PRESENTATION November 2018 2.81 / 7.14cm 3.16 / 8.02cm 1 5.30 / - - PowerPoint PPT Presentation
5.30 / 13.46cm 0.13 / 0.33cm 0.13 / 0.33cm 5.30 / 13.46cm 2.36 / 5.99cm 1.98 / 5.04cm Width: 29.7cm (11.69) Height: 21.0cm (8.27) COMPANY 0.28 / 0.70cm 0.64 / 1.63cm PRESENTATION November 2018 2.81 /
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
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November 2018
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
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The information contained herein pertaining to SIBUR (the "Company") has been provided by the Company solely for use at this presentation. By attending this presentation, or by reading these presentation slides, you agree to be bound by the limitations set out below. This presentation does not constitute or form part of, and should not be construed as, an offer, solicitation or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of the Company, nor shall any part of it nor the fact of its distribution form part of, or be relied on in connection with, any contract or investment decision relating thereto. No representation or warranty, either express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness, correctness or reliability of the information contained herein. It should not be regarded by recipients as a substitute for the exercise
investment advice. As such, it has no regard to the specific investment objectives, financial situation or particular needs of any recipient. There may be material variances between estimated data set forth in this presentation and actual results, and between the data set forth in this presentation and corresponding data previously published by or on behalf of the Company. This presentation contains forward-looking statements, including (without limitation) statements containing the words "anticipates," "expects," "intends," "may," "plans," “forecasts,” "projects," "will," "would", "targets,“ “believes” and similar words. These statements are based on the current expectations and projections of the Company about future events and are subject to change without notice. All statements, other than statements
such that future events and actual results may differ materially from those set forth in, contemplated by or underlying such forward-looking
actual results will not differ materially from the expectations set forth in such forward-looking statements. Factors that could cause actual results to differ from such expectations include, but are not limited to, the state of the global economy, the ability of the petrochemical sector to maintain levels of growth and development, risks related to petrochemical prices and regional political and security concerns. The above is not an exhaustive list of the factors that could cause actual results to differ materially from the expectations set forth in such forward-looking statements. The Company and its Affiliates are under no obligation to update the information, opinions or forward-looking statements in this presentation.
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
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Russia 58% Europe 30% Asia 6% CIS 5% Other 1% 380 412 455 544 2015 2016 2017 LTM Sep 18
Leading EM petrochemical company — Would be a top-10 petrochemicals-focused public company by 2017 EBITDA (c.$3 bln, with strong further growth potential on the back
— Average EBITDA margin of 35% over last 3 years (30%+ in average since 2010) Production base in West Siberia – a region attractive for petrochemical
— export-bound transportation costs and duty results in attractive prices for the stranded feedstock in West Siberia — barriers to entry due to SIBUR’s extensive infrastructure in the region Close-to-completion (89%) 2mtpa polyolefin ZapSib project is expected to triple SIBUR’s Olefins & Polyolefins (O&P) capacity — Total investment budget: $9.0 bln1, c.70% already financed as of 30-Sep-18 — Our recently launched O&P project in the same geography delivered EBITDA margin of 55% in 2017 Net Debt/EBITDA of 1.6x as of Sep-18; Baa3/BB+ rated by Moody’s/Fitch — Net debt at c.$5 bln corresponds with ZapSib accumulated capex (c.$6 bln as of 30-Sep-18)
Source: The Company data (1) Estimated capex budget. Translated into USD using historical annual average exchange rates. Residual capex Calculated based on exchange rates as of 30 Sep-18: RUB/$ at 65.6, RUB/EUR at 76.2. (2) Except natural gas
Key Facts Revenue Split by Segment and Geography, 2017 Key Financials
136 140 161 195 2015 2016 2017 LTM Sep 18 EBITDA margin x% 36% 34% 35% 36%
Revenue, RR bln EBITDA, RR bln
Olefins & Polyolefins 19% Plastics, Elastomers and Intermediates 32% Midstream 41% Other 8%
Petrochemicals $9.0 bln $3.2 bln
c.90% dollar-linked revenue2
A
INTRODUCTION TO SIBUR
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
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Midstream
Source: The Company data Note: Represented scheme includes LPG and naphtha purchased from third parties for resale, as well as certain LPG and naphtha volumes produced directly from APG processing (1) Capacity additions estimates of the Company of 500 kt for PP, 1,500 kt for PE. (2) JV sales include share of PVC, caustic soda (RusVinyl) and PP (Poliom) sales. (3) Other revenue for the FY 2017 (not indicated on the graph) – RR 38 bln
LOGISTICS CLIENTS SUPPLIERS
Complementary Petrochemical and Midstream Businesses Operating on Market Terms Enables Smoothing Cash Flow and Earnings Volatility
Associated petroleum gas (APG) is a by-product of oil production Natural gas liquids (NGLs) include raw NGL, LPG (liquefied petroleum gas) and naphtha. Raw NGL is a by-product of gas production Feedstock includes LPG, naphtha and raw NGL. Composition may vary from year to year depending on market conditions and other limitations
gas producers APG
(22.3 bcm)
NGLs
(3.6 mt)
gas fractionation 7.5 mt PETROCHEMICALS 1.2 mt 2.4 mt Natural gas (18.5 bcm) NGLs
6.0 mt
LPG and naphtha (2.9 mt)
Oil & Gas companies
Definitions: 0.7 mt2 gas processing LPG and naphtha (5.8 mt) 88
147
135
47 External revenue RR bln
FY 2017 data Plastics, Elastomers & Intermediates Olefins & Polyolefins
+ 2.7 mtpa of LPG and 0.3 mtpa of ethane post ZapSib1 (from external sales to O&P)
No cannibalization of Midstream as all intersegment flows will be priced at market level and arm’s length basis
A
INTRODUCTION TO SIBUR
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
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External Internal
184 45
229 89 Revenue EBITDA
Source: The Company data; (1) Incl. PTA Note: External revenues for the FY 2017 totaled RR 455 bln, including O&P (RR 88 bln), PE&I (RR 147 bln), Midstream (RR 184 bln) segments and other revenue (RR 35.4 bln); EBITDA was at RR 161 bln, including O&P (RR 45 bln), PE&I (RR 30 bln), Midstream (RR 89 bln) segments and other (RR (3.5) bln).
