GAS SUPPLY TO DOMESTIC MARKET . EXECUTING RUSSIAN REGIONS GASIFICATION PROGRAM Gennady Sukhov Member of the Management Committee, Head of Department, Gazprom Sergey Gustov Director General, Gazprom Mezhregiongaz St. Petersburg, May 22, 2019
Natural Gas Sales by Gazprom Group in Russia In 2018, Gazprom increased natural gas sales In 2018, Gazprom Group sold 13.6 bln m 3 of gas to consumers through exchange transactions on SPIMEX Breakdown of gas sales on SPIMEX Gas sales by Gazprom Group in Russia 1 Sales volume, bln m 3 17.5 13.6 – 22.3% 4.0 bln m 3 2018 239.7 – 32.5% 2.7 +4.3% 2017 2.5 229.9 2 0.8 0.7 +7.0% 2016 214.9 2017 2018 Q1 2018 Q1 2019 Independent producers’ resources Gazprom’s resources Average selling price, RUB/1,000 m 3 (excl. VAT) Weighted average selling prices of Gazprom’s gas show steady growth at balancing points 2018 3,981.3 +4.5% 2017 3,808.3 – 0.2% 2016 3,815.5 Selling prices of Gazprom Group’s gas on SPIMEX +7.6% Proceeds from sales, RUB bln (excl. VAT) 2,705 2,867 RUB/1,000 m 3 , 2,667 +7.5% 2,513 2018 954.5 excl. VAT +9.0% 2017 875.7 +6.8% 2016 819.9 Q1 2018 Q1 2019 2017 2018 1 Excluding intra-Group sales. These performance indicators of Gazprom were determined according to IFRS principles and may differ from corresponding figures in accounting documents prepared in line with management accounting methodology 1 GAS SUPPLY TO DOMESTIC MARKET. EXECUTING RUSSIAN REGIONS GASIFICATION PROGRAM
Key Operating Results of Gazprom Mezhregiongaz Group in Gas Sales In 2018, Gazprom Mezhregiongaz Group supplied gas to consumers in 69 Russian regions through 53 regional gas sales companies Gas sales 1 Gas consumers of Gazprom Mezhregiongaz Group in 2018 2 Gazprom Mezhregiongaz Group’s total sales of gas provided by Gazprom and other producers (including exchange-based trading) % Power industry Metallurgy bln m 3 19.8 Agrochemistry Cement industry 32.1 +3.7% 20.5 Utilities Other industries 260.0 250.6 8.5 2.9 14.8 Population 1.4 2017 2018 1 Management accounting data, may be inconsistent with IFRS indicators 2 Excluding exchange-traded gas 2 GAS SUPPLY TO DOMESTIC MARKET. EXECUTING RUSSIAN REGIONS GASIFICATION PROGRAM
Consumers’ Debt to Gazprom Mezhregiongaz Group 97.2% 97.3% 97.8% GAS BILLS PAID +6.2% 180.2 169.7 +5.5% 160.8 111.6* 124.3* Outstanding debt (RUB bln) As of 01.01.2017 As of 01.01.2018 As of 01.01.2019 Gas bills paid (%) Total debt (RUB bln) 101.6 8.4 Power industry 99.7 9.6 95.9 59.5 Heat suppliers 98.1 60.5 82.9 7.9 Public institutions 100.3 7.9 89.1 71.1 Population 91.6 77.1 99.3 22.8 Other consumers 99.2 25.1 As of 01.01.2018 As of 01.01.2019 In December 2017, assignment of receivables took place between Gazprom Mezhregiongaz Pyatigorsk and new regional gas sales companies in North Caucasus Federal District. * Taking into account assignment of receivables, which reduced amount of debt in accounting records. 3 GAS SUPPLY TO DOMESTIC MARKET. EXECUTING RUSSIAN REGIONS GASIFICATION PROGRAM
Arrears and Payments: Heat Supply Companies (HSCs) HSC arrears Sources of arrears in gas payments RUB bln Tariffs and standard heat consumption rates are insufficient for breakeven operation of HSCs without regional and local subsidies compensating for 60.52 59.45 revenue shortfall. 53.07 +1.8% Heavy wear of boiler and heating network equipment (above-standard losses) +12% due to sector underfunding. Routine transfer of property of HSCs operating rented assets without taking steps towards debt repayment. 01.01.2017 01.01.2018 01.01.2019 Largest debtors (as of 01.04.2019) HSC arrears by federal district (FD), as of 01.01.2019 RUB bln Far Eastern FD 0.7 Ural FD 0.4 Bryanskkommunenergo – RUB 2.7 bln Northwestern FD 2.8 Siberian FD 4.7 Southern FD 5.8 Tsentralnaya CHPP (Novokuznetsk, Kemerovo Region) – Volga FD 10.6 RUB 2.69 bln North Caucasus FD 15.8 Central FD 19.7 4 GAS SUPPLY TO DOMESTIC MARKET. EXECUTING RUSSIAN REGIONS GASIFICATION PROGRAM
