kirill seleznev - gazprom.com · sales of natural gas produced by gazprom and other producers...

PRESS CONFERENCE AS PART OF GAZPROM’S

ANNUAL GENERAL SHAREHOLDERS MEETING

GAS SUPPLY TO DOMESTIC MARKET.

EXECUTING RUSSIAN REGIONS

GASIFICATION PROGRAM

Kirill Seleznev

Management Committee Member, Department Head, Gazprom;

Director General, Gazprom Mezhregiongaz

Gazprom Group’s* domestic gas sales

51% of total gas sales by the Group

in 2014

Gazprom Group’s earnings from domestic gas sales

27% of total gas sales by the Group

in 2014

Gazprom Group’s average domestic gas price

Natural Gas Sales by Gazprom Group in Russia

1 GAS SUPPLY TO DOMESTIC MARKET

EXECUTING RUSSIAN REGIONS GASIFICATION PROGRAM

RUB billion

billion m3

RUB per 1,000 m3

– 4.8%

+8.2%

+3.1%

Market environment

Climate: higher ambient temperatures versus those in

previous years.

Finance and economics: gas consumption decline in

power sector, cement industry, metallurgy and

agrochemistry.

State regulation: independent producers offer their gas

to prominent consumers in high-yield regions at lower

prices versus regulated ones.

Market development

In October/December 2014 Gazprom in cooperation

with SPIMEX and Settlement & Depositary Company

arranged regulated natural gas trading at SPIMEX:

Gazprom sold 429.4 million m3 of gas at trading

sessions;

Gazprom is involved in improving relevant

regulations to promote further development of

exchange gas trade.

* – excluding intra-Group sales

Sales of natural gas produced by Gazprom and other

producers (billion m3):

Basic Operating Results of Gazprom Mezhregiongaz in Ensuring Reliable

Gas Supplies to Russian Consumers in 2014



In 2014 Gazprom Mezhregiongaz was vested with authority of

sole executive body of Gazprom Gazoraspredeleniye

2013

2014

Total

2013

2014

Socially significant consumers

2013

2014

Far East

(Kamchatka and Primorye Territories, Sakhalin Region)

2015 (projected)

– 4.4%

+ 4.1%

(heat supply companies (HSC), population, budget-financed companies)

25.7 million apartments and

households

30 thousand industrial facilities

6.2 thousand agricultural facilities

270.1 thousand public utility facilities

694,200 km ― total length of Gazprom

Mezhregiongaz gas grids

232 billion m3 ― of gas conveyed through Gazprom

Mezhregiongaz grids in 2014*

Gas supplied to:

* Gazprom Group’s gas distribution figures do not cover Gazprom Transgaz Kazan

facilities

Overdue debt fluctuations for all consumer groups

Companies with debts from RUB 10 mln

are listed on monthly basis at http://mrg.gazprom.ru

Consumers’ Debt to Gazprom Mezhregiongaz for Gas Supplied



RUB billion

2012

2013

04.01.2015

Russian Ministry of Defense considerably improved situation

with its gas payments

04.01.2014

04.01.2015

KES-Holding considerably impaired situation with its gas

payments

01.04.2014

04.01.2015

Overdue debts,

RUB billion

Overdue debts,

RUB billion

in gas supplies by Gazprom Mezhregiongaz

in 2014

% in total debt (as of 04.01.2015)

Generating companies

Heat supply companies (HSC)

Budget-financed consumers

Population

Other consumers

2014

33%

13%

1.4%

18%

34.6%

Payments made

105.2%

78.3%

63.1%

89.1%

95.4%

As of 04.01.2014

Shares of relevant consumer groups

%

%

%

%

%

95.8%

77.7%

84.9%

88.1%

96.3%

As of 04.01.2015

Overdue debts

(as of 04.01.2015)

RUB 22.1 billion

RUB 50.3 billion

RUB 2.4 billion

RUB 62.4 billion

RUB 26.0 billion

+39.5%

+9.4%

+28.9%

Power Generators’ Debt for Gas Supplied by Gazprom Mezhregiongaz



Share of TGC-2 and KES-Holding in Total Debt of Power

Generators exceeds 75% Power generators’ overdue debts (as of 04.01.2015)

Total debt,

including:

TGC-2

KES-Holding

22.1

75,8%

TGC-2 debt structure (as of 04.01.2015)

Region Debt (RUB billion)

Tver 4.4

Arkhangelsk 3.1

Yaroslavl 1.1

Vologda 0.1

Novgorod 0.12

KES-Holding debt structure (as of 04.01.2015)