Midstream Financial Results (2017), RR bln Olefins & Polyolefins Plastics, Elastomers & Intermediates
EBITDA margin
39%
88 25
113 45 Revenue EBITDA
EBITDA Margin
40%
147 2
149 30 Revenue EBITDA
EBITDA margin
20%
Internal External Internal External
Key Products
Share in Group Total 41% 56% 19% 28% 32% 19%
Key End Markets
25 18 15 13 13 16
Chemicals Automotive Construction Fuels FMCG Traders & Other
55 34 10
Petrochemicals Utilities and fuels Traders & Other
ZapSib is expected to triple polyolefin capacity
% %
(55% Tobolsk PP) Petrochemicals Business
33 22 9 8 8 19
Packaging FMCG Construction Chemicals Hygiene products Traders & Other %
A
INTRODUCTION TO SIBUR
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
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2.1 2.0 3.4 6.1 2.8 4.8 5.8 3.1
Sales 2013 2017 Столбец1 20192.0 2.2 2.4 2009 2013 2017 47 123 184
2009 2013 2017
Revenue Dynamics1 Sales Volumes Dynamics1
Source: The Company data Note: 2009 and 2013 reporting years had a different reporting segmentation. For comparison purposes, the figures for 2009 and 2013 include the following products as per previous reporting system: Olefins & Polyolefins: PE (LDPE), PP, olefins and BOPP-films; Plastics, Elastomers & Intermediates: commodity rubbers, specialty rubbers, thermoplastic elastomers (SBS), PET, glycols, EPS, alcohols, acrylates, plastic compounds, intermediates and other chemicals, MTBE and other fuels and fuel additives; Midstream: LPG, natural gas, naphtha, raw NGL. (1) External. (2) Capacity additions estimates of the Company of 500 kt for PP, 1,500 kt for PE.
14 31 88 2009 2013 2017
6.1x
0.5 0.6 1.2 3.2 2009 2013 2017 Column1 Column2
2.6x 6.4x OLEFINS & POLYOLEFINS
Post-ZapSib2
1.2x
57 107 147 2009 2013 2017
2.6x PLASTICS, ELASTOMERS & INTERMEDIATES 3.9x MIDSTREAM
2009 2013 2017 2009-2017 growth SEGMENT 2009 2013 2017 2009-2017 growth 2017PF growth PF
RR bln mln t
EBITDA margin
20%
EBITDA margin
39%
EBITDA margin
40% (55% Tobolsk PP)
LPG, Raw NGL, Naphtha 2.1x 1.6x
Internal sales to petrochemicals External sales
Post- ZapSib
A
INTRODUCTION TO SIBUR
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
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LOW COST CHEMICAL PRODUCER WITH HIGH BARRIERS TO ENTRY
expected transformational impact on SIBUR’s long-term earnings and cash flows
3rd party midstream infrastructure, and other projects
1 2 3 4 5 6
A LEADING EMERGING MARKETS PETROCHEMICAL COMPANY OPERATES IN GROWING AND DIVERSIFIED END-MARKETS AND GEOGRAPHIES SIGNIFICANT UPSIDE FROM CLOSE TO COMPLETION WORLD-SCALE ZAPSIB PROJECT SUPERIOR MARGINS AND RESILIENT CASH FLOW GENERATION THROUGH THE CYCLE STRONG MANAGEMENT AND SHAREHOLDER TEAM WITH TRACK RECORD OF VALUE CREATION AND TRANSPARENT CORPORATE GOVERNANCE
end-markets growth
strong track record of leading a large-scale public TSR-focused company
B INVESTMENT HIGHLIGHTS
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
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19,72210 Natural Gas 7,4819 1,495 LPG Naphtha 299 267 98 652 308 273 312 155 PP 78% / 84% PE2 42% / 56%3 PVC 34%4 BOPP Films 78%
Largest Player in Attractive CIS and Russian Markets
Source: IHS Markit, the Company data Note: Market shares calculated based on production volumes of SIBUR and assumed 100% share in respective JVs and respective markets production in Russia. (1) Excluding other olefins which are both used internally and sold to the market. (2) Includes LDPE only for 2017A, and additional capacity of 1,500 ths t includes HDPE and LLDPE. (3) Current market share calculated based on Russian LDPE market. SIBUR market share with ZapSib calculated based on Russian HDPE, LDPE, LLDPE markets. (4) Market share calculated based on the 100% of RusVinyl capacity (300 ths t) and total production capacity in Russia. (5) Company data. (6) Assuming 100% share of SIBUR’s in NPP Neftekhimia and Poliom. (7) Capacity additions estimates of the Company of 500 ths t for PP, 1,500 ths t for PE. (8) Assuming 100% SIBUR’s share in Rusvinyl. (9) Includes production volumes under processing arrangements. (10) Includes production volumes under processing arrangements.
Plastics, Elastomers & Intermediates SIBUR Production by Key Product in 2017
ths t
Midstream
ths t ths t mcm
1,7737 ZapSib expansion (post 2021) 1,4607
1
Olefins & Polyolefins1
ZapSib expansion (post 2021) JVs6 JV8
B INVESTMENT HIGHLIGHTS
SIBUR’s Share in Russia’s Production
LPG 45% Naphtha 5% Natural Gas 3% PET 51% MEG 66% EPS 89%5
Current market share / expected market share post ZapSib, %
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
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PP 30% HDPE 19% LLDPE 13% LDPE 10% PVC 19% PET 9%
100 120 140 160 180 200 220 240 260 2012 2016 2020 2024 2028 PP, Global PP, Asia PE¹, Global PE¹, Asia GDP, Global
CAGR Annual increase ’12-’17 ’17-’25 ’17-’25 PP, Global 5.4% 4.6% 4 mln t PP, Asia 7.8% 5.8% 3 mln t PE1, Global 4.2% 4.2% 5 mln t PE1, Asia 7.1% 5.7% 3 mln t GDP, Global 2.7% 3.0%
PE & PP Are the Most Widely Used Polymers PE & PP Sustainably Grow Faster than World GDP
Source: IHS Markit, AME, Bloomberg, Green Markets (1) PE includes HDPE, LDPE, LLDPE. (2) Virgin plastics demand.
Evolution of PE1/PP Consumption2 and GDP
B INVESTMENT HIGHLIGHTS
PE & PP Are Expected to Continue to Grow Faster than GDP over 2017-2025E with Asia Outperforming the Rest of the World
2
(Index) mln t
2017 World Major Polymers Consumption Polypropylene 70 mln t, 30%
232 mln t
Polyethylene 97 mln t, 42% Growth of Chemical Products Consumption Continue to Outperform Other Materials
CAGR’10-17, % 4.7% 3.9% 4.4% 3.2% 2.8% 2.7% 1.8% PP PE Nickel Cement Steel Copper Zinc GDP growth '10-17 = 1.9%
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
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Asia Russia + CIS Middle East Europe North America
91 6.2 24 0.3
Surplus Shortage
Source: IHS Markit, the Company data (1) Homopolymer. (2) Impact copolymer. (3) Random copolymer.
