Russia: Gazprom BoD Approves Adjusted Investment Program

September 27, 2011

The Gazprom Board of Directors approved the adjusted Gazprom Investment Program, Budget (Financial Plan) and Cost Optimization (Reduction) Program for 2011.

Pursuant to the adjusted Investment Program for 2011, the total amount of investments will make up RUB 1.2765 trillion which is RUB 460.11 billion more as compared to the Investment Program approved in November 2010. At the same time, capital investments will amount to RUB 1.1867 trillion (a RUB 456.85 billion increase versus the Investment Program endorsed in November 2010), of which RUB 1.15 trillion and RUB 36.69 billion will be allocated for capital construction and acquisition of non-current assets, thus showing an increase of RUB 422.75 billion and RUB 34.1 billion accordingly. The amount of long-term financial investments will stand at RUB 89.76 billion (RUB 3.26 billion up on the Investment Program approved in November 2010).

According to the adjusted Budget for 2011, revenues and gains will total RUB 4.3308 trillion while liabilities, expenditures and investments – RUB 4.811 trillion. The external financial borrowings are determined at RUB 150 billion, showing a RUB 60 billion rise versus the Budget approved in November 2010. The increase in borrowings is explained by the need to finance the current Investment Program and refinance the previously raised loans. At the same time, the relative debt ratios will remain at the level favorable for Gazprom: for instance, the total debt to EBITDA ratio will presumably be equal to 0.8.

The Budget surplus (inclusive of the cash balance as of early 2011) will make up RUB 0.5 billion.

The adjusted Cost Optimization (Reduction) Program for 2011 envisages measures aimed at cost optimization (reduction) to result in a cumulative effect of RUB 19.6 billion.

The 2011 Investment Program adjustment is mainly driven by the need to increase investments in the key projects for natural gas production, transmission and underground storage. Special attention is paid to the projects for establishing new gas centers in Yamal, Eastern Siberia and the Far East.

The Budget adjustment stems from volumetric and price changes in Gazprom’s gas marketing and macroeconomic indicators.