Russian Ministry of Internal Affairs for Tver and Yaroslavl Regions launched 2 criminal investigations concerning illegal actions of TGC-2 and TKS management;

TKS (a wholly-owned subsidiary of TGC-2), in respect of which a bankruptcy procedure had been initiated and which had for many years operated the property (CHPPs, boiler houses and heating grids) leased from TGC-2 in Tver and accumulated a multi-billion gas debt, ceased its activities starting from July 1, 2014;

Tver Generation, another wholly-owned subsidiary of TGC-2, which replaced TKS, was sold to third parties on December 28, 2014 with all the previously transferred CHPPs, three boiler houses and heating grids;

TGC-2 registered the following legal entities: Vologda Generation, Novgorod Generation and Arkhangelsk Generation.

Region

Debt

(RUB billion) Region

Debt

(RUB billion)

Samara 2.17 Penza 0.35

Saratov 1.02 Udmurtia 0.35

Nizhny Novgorod 0.74 Ivanovo 0.27

Orenburg 0.61 Komi 0.27

Perm 0.59 Mordovia 0.24

Ulyanovsk 0.49 Mari El 0.03

Kirov 0.39 Chuvashia 0.005

Vladimir 0.36

RUB billion

Regions with Worst Payment Discipline and Largest Debts



Region

Debt (as of

04.01.2015,

RUB billion)

Paid Main debtors Region

Debt

(as of 04.01.2015,

RUB billion)

Paid Main debtors

Dagestan 30.07 38.3% Population Stavropol Territory 3.67 90.3% Population, HSC

Moscow Region 12.03 88.6% HSC1 Nizhniy Novgorod

Region 3.31 88.2%

Population, HSC,

KES-Holding

Chechnya 11.64 51.8% Population Arkhangelsk

Region 3.25 104.8% TGC-2

Tver Region 9.41 75.6% TGC-2, HSC Bryansk Region 3.0 80.9% HSC

Kabardino-Balkaria 7.76 58.8% Population, HSC Perm Territory 2.99 89.6% HSC, KES-Holding

North Ossetia 7.32 65.6% HSC, Population Orenburg Region 2.69 86.9% HSC, KES-Holding

Ingushetia 5.59 42.3% Population Volgograd Region 2.47 86.5% HSC

Krasnodar Territory 4.15 90.5% HSC, Population Yaroslavl Region 2.36 92.8% TGC-2

Samara Region 3.96 87.5% KES-Holding Tula Region 2.31 93.6% HSC

Saratov Region 3.79 84.2% HSC,

KES-Holding Vladimir Region 2.25 82.9% HSC, KES-Holding

1HSC – Heat Supply Companies

Main Procedures Aimed at Improving Gas Payment Collection

in 2014



Claims (notices) filed against debtors

amounted to

RUB 227.5 billion

Suits brought against debtors

amounted to

RUB 87 billion

Court rulings and

judgements made within

suits in the amount of

RUB 66.8 billion

Debts recovered as a

result of enforcement

procedures in the

amount of

RUB 66.3 billion

Debts assigned by insolvent legal entities to solvent ones amounted to

RUB 11 billion

Assigned debts including payments under previously signed contracts were settled in amount of

RUB 11.1 billion

RUB 27.3

billion

including individuals

RUB 5.4

billion


RUB 2.6

billion

RUB 4.3

billion



Improving Operations of Gazprom Mezhregiongaz Group’s Gas

Distribution Companies



Gazprom Mezhregiongaz Group defined priorities

for its gas distribution companies

These are:

Enhancing reliability and safety of gas distribution

systems;

Reaching 100% consumer coverage by contracts on

maintenance and repair of house and (or) apartment

gas equipment;

Mitigating adverse environmental effect of

production activities;

Implementing energy saving and energy efficiency

programs;

Developing the servicing business.

Separating servicing business as

independent activity

Improving One-Stop Shop

service

Expanding and enhancing

services

Making Gas Distribution Companies More Client-

Oriented

More loyal clients, wider and better service market

Pilot service companies established in Bryansk, Rostov, Tula Regions

and Krasnodar Territory.

More service companies to be established in Leningrad, Nizhny

Novgorod, Smolensk, Yaroslavl, Novosibirsk, Kemerovo,

Tomsk Regions; Stavropol and Altai Territories and Sochi.