Arrears and Payments: Public Institutions and Power Companies Arrears – power companies Arrears in gas payments – public institutions 18.45 RUB bln RUB bln – 54.5% 7.96 9.56 8.4 7.87 +13.8% – 1.1% 4.3 +85.1% 01.01.2017 01.01.2018 01.01.2019 Power sector entities with highest arrears (as of 01.04.2019) 01.01.2017 01.01.2018 01.01.2019 T Plus 4.8 RUB bln Quadra 0.26 6.1 Arrears in gas payments – Ministry of Defense (MoD) entities* TGC-2 0.25 ** Tverskaya Generatsiya 0.78 7.35 RUB bln 7.25 Arrears of Tverskaya Generatsiya increased by RUB 1.31 bln in 2018. Situation deteriorated despite 3.76 +1.4% institution of control procedure with respect to debtor by regional authorities in October 2016. +92.8% Tverskaya Generatsiya’s gas payment rates: 2016 (prior to institution of control procedure) – 107% 01.01.2017 01.01.2018 01.01.2019 2017 (under regional authorities’ control) – 73.6% 2018 (under regional authorities’ control) – 69.8% 93.4% On February 18, 2019, Gazprom Mezhregiongaz Tver signed a 5-year debt restructuring agreement of state- funded organizations’ arrears in gas payments are run by MoD entities for RUB 4.38 bln with Tverskaya Generatsiya. * Central Public Utilities Directorate, Main Directorate for Housing & Utilities, Maintenance and Repair Directorate, etc. ** Taking into account existing restructuring agreement. 5 GAS SUPPLY TO DOMESTIC MARKET. EXECUTING RUSSIAN REGIONS GASIFICATION PROGRAM
Arrears and Payments: Population Arrears of household consumers in North Caucasus FD Arrears – population compared to arrears of all other categories of consumers +16.0% +8.4% RUB bln (as of 01.01.2019, RUB bln) +12.4% +17.4% Household consumers in North 77.1 71.11 68.6 68.6 61.28 61.03 Caucasus FD 52 All other consumers 111.6 01.01.2017 01.01.2018 01.01.2019 38% of all consumers’ arrears in gas payments due to Gazprom Mezhregiongaz Group are run by Total Incl. North Caucasus FD households in North Caucasus FD Arrears by federal district as of 01.01.2019 Arrears of household consumers Far Eastern FD 0.032 RUB bln (as of 01.01.2019, RUB bln) Ural FD 0.086 8.5 Households in North Caucasus Siberian FD 0.178 FD Northwestern FD 0.53 Households in other federal 68.6 Central FD 1.78 districts Volga FD 2.70 Southern FD 3.17 89% of households’ arrears are run by consumers North Caucasus FD 68.6 in North Caucasus FD 6 GAS SUPPLY TO DOMESTIC MARKET. EXECUTING RUSSIAN REGIONS GASIFICATION PROGRAM
Arrears in North Caucasus Federal District While consuming about 7% of all gas supplied, regions within North Caucasus FD account for 52.1% of arrears Arrears of end consumers in North Caucasus FD RUB bln 93.9 85.07 +17.4% 72.45 +10.4% +10.1% 65.77 01.01.2016 01.01.2017 01.01.2018 01.01.2019 Arrears by region within North Caucasus FD as of 01.01.2019 Arrears by consumer category as of 01.01.2019 RUB bln RUB bln Households Republic of Dagestan 46.1 68.6 Chechen Republic 15.9 HSCs 15.8 Republic of Kabardino-Balkaria 13.6 Power industry 1.3 Republic of North Ossetia-Alania 8.0 Republic of Ingushetia 6.8 Public institutions 0.8 Republic of Karachay-Cherkessia 2.0 Others 7.3 Stavropol Territory 1.5 7 GAS SUPPLY TO DOMESTIC MARKET. EXECUTING RUSSIAN REGIONS GASIFICATION PROGRAM
Measures to Improve Financial Discipline and Reduce Debt to Gazprom Mezhregiongaz Group More regions are reducing HSC arrears in gas payments. Due to stronger financial discipline, HSC arrears growth rates went down by RUB 5.3 bln from RUB +6.4 bln in 2017 to RUB +1.1 bln in 2018. Compliance with debt repayment schedules by regions as of 01.01.2019 Region Compliance Region Compliance Region Compliance Region Compliance Region Compliance Region Compliance Voronezh Region 100.0% Bryansk Region, 57.2% Tula Region 49.8% Samara 74.3% Republic of 12.7% Ulyanovsk 0.0% incl. Bryansk- 17.7% Region Kalmykia Region kommunenergo Kaluga Region 100.0% Ivanovo Region 31.2% Yaroslavl 47.3% Republic of 64.1% Republic of 0.0% Chuvash 0.0% Region Bashkortostan Udmurtia Republic Kemerovo Region 105.6% Smolensk 34.9% Republic of 41.9% Novgorod 66.0% Orenburg 0.0% Pskov Region 0.0% Region Mari El Region Region Republic of 100.0% Tambov Region 12.1% Kirov Region 76.8% Vologda 71.0% Saratov 0.0% Volgograd 0.0% Ingushetia Region Region Region Republic of 95.0% Stavropol 56.5% Nizhny 28.4% Kurgan Region 78.1% Penza Region 0.0% Vladimir 0.0% Adygea Territory Novgorod Region Region Gas supply restrictions/cut-offs targeting non-payers In 2017, 31 debt repayment schedules were in effect for 30 regions totaling RUB 25.9 bln. 2017 8,833 Legal entities 21 schedules totaling RUB 17.4 bln were signed in 2018. – 14.6% 2018 7,546 2017 164.4 Individuals* +0.4% Only 30.5% of arrears due under current repayment schedules were repaid in 2018: 2018 165.1 RUB 4.8 bln out of RUB 15.7 bln. *Excluding cut-offs related to absence of in-house gas equipment maintenance contract 8 GAS SUPPLY TO DOMESTIC MARKET. EXECUTING RUSSIAN REGIONS GASIFICATION PROGRAM
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