Being the largest importer of PP and PE, Asian markets drive much of the global supply/demand Asian markets being by far largest, fastest growing and strongly undersupplied throughout 2017-28E
1 2 X – Demand for PP and PE in 2017, mln t Y – Annual increase in demand for PP and PE, ’17-28E, mln t Net trade by 2028E
24 0.6 4 0.2 10 0.5 Net Import / (Net Export) by 2028E
North America
(13)
Europe
3.5
Russia + CIS
(6)
Middle East
(25)
Asia
32 X Y
ZapSib Will Allow to Enter New Market Segments
PE LDPE LLDPE HDPE Films Cable Insulation Injection Molding Pipes Anticorrosion coatings Blow Molding PP PPH1 ICP2 RCP3 Pipes Injection Molding Compounds Films Caps & Closures
Current SIBUR solutions ZapSib solutions
ZapSib Conveniently Positioned to Supply Both Asian and European Market
2
B INVESTMENT HIGHLIGHTS
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
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5 10 15 20 25 30 35 1,000 2,000 3,000 4,000 5,000 6,000 7,000
Source: IHS Markit (1) The Company analysis
B INVESTMENT HIGHLIGHTS
Emerging Markets Are the Major Source of Consumption Growth
2
29.6 kg per person NA & Europe Demographic Change Sustainability / Food Loss Functionality / Shelf Appeal Efficiency / Transportation Population (millions) Market Trends Drive Packaging Consumption Market Drivers
70% of population in emerging regions
1
c.60MMT PE upside potential assuming Asian per capita consumption grows to Europa/NA levels1
2
Market drivers require increasing use of high performance solutions outpacing growth in demand for traditional materials
3
Drivers of Polyethylene Consumption Growth
12.8 kg per person Other CIS excl. Russia Asia Russia ME Europe NA 2017 – PE Demand per Capita (kg per person) Headwind from plastic recycling
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
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3
B INVESTMENT HIGHLIGHTS
Source: The Company data (1) SIBUR International. (2) Amsterdam, Rotterdam, Antwerp.
ZapSib Impact on Logistics Infrastructure CIS
Russia
Vostochnyy Vladivostok
Europe
Turkey
Shanghai
China
SI1 ARA2 LPG shipment to Europe:
Worldwide Polymer Shipment:
transport
Western Siberia Tobolsk
Transportation Cost of Solid Granules Cheaper than Liquids under Pressure
LPG shipment Today:
flammable liquids by train
Polymer shipment Post ZapSib launch:
polyolefin granules)
Transportation Cost of Solid Granules Cheaper than Liquids under Pressure
seaports / border crossings warehouses rail transportation (containers) auto transportation shipping rail transportation (carriage) ZapSib
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
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Source: The Company data, IHS Markit, BP Annual review. (1) Converted into mmbtu at mmbtu/t ratio of 47.2 for LPG and 49.2 for Ethane. (2) CIF Japan. (3) FOB USGC. (4) DAF Brest propane-butane (50/50). (5) FOB Singapore. (6) FOB USGC. (7) CIF North West Europe. (8) Export duty and freight calculated based on IHS data, rail transportation costs to Kstovo calculated based on Russian Railways tariffs for 2017, assuming 58.3 RR/$ exchange rate, Ust-Luga as a station of destination, leased railcars, and 66t cargo capacity of a tank wagon.
LPG
Russia Is Full of Hydrocarbons and Major Oil Fields (West Siberia) Are Far from Key End Markets, Making the Region a Natural Place for Petrochemical Operations
3
Naphtha
2017, $ / t 2017, $ / t
West Siberia is a market with one of the lowest energy costs globally, providing strong competitive advantage to petrochemical operations Abundant NGL supply paired with limited utilisation options provides petrochemical operations in the area with ample low-cost feedstock supply
10.6 8.7 8.5 2017, $ / mmbtu1 4.8
Western Siberia Tobolsk
B INVESTMENT HIGHLIGHTS
220 378 484 465 468 Netback price in Central Russia (Kstovo) Recoverable Excise for Naphtha Converters Netback price in Central Russia (Kstovo) before excise tax Transport & Duties from Kstovo to Europe Europe US Asia (106) (157)
5 6 7 8
225 396 410 499 Netback price in West Siberia Transport & Duties Europe (main destination for Russian producers) US Asia (171)
3 2 4
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
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Source: The Company data, IHS Markit
ZapSib Is Expected to Triple PE/PP Capacity Adding 2 mtpa to Existing Operations and Utilize Ample Own Advantaged Feedstock
Fixed costs WE LPG cash cost Fixed ZapSib cash cost Logistic arbitrage Utilities Variable Net Feedstock Other
4
B INVESTMENT HIGHLIGHTS
ZapSib Is one of the lowest-cost project globally and expected to be positioned in the 1st quartile on the global ethylene cost curve driven by Low feedstock cost (LPG netback price in West Siberia) Low energy cost in Russia Economy of scale and low labour cost in Russia
200 400 600 800 1,000 40 80 120 160 200 $ / t Cumulative Production - mln t MDE Avg NAM Avg NEA Avg WEP Avg ZapSib projected cash cost
2022, assuming Brent oil price of 68.7 $/bbl
…the Project Is Expected to Be Positioned in the 1st Quartile
Considering Advantageous Geography and World-Scale Size of ZapSib…
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
15
ZapSib Is a Scale-Up and Extension of Tobolsk PP Plant Experience
Source: The Company data (1) Average SIBUR selling prices (FY2017) calculated using exchange rate of 58.3 RR/$. (2) Calculated as average EBITDA margin over 2016-2017. (3) ZapSib capacity figures are estimates of the Group. (4) IHS actual 2017
ZapSib (Project in Progress)3
ZapSib: 2 mtpa
Expected launch in 2019 500 ktpa +$1,190 per tonne4 PP5 LPG
2.7 mtpa
1,500 ktpa +$1,371 per tonne4 PE5
Key Features
butadiene, fuel components ethane
0.3 mtpa
with more stable and easily-manageable Ethylene production technology
LLDPE)
construction, commissioning and running modern Polyolefin Plant
teams well-prepared for further expansion
229 ktpa +$884 per tonne6
Tobolsk PP Plant
Tobolsk PP: 0.5 mtpa
Launched in 2013 500 ktpa $1,215 per tonne1
PP
LPG
610 ktpa 2017 Results
EBITDA margin of 63%2 since fully launched)
Technology: PDH (propane dehydrogenation); licensor UOP Gas-phase polymerisation; licensor INEOS Technology: EPB cracker; licensor Linde AG PE unit: gas-phase polymerisation (Innovene FullFlex) / suspension polymerisation (Innovene) licensor INEOS PP unit: Spheripol; licensor LyondellBasell
B INVESTMENT HIGHLIGHTS
4
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
16 Source: The Company data (1) Source: Gazprom. (2) Expected capacity in billion cubic metres. (3) Expected capacity in million cubic metres.