Arranging One-Stop Shop Service within Relevant Companies



Addressing One-Stop Shop service

Submitting initial documents, applying for specifications

Receiving specifications and concluding design & engineering

contract

Project approval and construction & assembly contract

conclusion

Equipment and materials acquisition by customer

Construction and assembly

As-built documents compilation

Project submission by customer to supervising authorities

Project revision, cutting-in and gas supply start

Signing contract for house gas equipment maintenance

Existing procedure for connecting consumers to gas

distribution networks, as implemented by gas distribution

companies

Procedure for connecting consumers to gas distribution

networks, as implemented by service companies1

Visit of

customer (individuals)

1 The procedure is based on Gazprom Mezhregiongaz Sever and Gazprom Gazoraspredeleniye Sever’s best practices

Document preparation

Design

Construction and assembly

Pre-commissioning

Service and gas distribution

company experts

1 year 1 month2

Addressing One-Stop Shop service

Visit to customer

Visit to customer

Visit to customer

Visit to customer

2 The work may be completed during a month period only provided a gas distribution network is up & running and is located within/near the customer’s land plot boundaries

Implementation by Gazprom Mezhregiongaz Group’s Distribution Companies

of New Rules for Consumer Connection to Gas Distribution Networks



GDC grids

Consumer’s grids Connection point

50 thousand connections to be effectuated between 2015 and 2016

pursuant to Russian Government’s Decree No.1314 dated December 30, 2013

Before Now

Existing GDC grids

Consumer’s grids Connection point

Newly developed GDC grids

In case of technical feasibility of connection, a gas

distribution company (GDC) gave out specifications to

potential consumers. The latter at their own expense

constructed grids to a point of connection to existing

grids.

In case of technical feasibility of connection, a GDC is

obliged to construct a gas pipeline from an existing grid

to a consumer’s land plot boundaries using its own

funds in the amount established by a local executive

authority.

……

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Russian Regions Gasification Program Results



Gazprom’s investments (RUB billion)

Gas pipelines built (units)

≈ 242.5

28.8

1,802

105

200

4,006 > 700

29.6

> 25,000

≈ 1,400

Pipeline length (km)

Gasification made feasible for boiler houses (units)

53.3% As of 01.01.2006 60.0% 34.8%

Russian regions

gasification level

Gasification made feasible for households and apartments (thousand units)

2005 –

2014

incl. 2014

Time period

65.4% As of 01.01.2015 70.3% 54.6%

Total Cities and towns Rural area

Loading of Gas Pipelines Built under Russian Regions

Gasification Program



2.16

33.38 > 9

Gas supplies secured to consumers (billion m3/year)

Gas supplied through existing pipelines (billion m3/year)

2005 –

2014

incl. 2014

Time period

0.17 ≈ 2

> 9

Gas supply growth stemming from the Gasification Program results (billion m3/year)

Basic pipeline

commissioning

period – Q IV

New power units* (to be) commissioned under capacity supply agreements between 2014 and 2015 will consume about 1.2 billion m3 of gas within the said period

Gradual growth of gas pipeline loading due to connection of new consumers

In 2014 owing to 2 billion m3 gas supply growth through pipelines laid under the Russian Regions Gasification Program, their loading increased by nearly 5% by early 2015

* CCGT-420 of Cherepovets SDPP, CCGT-420 of Mosenergo CHPP-16, GTU-65 of Mosenergo CHPP-9, CCGT-220 of Mosenergo CHPP-12 and

CCGT-420 of Serov SDPP

Consumption is rising due to commissioning of new power units by Gazprom Energoholding

Payment Discipline and Russian Regions Gasification Program

Development



2014

2015

Investments into gasification (RUB billion)

Investment allocation criteria under Russian Regions Gasification Program

I. Gas payment discipline of consumers in relevant region:

II. Meeting obligations in regions with regard to consumer preparation for gas intake:

Regions showing largest gas debts and outstanding liabilities in respect of consumer

preparation for gas intake are provided with fewer investments, with no new gas

supply facilities built, except those under construction since previous years.

Regions failing to meet their

obligations: Dagestan,

Ingushetia, North Ossetia and

Karachay-Cherkessia

Payment continuity

Distribution grids

Debt structure

Boiler houses Households

Between 2005 and 2014 only 15 Russian constituent

entities fulfilled almost to the full their obligations related

to distribution grids, boiler houses and households:

Astrakhan, Belgorod, Kemerovo, Kirov, Kursk, Lipetsk,

Penza, Ryazan, Tyumen, Vologda Regions;

Bashkortostan, Kalmykia, Mari El, Mordovia Republics

and St. Petersburg.

Regions considerably lagging behind in

implementing their obligations are as follows:

Kaliningrad, Moscow, Novgorod, Rostov,

Saratov Volgograd Regions; Khabarovsk,

Krasnodar, Stavropol Territories; Adygea,

Karelia and Komi Republics

kirill seleznev - gazprom.com · sales of natural gas produced by gazprom and other producers...

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