Gazproms Financial and Economic Policy Andrey KRUGLOV Deputy - - PowerPoint PPT Presentation

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Gazprom’s Financial and Economic Policy

Andrey KRUGLOV

Deputy Chairman of the Management Committee, Head of the Finance and Economics Department

129.1 138.1 30 60 90 120 150 Janurary-May '09 January-May '10

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Billion cubic meters

Gas Production

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Source: Company data

25.6 17.6 20 40 60 80 January-May '09 January-May '10

billion cubic meters

Gas sales in Russia

billion cubic meters

Gas export to Europe

billion cubic meters

Market Environment Gas Demand Recovery

61.7 49.0 20 40 60 80 January-May '09 January-May '10 25 35 45 55 January February March April May June July August September October November December 2009 2010

Gas export to CIS and Baltic states

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2009 Financial Performance

1 464 1 090 2008 2009 3 290 2 999 2008 2009 292 343 202 211 334 4Q08 1Q09 2Q09 3Q09 4Q09 37.5 103.7 192.6 174.6 308.7 4Q08 1Q09 2Q09 3Q09 4Q09 13% (26%) (9%) 59%

Adjusted EBITDA(2)

(RUB billion)

– An increase in 2009 operating expenses is provoked by higher expenditures for purchased oil and gas, as well as for their transit. – The growth of these expenditures is caused by an increase in the Central Asian suppliers’ gas purchase prices and in the rates for gas transit across Kazakhstan and Uzbekistan. – The 2009 decline in the operating profit was offset by non-recurring income and positive financial activity of associated companies. – As a result the income attributable to the Gazprom shareholders showed a 5% increase in 2009.

Proceeds(1)

(RUB billion)

– Sales fell 9% YoY due to a drop in global gas demand, which resulted in the decreased supply volume and gas price on the key markets in 2009. – Starting from 2009, the financial result of the trading activity is given separately as net income in the consolidated statement

• f total income.

723% 5%

Profit (3)

(RUB billion)

77% 743.0 780.0 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.

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Gas Sales Proceeds

Net proceeds from gas sales in and beyond Europe Net proceeds from gas sales in the former Soviet Union

RUB billion 1 103.0 1 260.6

500 1000 1500 2008 2009 (13%)

RUB billion 309.9 356.5

500 1000 1500 2008 2009 (13%)

Proceeds decreased due to a drop in demand and a significant decline in gas prices on the European market Proceeds decreased due to a drop in sales volume, which was partially offset by an increase in gas prices within the FSU states

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Gas Sales in Russia

Net proceeds from gas sales

RUB billion 503.1 479.4

200 400 600 2008 2009

+ 5%

Proceeds grew due to a rise in the average regulated gas price, which was partially evened by the sales drop

1 000 2 000 3 000 4 000 5 000

2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E

Industrial consumers Population +27% +15% +15% +15% +16% +26% +15% +11%

Annual average gas price for industrial consumers and population (1)

RUB per 1 000 m3

1. Starting from 2009 the gas price growth rates are brought in line with the Scenario Conditions and Forecast for Russia’s Social 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.

+19.2% +15% +15% +25% +15% +16% +27% +17%

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Oil price, USD per barrel RUB/USD exchange rate Investment program, RUB billion Borrowing program, RUB billion Weighted average price for the gas sold beyond FSU, USD per 1,000 cubic meters Net profit, RUB million 61 31.69 803.7 304.9 298.4 624,613 (3) 58 33.90 802.4 90.0 280.0 554,504 2010 Estimated (2)

Gazprom’s Budget (1)

2009 Actual Budget parameters

1. The parent company. 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).

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Gas Production and Transportation Costs (Specific Indicators)

Gas production cost Gas transportation cost

RUB per 1,000 cubic meters 516.3 528.5 535.2 459.2 150 300 450 600 2008 Actual 2009 Estimated 2009 Actual 2010 Estimated RUB* per 1,000 cubic meters/100 kilometers 38.7 38.6 39.1 33.6 15 30 45 2008 Actual 2009 Estimated 2009 Actual 2010 Estimated