Further Growth in Regions with 3rd party Midstream Infrastructure: Illustrated by Amur Project
PROJECT HIGHLIGHTS:
world-scale contract
to China with ethane as by-product – ready-made midstream for SIBUR
share business and implementation risks
Skovorodino Kovytkinskoye Field Chayandinskoye Field
Products: Methane, ethane, propane, butane, pentane-hexane fraction Gas processing capacity1 42 bcm2 Helium production capacity 60 mcm3
Amur GPP Gazpom Markets
Methane C3 – C4 Helium C5+ Cracker (1.5 mtpa) PE UNITS (1.5 mtpa) Ethylene
Amur GCC + Potential Partner (s)
C2 (Ethane) for Amur GCC
Svobodny
PROJECT UPDATE:
reaching designed capacity
Gazprom Amur GPP EUROPE
B INVESTMENT HIGHLIGHTS
4
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
17
Source: The Company data (1) Reliance SIBUR JV Elastomers production (India)
Midstream Olefins & Polyolefins Plastics, Elastomers & Intermediates
ZapSib
Construction phase Design phase
Amur project
increase NGLs as a gas industry by- product on the back of increasing gas condensate base in the region
DOTP TPE PTA BR1
growth over the past decade, no new material investments are expected
margin O&P segment
1 2 3
Profitable growth beyond core production base to tap new O&G regions with a potential to leverage midstream infrastructure developed by 3rd parties Continuously pursue
Expand core production base
Ideas phase Monetisation of low-cost hydrocarbons in Tobolsk with integration into existing infrastructure and facilities Developing petrochemicals leveraging
midstream infrastructure Develop new products based on local needs (i.e. propylene oxide) Incremental projects with low capital requirements based on our expertise in petchem facilities construction
4
Continuous Ideas Screening with a Focus on Profitable Niches and Feedstock Monetization
B INVESTMENT HIGHLIGHTS
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
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70 79 66 61 89 127 8 16 34 32 30 32 7 15 37 49 45 40 (6) (7) (2) (1) (3) (5) 2013 2014 2015 2016 2017 Sep 2018 LTM
SIBUR EBITDA ($ bln) 2.5 2.7 2.2 2.1 2.8 3.2 SIBUR EBITDA (RR bln)
Balanced Business Model Allowing to Benefit from Both O&G and Petrochemical Cycles, Smoothing Cash Flow and Earnings Volatility
Source: The Company data. (1) Adjusted for estimated value of naphtha trading operations via Ust-Luga, ceased in 2015
B INVESTMENT HIGHLIGHTS
Downstream Integration and Resilience of EBITDA Margin Key Pillars of Sustainable Margins
RR bln
Balanced business model with integration into feedstock
Supply contracts pricing formulas allowing to partially pass on O&G volatility to suppliers
Natural hedge from commodity prices and FX fluctuations
5
Midstream Plastics, Elastomers & Intermediates Unallocated Olefins & Polyolefins 136 140 161 103 79 195 109 100 53 44 54 69 Brent price (avg $/bbl) 29% 32%1 36% 34% 35% 36% EBITDA margin
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
19
RR 544 bln RR 385 bln Revenue OpEx 33% 9% 18% 20% 5% 15% 20% 9% 11% 10% 18% 32% LPG & Naphtha Natural Gas Olefins & Polyolefins Plastics & Elastomers MTBE Other Other D&A Energy Transportation & Logistics Feedstock& Materials Staff
Source: the Company data
B INVESTMENT HIGHLIGHTS
Natural Hedge from Commodity Prices and FX Fluctuations: Production Facilities Are Located in Russia Benefiting from Inverse Correlation of RR and Commodity Prices
5
10 20 30 40 50 60 70 200 400 600 800 1,000 1,200 1,400 1,600 PP rafia China Main Port. Spot Liquids weighted export price NGLs weighted cost RR/$
Hard Currency ($, EUR) Rouble
FX Exposure of SIBUR Revenue and Costs
$ linked
LTM as of Sep 2018
Chemical Spread Is Supporting Midstream Margin
$ / t 2013 O&P segment spread Midstream spread 2014 2015 2016 2017
Transportation and logistics costs $ linked
RR/$
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
20
Typical margin chemicals High margin chemicals
B INVESTMENT HIGHLIGHTS
High and Stable EBITDA Margins Compared to Peers
With an average EBITDA margin of 33% over 2012-2017, SIBUR is among the most profitable companies of the peer set
Source: Companies data
5
35% 38% 30% 23% 20% 21% 20% 15% 25% 5% 10% 15% 20% 25% 30% 35% 40% 2012 2013 2014 2015 2016 2017
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
21
Portfolio of Executed Projects
Source: The Company data (1) Projects of more than RR 1 bln budget. (2) Converted into USD at respective RR/$ exchange rate for each year – 31.1 for 2012, 31.9 for 2013, 38.6 for 2014, 61.3 for 2015, 66.8 for 2016, 58.3 for 2017.
63 116 142 300 81 Feedstock processing infrastructure Transportation infrastructure Petchem Other TOTAL Construction and expansion of GPPs, GFU Ust-Luga transshipment facility, railway loading racks, raw NGL pipelines Tobolsk PP production and multiple smaller scale projects Maintenance, R&D, IT, and other ~700 in 8yrs RR bln (excl. VAT) ZapSib
SIBUR Execute Projects within Budget and in Time
2 2 1 3 3 2 1 (20%) (15%) 5% (10%) (5%) 10% 15% Weighted Average Variance Savings Over the budget
80% of projects within 10% variance vs. initial budget More than 50% of projects with saving vs. initial budget Executed projects: 14 large-scale projects in 2012-2017 Total budget = 210 RR bln All the projects executed in time or ahead of time
Variance from Committed Budget 9% 17% 20% 43% 11% % of total
Current Management Team Has Proven Track Record of Completing Large-Scale1 Value- Accretive Investment Projects within Budget and Ahead of Time
6
B INVESTMENT HIGHLIGHTS
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
22
Two-tier governance structure with Board of Directors and strong management team focused on shareholder value maximization 4 independent members of the Board of Directors
Committee Management team with clear accountability and being compensated according to SIBUR’s performance vs. its peers
Leonid Mikhelson Chairman of the Management Board, PAO NOVATEK Dmitry Konov Chairman of the Management Board of PJSC SIBUR Alexander Dyukov CEO, PAO Gazprom Neft Wang Dan Executive Vice President
Gennady Timchenko Member of the Board of Directors, PAO NOVATEK Chang Zhenyong Vice President and Head of Chemical Division at Sinopec Vladimir Razumov Deputy Chairman of the Management Board, PAO SIBUR Holding Kirill Shamalov Deputy Chairman of the Management Board Alexey Komissarov Chairman of Federal Freight, Director of RANEPA Formerly Minister of the Government of Moscow and Advisor of Mayor of Moscow Peter Lloyd O’Brien Chairman of TransFin-M, Board positions2 - TMK (AC Chair), TFM (Chairman), and Sberbank CIB US (INED) Formely Co-Head of Investment Banking at Morgan Stanley, CFO of Rosneft Andrei Vernikov Multiple Board Member positions at banks Formerly Professor of Banking at the Higher School of Economics Sergey Vasnetsov Board Member at Eurochem AG Formerly SVP of Strategic Planning at LyondellBasell
High Corporate Governance Standards
Source: The Company data (1) While Novatek generated dollar yearly TSR of 20% since IPO in 2005. (2) As of Jul-2018.
