Gazprom is starting to put 50 % of its adjusted net income into dividends, Alexei Miller, the Chairman of the company’s management committee said on Gazprom’s Investor Day at the end of last month.
At the end of 2020, Gazprom’s Board of Directors was to put no less than 40 % of adjusted income into dividends and at the end of 2021 no less than 50 %, according to Gazprom’s dividend policy approved in December 2019. But in the even, this norm is to be put into use a year earlier than planned.
“The strong indicators from Gazprom’s work at the beginning of 2021 and a good forecast of our budget up to the end of the year allowed management to decide on a coefficient of dividend payments of 50 %,” Miller said. He added that management had submitted a request to the board of directors to pay out 297 billion roubles ($3.97 billion) in dividends.
Dividends and capital investment
In 2020, Gazprom reported net income of 135 billion roubles according to the company accounts by International Financial Reporting Standards. But with due account of the dividend base, actual net profit, in accordance with dividend policy, is adjusted for interest rate fluctuations, losses from devaluations of asset values and investments and also the difference between the share of profit and receipts from associated and joint ventures.
“As a result, the dividend base for 2020 is considerably higher than the volume of net income and totalled 595 billion roubles,” said Famil Sadygov, Deputy Chairman of Gazprom’s Management Committee.
Sadygov said that this year free cash flow (or simply, operational income net of capital investment) would cover the divided payments at the close of 2020, as a result of factors including control of capital expenditure.
In 2021, Gazprom (parent company), would allocate 902 billion roubles for investment, less than in 2020 (922 billion roubles according to the drafting of the investment programme in October and also in 2019 (1,323 billion roubles). For the group as a whole, revenue in 2021 is forecast to grow by 16 % and the indicator EBIDTA – by 9 %, Sadygov said.
Export and refining
The improved financial indicators are linked in no small way to the recovery in the European gas market.
“In 2021, the price situation in Europe will be more predictable than a year ago,” said Elena Burmistrova, General Director of Gazprom Export, emphsasising that stocks of gas at the moment were considerably lower than the average levels of recent years. As of 20th April, according to data from Gas Infrastructure Europe, underground storage areas in Europe were filled to 28.9 % capacity – half the figure of a year ago (59 % of capacity as of 20thApril 2020).
“The need to replenish stocks will support demand and prices this coming summer,” Burmistrova said.
In the medium term, Gazprom intends to boost exports in three areas:
- the European branch of the Turkish Stream pipeline, to be completed next autumn.
- the eastern “Power of Siberia” route. Shipments along this route increased from 328 million cu.m. in 2019 to 4.1 billion cu. m. in 2020, but remain below the peak contract levels.
- the Western route of the “Power of Siberia” pipeline which supplies gas to China through Mongolia.
“By 2030, we are expecting a significant rise in gas demand from Chiba – more than 50 % compared to 2020 levels,” said Burmistrova.
Gazprom also intends to boost volumes of gas refining, both at the Amur refinery with a capacity of 42 billion cu.m. and a base for the Chayandinskoye and Kovyktinskoye gasfields in Yakutia, and at the Ust-Luga refinery in Leningrad region with a capacity of 45 billion cu.m.
That plant will take shipments of gas containing ethane from the Nadym-Put-Tazovsky region of western Siberia.
“The first phase unit will be brough on stream this year. The plant will reach its full capacity at the beginning of 2025,” said Vitaly Marelov, Deputy Chairman of the Management Committee, referring to construction of the Amur refinery. The plant at Ust-Luga, he said, had already begun operations.
LNG and sustainable development
Markelov said the Baltic refinery network would include a plant to produce liquefied natural gas (LNG) with a capacity of 13 million tonnes per year. This project will expand Gazprom’s LNG assets, with the largest for the moment being the Sakhalin Energy plant, with a capacity of 9.6 million tonnes a year.
In March, one of the companies that own the plant, the Anglo-Dutch company Shell, became Gazprom’s partner in introducing “green LNG” to the market. The carbon footprint of a shipment of LNG purchased by Shell and unloaded at Britain’s Dragon terminal was provided with a Verified Carbon Standard and Climate, Community and Biodiversity certificate for completion of a project that protects the environment – a development noted by Burmistrova on Investor Day.
“We are ready, through out export activity, to continue to make a contribution to the low-carbon development of Europe and China,” said Oleg Aksyutin, Deputy Chairman of the Management Committee. Gazprom, he said, had reduced its greenhouse gas emissions by nearly 15 % in 2020.