Financial Activities

Financial highlights for 2014:

  • Gazprom Group’s earnings (net of VAT, excise and other payments) — RUB 5.661 trillion

What are Gazprom’s annual earnings?

In 2014 Gazprom and its subsidiary companies earned RUB 5.661 trillion (according to the Consolidated Accounting Statement prepared in accordance with the applicable Russian laws and regulations).

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How much does Gazprom pay in taxes?

Gazprom Group’s tax payments*, RUB billion*IFRS consolidated financial statements include taxes, customs duties, excise taxes and insurance payments to public funds.
Gazprom Group’s tax payments*, RUB billion
*IFRS consolidated financial statements include taxes, customs duties, excise taxes and insurance payments to public funds.

Gazprom channels its taxes and other obligatory payments at all levels as required by applicable tax legislation.

Thus, the Company paid RUB 980 billion in taxes and other payments in 2007, RUB 1.1 trillion in 2009, RUB 1.7 trillion in 2011, RUB 1.8 trillion in 2013 and RUB 2.063 trillion in 2014.

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What does Gazprom spend money on?

Gazprom commits multibillion investments into the core businesses, thus securing operational reliability of the huge production and technology complex and rapid development of the Company. Neither the current production programs nor the strategic projects are feasible without a pro-active investment policy.

Gazprom’s Investment Program for 2015 stipulates the total volume of investments in the amount of RUB 840.35 billion, including capital investments and long-term financial investments in the amount of RUB 733.13 billion and RUB 107.22 billion respectively.

According to the Investment Program for 2015, capital construction priorities in the upstream and midstream sectors are the following: implementing the program for the comprehensive development of the Yamal Peninsula fields, constructing gas transmission and gas processing capacities using gas from the Yakutia Gas Production Center, inter alia, the Power of Siberia project, constructing the Southern Corridor gas pipeline system and developing the underground gas storage system.

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How does Gazprom spend its money?

While running their businesses, Gazprom’s subsidiary companies consume over 600 thousand items of materials and equipment, incurring substantial costs. It is obvious that Gazprom’s final operating results directly depend on the procurement policy efficiency.

The lineup of products required by gas industry companies is roughly the same. In this context, with a view to counter the price bargaining power of suppliers, the bulk of materials and equipment should be acquired through a single channel.

In Gazprom Group these functions are charged to a special-purpose subsidiary company – OOO Gazprom Komplektatsiya. It is inexpedient, however, to vest this unit with 100% of procurement, since each member company has its specific features.

Moreover, subsidiaries may have unforeseen needs in this or that product (for instance, in case of emergency), which have to be met in a very prompt manner. That is why, around 80% of Gazprom Group’s current procurement requirements are satisfied via Gazprom Komplektatsiya, with the remainder acquired by subsidiaries independently.

A specialized Department of OAO Gazprom acts as a central body for managing purchases in Gazprom Group. Tender notices are published at the website of OAO Gazprom (www.gazprom.com) in the Tenders section, at www.zakupki.gov.ru and in print media. The annual plan of Gazprom Group’s competitive purchases is also available on the website.

Gazprom has long been focused on domestic manufacturers in its procurement policy. The share of imports in OOO Gazprom Komplektatsiya’s purchases is declining: while in 2006 the purchases from beyond the former Soviet Union accounted for 14.7% of the overall procurement, this figure shrank to 9.5% in 2010 and within the recent four years it has averaged about 6%. At present, Gazprom acquires abroad only unique products and those unrivaled in Russia.

Such an approach is favored by Russian manufactures. For instance, Russia’s leading machine-building companies supply Gazprom with gas compressor units at a far lower price than for customers abroad.

It is worth mentioning that owing to a focus on Gazprom’s promising projects, Russia develops new production facilities and enhances its production technologies. For instance, Gazprom’s needs for high-quality large-diameter pipes have triggered their manufacturing at Russia’s major pipe plants. It wouldn’t be an exaggeration to say that Gazprom’s product orders represent effective investment demand in the domestic industry.

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Isn’t Gazprom’s debt burden too heavy?

Gazprom Group’s net debt (according to the consolidated financial statements prepared in compliance with the IFRS) as of December 31, 2014 amounted to RUB 1.65 trillion.

Although this figure might seem impressive, in fact it is acceptable among global energy companies commensurate with Gazprom. Firstly, repayment is spaced out for many years ahead – thus, about one-third of the Group’s credit portfolio accounts for the debt with the period outstanding of over five years. Secondly, no company ever engages in large-scale projects entirely on its own. No pragmatic lender would give the Company a cent if they had the slightest doubt about its trustworthiness.

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OAO Gazprom’s debt structure by term of borrowings, %
  2008 2009 2010 2011 2012 2013 2014
Less than 1 year 32 26 15 24 22 18 17
1-2 years 13 10 13 17 19 13 15
2-5 years 20 33 42 38 33 36 36
More than 5 years 35 31 31 21 26 33 32
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Both domestic and international investors lend eagerly to Gazprom. Even in the unstable financial market environment in late 2014 – early 2015, Gazprom attracted rather favorable investments. Thus, during this period complicated for Russian debtors Gazprom completed three transactions on finance attracting from the international capital market under pre-crisis terms: worth USD 700 million at the rate of 4.3%, worth EUR 390 million and 350 million at EURIBOR +2.75%.

Gazprom pursues a conservative debt management policy. The key debt ratios are commensurate with those of the world’s leading oil and gas companies and are comfortable for Gazprom.

For instance, according to the results of 2014 the total debt/EBITDA (earnings before interest, taxes, depreciation, and amortization, adjusted according to changes in provisions for asset depreciation) ratio in the USD equivalent was maintained at a low level – 0.9, the net debt/adj. EBITDA ratio – 0.6. It means that Gazprom can redeem its total debt using the Company’s available funds and an operating cash flow generated in less than one year. The Company ensures such results both due to low debt cost and a number of measures taken. In particular, Gazprom is active in developing the centralized cash pooling system that enables mobilization of internal financial resources, thus reducing the circulating capital and the demand for loans and improving the quality of cash management. Moreover, much attention is paid to Gazprom’s projects involving project finance.

Gazprom was assigned the highest credit rating by Dagong, China’s biggest independent rating agency.

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Is it true that many of Gazprom’s subsidiary companies have no relation to its core business?

Today Gazprom’s policy is to stay focused on its core business, i.e. hydrocarbons production, transportation, storage and processing as well as the power industry development. However, some time ago Gazprom owned a significant share of non-core assets. They were mainly acquired over the 1990s as Russian consumers’ payments for gas supplied by the Company as well as set up in order to carry out major activities. Many Russian consumers practiced non-cash gas payments in allowances, securities or other “cash equivalents”. By now, the major part of non-core assets has been sold out. According to the results of 2014, Gazprom and its subsidiary companies earned RUB 16.08 billion on non-core/ineffective asset sales (RUB 11.36 billion disregarding the Group’s in-house deals).

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