Overview of Governance Concept Overview of Board of Directors
.
.
.
Shareholding Structure
Independents
6
B INVESTMENT HIGHLIGHTS
Leonid Mikhelson 48.5% Gennady Timchenko 17.0% Current/former Managers of PJSC SIBUR 14.5% Sinopec 10.0% The Silk Road Fund 10.0%
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
23
136 140 161 195 35.7% 33.9% 35.4% 35.8% 2015 2016 2017 9M 2018 LTM 6 9 8 9 142 149 169 204 41 24 28 37 43 121 107 116 2015 2016 2017 9M 2018 LTM 84 146 135 153 119 138 153 169 2015 2016 2017 9M 2018 LTM 380 412 455 544 2015 2016 2017 9M 2018 LTM
Source: The Company data (1) In $ terms. (2) RR/$ average exchange rates of 60.6 used for 9M 2018 LTM and 58.4, 67.0, 61.0 for the years 2017, 2016, 2015, respectively. (3) Adjusted for the share of EBITDA from JV and associates, including RusVinyl, Yuzhno-Priobsky GPZ, NPP Neftekhimia, Sibgazpolimer, SNHK, Reliance Sibur Elastomers Private Limited. (4) CapEx includes purchase of property, plant and equipment, as well as purchase of intangible assets and other non-current assets.
C FINANCIAL HIGHLIGHTS
RR bln Revenue, $ bln2 6.2 6.1 7.8 9.0
Operating Cash Flow CapEx4
+73%
+16% +11% +10% Capex, $ bln2 1.4 2.2 2.3 2.5 RR bln
(7%) +31%
RR bln RR bln Adj EBITDA, $ bln2,3 2.3 2.2 2.9 3.4 OCF, $ bln2 2.0 2.1 2.6 2.8 EBITDA margin, %
Revenue Adjusted EBITDA2
ZapSib Capex Other Capex EBITDA JV’s share of EBITDA Adjusted EBITDA3 +8% +10% +20%
+5% +13% +21%
12% Revenue CAGR‘15-171 16% OCF CAGR‘15-171 29% CapEx CAGR‘15-171 11% EBITDA CAGR‘15-171
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
24
1 2 3 4 5 6
A LEADING EMERGING MARKETS PETROCHEMICAL COMPANY OPERATES IN GROWING AND DIVERSIFIED END-MARKETS AND GEOGRAPHIES LOW COST CHEMICAL PRODUCER WITH HIGH BARRIERS TO ENTRY SIGNIFICANT UPSIDE FROM WORLD-SCALE ZAPSIB PROJECT AND FURTHER POST-ZAPSIB GROWTH PROJECTS SUPERIOR MARGINS AND RESILIENT CASH FLOW GENERATION THROUGH THE CYCLE STRONG MANAGEMENT TEAM WITH TRACK RECORD OF VALUE CREATION AND TRANSPARENT CORPORATE GOVERNANCE
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
26
SIBUR business 1. What are the company’s production capacities? 2. How is your feedstock priced? Do you see any risks of feedstock undersupply? 3. What is SIBUR midstream infrastructure? 4. What is SIBUR feedstock base? 5. What is your debt position? Do you see any liquidity risks? 6. Who is your management team? EHS1 7. How petchem products are different from other commodities? 8. What are SIBUR’s achievements in EHS1? 9. How SIBUR ensures industrial-safety on its production sites? ZapSib
(1) Environmental, Health & Safety.
D APPENDIX: FREQUENTLY ASKED QUESTIONS
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
27
970 970 980 245 270 270 1,215 1,240 1,250
PE PP
926 926 926 720 732 744 1,646 1,658 1,670
Ethylene Propylene
287 287 287 81% 89% 96% 2015 2016 2017 98% 97% 100% 2015 2016 2017 83% 90% 96% 2015 2016 2017 562 572 572 73% 79% 85% 2015 2016 2017 947 953 964 93% 95% 94% 2015 2016 2017 93% 88% 90% 2015 2016 2017 98% 87% 92% 2015 2016 2017 8.0 9.5 9.5 24.0 25.4 25.4
Continuous Optimization of Processing and Production Capacities
Source: The Company data Note: Nameplate capacity indicated - capacity officially registered with RosTeckNadzor. Capacity utilisation exceeds 100% when SIBUR is able to run a facility more efficiently over time, upgrading the technology and implementing various de-bottlenecking measures (1) Including JVs – NPP Neftekhimia, Poliom. (2) Including propylene and ethylene from O&P and PE&I segments. (3) 69% utilized for the intended purpose. (4) Including SIBUR Togliatti (80 ths tpa) and SIBUR-Tobolsk (207 ths tpa) capacities, 62% utilized for the intended purpose. (5) Including Yuzhno-Priobskiy GPP operated under JV (since October 2015). (6) Including Uralorgsintez divested in April 2017; capacity is used under long-term processing arrangement
Olefins & Polyolefins Midstream Plastics, Elastomers & Intermediates Elastomers PP1 and PE Propylene and Ethylene2 Plastics & organic synthesis products Gas Processing5 Gas fractionation6
Capacity utilization rate, % Production capacities, ths t / Processing volumes, bcm
ths t ths t ths t ths t
D APPENDIX: PRODUCTION CAPACITIES
Butadiene4
ths t
3
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
28
APG Raw NGL Pricing Drivers
Base price for APG depends on 3 key drivers: Regulated domestic natural gas price Target liquid fractions content, distance and processing cost (i.e. value for SIBUR) Alternative cost for the seller Russian Government has consistently increased incentives for oil companies to utilise APG: penalties for flaring increased from 4.5x the standard emission charge in 2012 to 25x starting from 2014 With reference to international prices for LPG and naphtha, and to domestic LPG prices Pricing in raw NGL supply contracts is determined on an export netback basis and reflects Fraction content of LPG & naphtha and fractionation cost (i.e. value for SIBUR) Transportation costs and export duties Alternative channels available for NGLs supplier (i.e. alternative cost
Key Suppliers
Contract Characteristics Illustrative Margin