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BUDGET COST REDUCTION based on the results of project ranking and cost items prioritization including:

• perating activity

investment activity

RUB 265.5 billion (1)

RUB 83.5 billion RUB 182.0 billion RUB 11.7 billion

1. Compared to the initial draft version of the Budget compiled in conformity with the requests of the Company’s structural subdivisions

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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

Cost Optimization in 2010 (Parent Company)

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Asset Management and Corporate Relations

Before revaluation After revaluation

RUB 3,293 billion RUB 3,775 billion + RUB 482 billion

Fixed assets revaluation results (balance sheet value) as of January 1, 2010

Gazprom’s fixed assets revaluation was carried out as of January 1, 2010:

• assets value increased by RUB 482 billion
• 27 subsidiaries of Gazprom Group simultaneously

carried out revaluation of their fixed assets

2.39 2.66 2.54 1.5 1.19 0.69 0.4 0.36 1 2 3 2002 2003 2004 2005 2006 2007 2008 2009 10 20 30 40 50 60 70 Amount of dividends Payouts per share

Payouts per share

RUB billion RUB The Gazprom Board of Directors proposed RUB 2.39 dividend payout per share

• payout grew 664% versus 2008
• maximum payout level of 2006-2007 reached

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

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1.2x 1.5x 1.7x 0.9x 1.7x 1.0x 1.3x 1.4x 0.7x 1.4x 2007 2008 9M09 2009 2010E Total debt / Adjusted EBITDA Net debt / Adjusted EBITDA

Relative debt indicators(1)

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Debt and Liquidity Management

1219 1018 1469 1372 291 348 293 254 2007 2008 9M09 2009 Net debt Monetary assets and their equivalents

Total and net debt

1. Calculated as of the end of the respective period.

Financial instruments diversification

RUB billion

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Shaping Centralized Cash Flow Management System

Centralized cash flow control system

Gazprombank

Current participants: 56 subsidiaries and subdivisions of the Company Promising participants: 20 more subsidiaries and subdivisions

• f the Company

Capital gain from the temporarily disposable cash assets placed by Gazprom Group on a short-term basis featured a 40% increase Liquidity management projects in foreign subsidiaries Deutsche Bank AG Zero Balancing Pool Companies of Gazprom Germania group Gazprom E.P. International B.V., Gazprom Sakhalin Holdings B.V., Gazprom Finance BNP Paribas Notional Pool

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

Russian notional pool shaping

Gazprom’s Informatization Strategy

• Automated system for development of

management reports on the basis of key performance indicators (KPI)

CORPORATE DATA STORAGE Integration platform Integration platform

Corporate portal

Vertically integrated Information management systems (IMS)

IMS MRMB IMS ТGGC IMS HCRM ABMS IMSI ACRS ADCS UGSS ALMS AHRMS MRACS IMS ME

Typical information management systems of an enterprise (IMS E) according to the types of activity

Production

Gas transportation

UGS Processing Gas distribution and sale

Sectoral data reference bank (SDRB)

IMS MRMB IMS for replenishment of mineral and raw material base and hydrocarbon production IMS T IMS for transportation of gas and gas condensate 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

Gazprom Group Types of business Investment projects Subsidiaries Subsidiaries Investment projects Investment projects Business processes Types of activity

KPI

Corporate Data Bank is Efficient Tool of Managerial Decision Making

Finance Production Management Innovation and human resources Sales markets

• Gazprom Group
• Businesses
• Activities
• Gazprom and

subsidiaries

• Investment

projects

• Business

processes

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Conclusion

 Carrying on major production projects financing  Ensuring strict cost control  Effective debt management and fund raising  Maintaining a reasonable level of working capital  Continuing a dialogue with the Russian Government on switching to market-based gas pricing principles in Russia  Cooperating with authorities to freeze the tax burden and customs duties  Improving inter-group liquidity management quality  Enhancing transparency and corporate governance

We continue improving the efficiency of our activity