) Region (RUB billion) Samara 2.17 Penza 0.35 TGC-2 debt structure (as of 04.01.2015) Saratov 1.02 Udmurtia 0.35 Region Debt (RUB billion) Nizhny Novgorod 0.74 Ivanovo 0.27 Tver 4.4 Orenburg 0.61 Komi 0.27 Arkhangelsk 3.1 75,8% Perm 0.59 Mordovia 0.24 Yaroslavl 1.1 Ulyanovsk 0.49 Mari El 0.03 Vologda 0.1 Kirov 0.39 Chuvashia 0.005 Novgorod 0.12 Vladimir 0.36 Russian Ministry of Internal Affairs for Tver and Yaroslavl Regions launched 2 criminal investigations concerning illegal actions of TGC-2 and TKS management; TKS (a wholly-owned subsidiary of TGC-2), in respect of which a bankruptcy procedure had been initiated and which had for many years operated the property (CHPPs, boiler houses and heating grids) leased from TGC-2 in Tver and accumulated a multi-billion gas debt, ceased its activities starting from July 1, 2014; Tver Generation, another wholly-owned subsidiary of TGC-2, which replaced TKS, was sold to third parties on December 28, 2014 with all the previously transferred CHPPs, three boiler houses and heating grids; TGC-2 registered the following legal entities: Vologda Generation, Novgorod Generation and Arkhangelsk Generation. GAS SUPPLY TO DOMESTIC MARKET 4 EXECUTING RUSSIAN REGIONS GASIFICATION PROGRAM
Regions with Worst Payment Discipline and Largest Debts Debt (as of Debt Region 04.01.2015, Paid Main debtors Region (as of 04.01.2015, Paid Main debtors RUB billion) RUB billion) Population Population, HSC Dagestan 30.07 38.3% Stavropol Territory 3.67 90.3% Population, HSC, Nizhniy Novgorod HSC 1 Moscow Region 12.03 88.6% 3.31 88.2% Region KES-Holding Arkhangelsk Chechnya 11.64 51.8% Population 3.25 104.8% TGC-2 Region TGC-2, HSC HSC Tver Region 9.41 75.6% Bryansk Region 3.0 80.9% Population, HSC HSC, KES-Holding Kabardino-Balkaria 7.76 58.8% Perm Territory 2.99 89.6% HSC, Population HSC, KES-Holding North Ossetia 7.32 65.6% Orenburg Region 2.69 86.9% Population HSC Ingushetia 5.59 42.3% Volgograd Region 2.47 86.5% HSC, Population TGC-2 Krasnodar Territory 4.15 90.5% Yaroslavl Region 2.36 92.8% KES-Holding HSC Samara Region 3.96 87.5% Tula Region 2.31 93.6% HSC, Saratov Region 3.79 84.2% Vladimir Region 2.25 82.9% HSC, KES-Holding KES-Holding 1 HSC – Heat Supply Companies GAS SUPPLY TO DOMESTIC MARKET 5 EXECUTING RUSSIAN REGIONS GASIFICATION PROGRAM
Main Procedures Aimed at Improving Gas Payment Collection in 2014 including individuals including individuals RUB 2.6 Court rulings and RUB 27.3 Claims (notices) filed against debtors judgements made within billion billion amounted to suits in the amount of RUB 227.5 billion RUB 66.8 billion including individuals including individuals Debts recovered as a RUB 5.4 RUB 4.3 Suits brought against debtors result of enforcement billion billion amounted to procedures in the RUB 87 billion amount of RUB 66.3 billion Debts assigned by insolvent legal entities to solvent ones amounted to RUB 11 billion Assigned debts including payments under previously signed contracts were settled in amount of RUB 11.1 billion GAS SUPPLY TO DOMESTIC MARKET 6 EXECUTING RUSSIAN REGIONS GASIFICATION PROGRAM
Improving Operations of Gazprom Mezhregiongaz Group’s Gas Distribution Companies Making Gas Distribution Companies More Client- Gazprom Mezhregiongaz Group defined priorities Oriented for its gas distribution companies These are: Expanding and enhancing Improving One-Stop Shop Enhancing reliability and safety of gas distribution services service systems; Reaching 100% consumer coverage by contracts on maintenance and repair of house and (or) apartment Separating servicing business as independent activity gas equipment; Mitigating adverse environmental effect of production activities; Implementing energy saving and energy efficiency More loyal clients, wider and better service market programs; Developing the servicing business. Pilot service companies established in Bryansk, Rostov, Tula Regions and Krasnodar Territory. More service companies to be established in Leningrad, Nizhny Novgorod, Smolensk, Yaroslavl, Novosibirsk, Kemerovo, Tomsk Regions; Stavropol and Altai Territories and Sochi. GAS SUPPLY TO DOMESTIC MARKET 7 EXECUTING RUSSIAN REGIONS GASIFICATION PROGRAM
Arranging One-Stop Shop Service within Relevant Companies Existing procedure for connecting consumers to gas Procedure for connecting consumers to gas distribution distribution networks, as implemented by gas distribution networks, as implemented by service companies 1 companies Visit of Addressing One-Stop Shop service Addressing One-Stop Shop service customer (individuals) Service and gas distribution Submitting initial documents, applying for specifications company experts Receiving specifications and concluding design & engineering contract Document preparation Project approval and construction & assembly contract conclusion Visit to customer Equipment and materials acquisition by customer 1 year 1 month 2 Design Construction and assembly Visit to customer Construction and assembly As-built documents compilation Visit to customer Project submission by customer to supervising authorities Pre-commissioning Project revision, cutting-in and gas supply start Visit to customer Signing contract for house gas equipment maintenance 1 The procedure is based on Gazprom Mezhregiongaz Sever and Gazprom Gazoraspredeleniye Sever’s best practices 2 The work may be completed during a month period only provided a gas distribution network is up & running and is located within/ near the customer’s land plot boundaries GAS SUPPLY TO DOMESTIC MARKET 8 EXECUTING RUSSIAN REGIONS GASIFICATION PROGRAM
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