92% 87%
% Guaranteed under LT contracts % Guaranteed under LT contracts Weighted average maturity Weighted average maturity
14.3
YEARS
16.1
YEARS
Oil Majors Gas Majors D APPENDIX: LONG-TERM CONTRACTS
Long-Term Contracts with Attractive Pricing Formulas
Source: The Company data Note: As of 31-Dec-2017
D APPENDIX: LONG-TERM CONTRACTS
APG purchase price Processed NGL selling price NGL purchase price Processed NGL selling price Natural gas selling price
Margins high but volatile (relatively to NGLs feedstock processing) Margin substantially lower vs. APG processing but is highly robust and stable as purchase and selling prices are strongly correlated
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
29
SIBUR Owns and Operates Midstream Infrastructure Securing Feedstock Supply to Its Chemical Business
Russia's largest and most extensive integrated infrastructure for processing and transportation of APG and NGLs
1
c.90% of annual supplies are guaranteed by long-term contracts with weighted average maturity of c.15 years
2
No third party gas processing additions in the region over last two decades while SIBUR doubled processing capacities and modernized legacy transportation infrastructure by investing $4.4 bln
3
Source: the Company data, CDU TEK and companies’ data Note: As of 2017FY (1) Including Yuzhno-Priobskiy GPP, JV between SIBUR and Gazprom Neft. (2) Including Uralorgsintez (0.9 mtpa) divested in April 2017 (capacity is used under long-term processing arrangement). (3) Estimate based on CDU TEK and companies’ data (FY2017)
9.52 mln t
Gas fractionation
25.41 bcm
APG processing
SIBUR infrastructure Third-party infrastructure SIBUR newly constructed / upgraded assets
SIBUR Asset Base in Western Siberia
8 GPPs1
2,712 km
Pipeline network
Tobolsk
Western Siberia Tobolsk
Scale: 1cm= c.90km
D APPENDIX: MIDSTREAM INFRASTRUCTURE
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
30
19 21 22 23 26 33 34 34 2010 2011 2012 2013 2014 2015 2016 2017 Western Siberia Other 65 68 72 75 85 89 96 98 83% 82% 86% 90% 92% 93% 92% 91% 2010 2011 2012 2013 2014 2015 2016 2017 Western Siberia Other Production (excl. flared volumes)
Source: Estimate based on CDU TEK and companies’ data (FY 2017), IHS Markit, Petromarket
Russian Unstable Gas Condensate Production Russian APG Production and Utilisation
mln t
Feedstock Overview
APG production (bcm) APG utilization rate in West Siberia (%) 2012: Introduction of regulation targeting 95% utilization rate by 2020 with gradual increase in fines
Oil field C1 C5 C4 C3 C2 C7+ C6 C1 C3 C2 C4 C5 C6 C7+ Core products
companies Gas field APG / gas condensate Raw NGL Natural gas LPG Naphtha Oil Petrochemical feedstock Methane (gas)
C1
Ethane (gas)
C2
Heavy fractions
C7+
Pentane Isopentane (gas/liquid)
C5 C3
Propane (gas/liquid)
C4
Butane Isobutane (gas/liquid)
C6
Hexane (gas/liquid)
High Concentration of O&G Production in West Siberia
West Siberia’ share in Russian oil production
57% WESTERN SIBERIA–SIBUR feedstock base
West Siberia’ share in Russian gas production
87%
D APPENDIX: SIBUR FEEDSTOCK BASE
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
31
Debt Structure and Maturity Profile
100% 32% 94% 54% 68% 6% 28% 18% Unsecured Fixed / Floating Long-term / Short-term $ / EUR / RR
RR bln, except as stated 31 Dec 2015 31 Dec 2016 31 Dec 2017 30 Sep2018 30 Sep ‘18 vs. 31 Dec ’17, % Total debt 457 342 312 323 3% Conventional debt 299 182 139 95 (31%) ZapSib related debt 158 160 173 228 31% Cash & cash equivalents 172 61 48 19 (60%) Net debt 285 281 264 304 15% Conventional net debt 247 163 103 76 (26%) ZapSib related net debt 38 118 161 227 41% WA loan tenor (years) 6 7 7 7 WA Conventional debt 3 3 3 4 WA ZapSib related debt 13 11 10 9 Available credit lines, incl. 288 185 267 370 39% Committed 170 113 128 112 (13%) 31 Dec 15 31 Dec 16 31 Dec 17 30 Sep 18 Debt / EBITDA 3.4x 2.4x 1.9x 1.7x Net debt / EBITDA 2.1x 2.0x 1.6x 1.6x Conventional net debt 1.8x 1.2x 0.6x 0.4x ZapSib related net debt 0.3x 0.8x 1.0x 1.2x Net debt / EBITDA (in $) 1.8x 2.2x 1.7x 1.4x
Key Figures Leverage Ratios Loan portfolio structure as of 30 Sep 18
Source: The Company data (1) Items denominated in USD and EUR are converted into RR at RR/USD and RR/EUR FX rates as of 30 September 2018. (2) Excluding the undrawn EUR ECA.
capital to shareholders
Overview
Cash & Cash Equiv. Committed Credit Lines 19 112 259 2 21 33 29 24 73 18 18 15 15 16 128 Liquidity 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 After 2028 Uncommitted Credit Lines Eurobonds Undrawn EUR ECA Loans RR Bonds ECA NWF RR bln (1) RR 323 bln2
As of 30 September 2018 Total Debt of RR 323 bln1 Average interest rates (%)
% 2015 2016 2017 3Q 2018 $ den. debt 3.4% 3.3% 4.0% 4.1% EUR den. debt 1.2% 1.1% 1.2% 1.2% RR den. debt 12.9% 10.9% 9.3% 9.2%
D APPENDIX: DEBT STRUCTURE AND MATURITY PROFILE
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
32
Source: The Company data (1) Environmental Impact Index is an average indicator of the specific load on the environment as a ratio of all types of impacts (emissions, discharges and waste) to the volume of production.
Experienced Management Team with Strong Track Record in Revenue Growth and Project Execution
EBITDA Evolution Since 2004
RR bln
Experienced and Committed Management Team with Industry Leading Expertise
Most Board / Management Members joined at least 10 years ago Chairman and CEO of OOO SIBUR joined in 2003 Chairman of PJSC SIBUR joined in 2004
2002 2003 2004 2005 2007 2008 2009 2010 2011 2012 2013 2015 2017 2006 2014 2016 2018 Mikhail Karisalov Chairman and CEO
Pavel Lyakhovich Plastics, Elastomers and Intermediates Alexander Petrov CFO Sergey Komyshan Polyolefins & Development Projects 2001 2000 1999 Dmitry Konov Chairman of the Mgmnt Board and a member of BoD of SIBUR Vladimir Razumov Chairman of SIBUR R&D, project management, ethics and discipline committees Igor Klimov CEO of ZapSib& SIBUR Tobolsk Rustam Galiakhmetov Production & Performance Improvements Oleg Makarov Logistics, Supply Chain & Midstream Vasiliy Nomokonov Executive Director IT, R&D
D APPENDIX: MANAGEMENT TEAM
13 161 2004 2017
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
33
35.9 8.6 4.5 4.3 2.6 2.4 1.5 1.4 1.1 0.6 Copper Aluminium Iron Steel Synthetics Rubbers Glass Cement Carton and Paper Plastics Pulp
MWth per tonne
8.1 6.7 5.5 1.8 1.4 0.7 0.6 0.6 0.5 0.2 Aluminium Synthetics Rubbers Copper Steel Iron Glass Carton and Paper Pulp Cement Plastics
Tonne of CO2 per tonne
Source: USGS, FAO, BP, Rubber, The New Plastic Economy Note: The average world indicators for the consumption of electricity and CO2 emission for the whole production cycle are presented
Electricity Consumption CO2 Emission
D APPENDIX: EHS
Petchem Products Have Environmental Advantages and Leave a Smaller Carbon Footprint Compared to Alternative Materials
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
34
Lost Time Injury Frequency1
D APPENDIX: EHS
Socially Responsible Business with Negative CO2 Footprint and Rigorous Focus on Health and Safety
Safety Indicators (International Benchmark), 2017 Efficient Prevention of CO2 Emissions (72) 7
Greenhouse gas emissions in CO2 equivalent (mln tonnes)
SIBUR Prevented as a result of APG processing Through APG processing SIBUR contributes to: Improvement in the ecological situation in petrochemical regions Establishment of resource base for subsequent processing of hydrocarbon resources into fuel and petrochemical products With 1 mln m3 of APG flared, c.300 tonnes of pollutants are emitted As SIBUR processed 22.8 bln m3 of APG in 2017, the emission of c.7 mln tonnes of pollutants and more than 72 mln of greenhouse gas (in СО2 equivalent) was prevented
SIBUR SHELL IOGP LANXESS BASF EVONIK
0.8 1.0 1.0 TRCF 0.4 0.8 1.1 FAR 0.20 0.36 0.27 1.70 1.40 1.11 LTIF
(1) Including contractors. Source: The Company data (2) Industry averages. Source: IOGP (International Association of Oil&Gas Producers) TRCF – Total Recordable Case Frequence; LTIF – Lost time injury frequency; FAR - Fatal Accident rate
2
0.98 0.85 0.30 0.36 2014 2015 2016 2017
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
35
90.2% 89.7% 92.0% 2016 2017 1H 2018
Industrial-Safety Repair and maintenance costs are allocated to a separate budget (fixed assets repair and maintenance) OpEx includes repair and maintenance costs, incl. regular maintenance
(optimization of repairs, import substitution, improved transparency of costs, training of own repair personnel, work with contractors to reduce the cost of services) CapEx-part contains fixed assets upgrading and modernization costs. Projects formation implies risk-based approach where all the projects are assessed in terms of the risks of consequences and the effectiveness
Only efficient investments with clear return are made Repair and Maintenance Expenses, RR bln
Losses due to equipment breakage Share of planned works (%)
6.7 5.9 5.3 8.6 8.5 8.3 3.2 3.6 5.0 18.0 2015 2016 2017 18.5 18.6
Expenses for materials and spare parts in “Other raw materials” item CapEx for modernization of the fixed assets Repair and maintenance expenses as % of amortisation and depreciation 59% 51% 52%
Source: The Company data (1) LPM – Lost profit margins –production uptime losses in money terms
OpEx CapEx
Repair and Maintenance Costs Improvement Measures Cutting-Edge Tools for Maintenance
9.1 6.0 2.4 4.2% 2.7% 0.9%
0.0% 2.0% 4.0% 0.0 5.0 10.0 15.0 20.0 25.0 2016 2017 1H 2018 LPM, RR bln production uptime losses, %
1
Digital systems for business process management for maintenance and repairs SAP, Meridium Technical conditions monitoring systems are installed on the most important equipment A reliability management service is established for switching to reliability centered maintenance (RCM) Diagnostic units are equipped with modern instruments, regular search and implementation of new tools is held for diagnostics quality improvement
D APPENDIX: EHS
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
36
Expected Position of ZapSib on 2022 Cost Curve (Including Transportation)
Source: IHS Markit
HDPE
ZapSib is expected to be one of the most cost-efficient assets to deliver to China and Western Europe
LLDPE PP
Delivered to W. Europe Delivered to China
1,000 2,000 35 70 $/Metric Ton Cumulative Production – Million Metric Tons
A: ZapSib NEA Avg WEP Avg MDE Avg NAM Avg
1,000 2,000 25 50 $/Metric Ton Cumulative Production – Million Metric Tons
A: ZapSib NEA Avg WEP Avg MDE Avg
1,000 2,000 50 100 $/Metric Ton Cumulative Production – Million Metric Tons
A: ZapSib NEA Avg WEP Avg MDE Avg NAM Avg NAM Avg
1,000 2,000 35 70 $/Metric Ton Cumulative Production – Million Metric Tons
A: ZapSib NEA Avg WEP Avg MDE Avg NAM Avg
1,000 2,000 25 50 $/Metric Ton Cumulative Production – Million Metric Tons
A: ZapSib NEA Avg WEP Avg MDE Avg
1,000 2,000 50 100 $/Metric Ton Cumulative Production – Million Metric Tons
A: ZapSib NEA Avg WEP Avg MDE Avg NAM Avg NAM Avg
A A A A A A
D APPENDIX: ZAPSIB COMPETITIVENESS
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
37
2017A 2017A PF ZapSib¹ Other Plastics, Elastomers & Intermediates Olefins & Polyolefins Midstream xx% Segment average EBITDA margin '15-17, % 41% 24% 35% External Revenue EBITDA EBITDA Margin
O&P PE&I Mid- stream Group
ZapSib Is Expected to Internalize Ample Own Feedstock…
Feedstock use by segment, mtpa
…Resulting in Expansion of O&P Revenue & EBITDA Margin…
Revenue Contribution by Segment, %
O&P EBITDA Margin, %
…& Strong Profitability Boost for the Group
ZapSib Expected Impact on SIBUR
Source: The Company data, IHS (1) Estimated ZapSib upside potential corresponds to 2017PF revenue assuming 100% utilisation rate, PP selling price per ton of $1,105 (average SIBUR selling price for 2017A) and HDPE selling price per ton of $1,354 (average SIBUR selling price for 2017A). EBITDA margin attributable to ZapSib’s operations represents a targeted ZapSib EBITDA margin for medium to long-term
ZapSib Is Expected to Result in A Long-Term Profitability Boost
D APPENDIX: ZAPSIB IMPACT ON BUSINESS
5.9 2.9 1.9 4.9 0.9 0.9 2017A 2017A PF Split incl. expected ZapSib production Plastics,Elastomers & Intermediates Olefins & Polyolefins External Sales of LPG & Naphtha 8.8 8.8 Highest margin segment 11% 21% 68% 11% 56% 34%
1
xx% - share of segment in LPG and Naphtha consumption xx - mln t of LPG and Naphtha used by each segment 41% 55% O&P Segment Margin '15-17 Tobolsk Polymer '17 ZapSib¹ O&P Segment Margin Post ZapSib²
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
38
Typical Ramp-Up Profile Benchmark of Actual Industry Ramp-Up (Sourced by Nexant)
Source: The Company data, industry benchmarks
ZapSib Ramp-up Profile Is Expected to Be in Line with Industry Benchmarks
Typically operations start at modest rates at easier units and move
complex is under commercial operation Subsequent years affected by outages due to unexpected fouling/coking The following graphics illustrate actual operating rate profiles and achieved production from real complexes monitored by Nexant. The variability of Year 3 is most frequently caused by an external constraint (inability to source sufficient feedstock, or market full production).
30 40 50 60 70 80 90 100 1Q2020 2Q2019 3Q2020 3Q2019 4Q2019 1Q2021 2Q2020 4Q2020 2Q2021 3Q2021 4Q2021
Lower bound Higher bound
Incremental ramp-up profile for a typical project
Year 1 Year 2 Year 3
80% 50% 90% 60% 90% 100% Capacity utilization rate,%
D APPENDIX: ZAPSIB RAMP-UP PROFILE
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
39
Project 8 Project 5 Project 12 Project 11 Project 6 Project 2 Project 3 ZapSib Project 4 Project 7 Project 1 Project 10 300 800 1,300 1,800 2,300 2,800 1,400 2,200 3,000 3,800 4,600 5,400 6,200 Capacity Capex/Ton Ethylene cracker ZapSib Integrated³ Project 9
Major Global Pyrolysis Projects Overview
Source: Projects and respective capacities provided by IHS Markit, projects capex calculated based on companies’ publicly reported data (1) Size of the buddle indicates the total capex spent on the project. (2) Including PP projects. (3) Ethylene and its derivatives production units. (4) Per special report ICIS top 100 chemical companies 2016
With Capex Per Tonne of Capacity Broadly in Line with The Industry, ZapSib is Expected to Deliver Superior Economics on The Back of Its Advantageous Position on The Cost Curve
SIBUR vs Global Peers
PE projects1 7,000 8,000
2
Higher cost of investment due to geographical, climatic and infrastructure characteristics, and necessity to import equipment and technologies is well compensated by better position on the cash cost of olefins and polyolefins producers due to advantageous access to cheap feedstock, low energy and labor costs in Russia
Successful track record of large-scale investment projects execution and expertise in construction risk management (No.4 in the world by the size of investment among petrochemical companies)4
Competitive cash cost position further strengthened by economy of scale
D APPENDIX: ZAPSIB POSITIONING
5.30” / 13.46cm 0.13” / 0.33cm 0.13” / 0.33cm 5.30” / 13.46cm 2.36” / 5.99cm 1.98” / 5.04cm 0.28” / 0.70cm 0.64” / 1.63cm 2.81” / 7.14cm 3.16” / 8.02cm
Width: 29.7cm (11.69”) Height: 21.0cm (8.27”)
40
D APPENDIX: ZAPSIB COST POSITIONING
9.1 8.4 8.4 4.7 4.5 5.7 3.9 Source: The Company data, IHS Markit, World Freight Rates, Russian Railways, Vostochnaya Stevedoring Company. (1) Freight and railway transportation costs calculated as of 08-Oct-18, transhipment costs calculated based on announced tariffs by VSC, the railway transportation costs converted into USD at 2017A RR/$ FX rate of 58.3
ZapSib Is Expected to Be Positioned in The 1st quartile
One of the lowest-cost projects globally with cost advantage driven by: Low feedstock cost (LPG netback price in West Siberia) Low energy cost in Russia Economy of scale and low labour cost in Russia
LPG shipment to Europe:
for hazardous cargo
Worldwide Polymer Shipment:
and relatively cheap transport
1 2 Transportation Cost of Solid Granules Cheaper than Liquids under Pressure
396 225 171
LPG in Europe Transport & duties Netback in Tobolsk 1.5 ton of LPG is required in order to produce 1 ton of polyolefin
Price for feedstock $ per ton
171*1.5
257 168 226 89 31
Savings in case of producing 1 ton of polyolefin in West Siberia
Transport savings for producing polymers in WS
Transportation cost of 1 ton of polyolefin from Tobolsk to China1 Benefit per 1 ton of PO Transportation cost of 1 ton of polyolefin from Tobolsk to Central part of Russia1 Benefit per 1 ton of PO Delivery to China Delivery to Central part of Russia
171*1.5
171*1.5
Electricity Prices in Russia for Industrial Customers are Among the Lowest Globally
2016 2015 2017 3.2 3.3 EU Electricity price for SIBUR is substantially lower than the country average (31.6%) (32.1%) Russia SIBUR
US Cents / kW/h
1 2 WE LPG cash cost Fixed Logistics arbitrage Utilities Variable Net Feedstock ZapSib cash cost Other Fixed costs + upscale effect The Main Factors for SIBUR’s Low Energy Costs: Optimization of electricity purchases in the wholesale and retail markets through the own energy sales company Optimization of power transmission services costs by switching to the most competitive rates in Russia Development of own power generation
$ per ton The chart presented for illustrative purposes only