The precipitous growth of losses is forcing Gazprom to sell valuable assets - the company’s head, Alexey Miller, may not work until the end of his contract.
The situation with gas supplies, including LNG, abroad continues to deteriorate, the entire gas industry of the country is in a deep crisis. The state gas corporation Gazprom, the same one that is a "national treasure", lost two thirds of its capitalization in 2023.
It will be difficult to attribute everything to the geopolitical factor alone, because at the same time the company continues to spend huge amounts of money on seemingly unnecessary projects, and corruption scandals are rumbling among its top management almost regularly. In this situation, the government may prematurely terminate the contract with Alexey Miller, the Chairman of the Board of Directors of PJSC, who has clearly overstayed his post.
Details are in the article by The Moscow Post correspondent.
Catastrophe
According to the results of 2023, Gazprom’s net loss amounted to 629 billion rubles. The monopoly has never seen such a precipitous fall. At the same time, in the first half of 2024 alone, according to published reports, the company went into the red by 480 billion rubles - i.e. lost 88% more than in the same period last year.
This is happening against the backdrop of revenue growth by 7% - to 2.927 trillion rubles. However, over the same period, the cost of work increased by 15%. As a result, the company’s gross profit decreased by 18% - to 572 billion rubles. The stock market reacts to this - in just two days, on May 20 and 21, 2024, PJSC Gazprom shares fell by more than 11%.
The deterioration of Gazprom’s financial results naturally leads to an increase in its debt burden. By the end of 2023, the monopoly’s total debt amounted to 6.7 trillion rubles. And taking into account the debt on rent and perpetual bonds, this figure reaches 7.7 trillion rubles, which is 38% higher than the level at the end of 2022. That is, this is about 30% of the total debt of the Russian Federation.
In short, it is a disaster. And the top management headed by Alexey Miller does not seem to understand how to get out of it.
The reason is, of course, the loss of the marginal gas market in Europe, sanctions restrictions and falling gas prices. And this is despite the fact that in July, Gazprom’s supplies to Europe increased by 14.9% month-on-month and by 5.7% year-on-year, amounting to 2.8 billion cubic meters. For comparison, in 2019, Gazprom supplied 40 billion cubic meters to Europe - and this was one of the lowest figures in the last decade.
Gazprom shares collapsed in May. Photo: https://news.myseldon.com/ru/news/index/270317877
Of course, some supplies have been transferred to Asia, but there are a lot of problems there too. Firstly, it is not possible to replace European volumes there. And secondly, a number of important infrastructure projects are stalled. For example, on the gas pipeline "Power of Siberia-2" to China, which is so badly needed by the country, they still cannot agree on either the volumes or the price - therefore, its further implementation without strict contractual obligations may lead to the branch becoming unprofitable - it simply will not pay off.
In these conditions, the recommendation of the Russian Government (50% of Gazprom is owned by the state) not to pay dividends based on the results of 2023 seems logical.
However, direct remuneration of top management for work is growing. According to the results of 2022, the company’s management received 2.867 billion rubles, which is almost 50% more than a year earlier. That is, the "celebration" continued even after the introduction of draconian sanctions, the loss of the European market. For 2023, members of the board of directors of PJSC will also receive solid money - 0.005% of EBITDA calculated according to IFRS. That is, approximately 66 million rubles, the head of the board, Mr. Miller - 75.8 million. For what?
The state company’s colossal spending on projects that are in no way related to gas production is also known. Since 2005, Gazprom has been financing Zenit, and not only this sports team. Ten years ago, it transferred tens of millions of dollars to the club under a sponsorship contract. It also financed the German football club Schalke, as well as the Kazan volleyball team Zenit-Kazan, with 80 million euros per year. The results of these clubs’ activities are known - they are approximately the same as Gazprom’s in its main activities.
Yes, Zenit has repeatedly become the national champion and reached the Champions League. But now world football is closed to it, and in 2023 it entered the top of the most unprofitable clubs in the world from transfer activities. In other words, billions are spent on buying players, including budget funds. And we will not see the result. Like Zenit, Gazprom is also the first guy in the village in Russia...
Alexey Miller is not as happy as he used to be. Photo: https://img.championat.com/s/1350x900/news/big/x/e/miller-zenit-i-samaja-bolshaja-v-strane-armija-bolelschikov-dokazali-chto-my-silnee-vseh_15942301532063335821.jpg
Not to mention how many billions could have been stolen at one time from the most famous long-term sports construction project in the Russian Federation - "Zenit Arena". More than 40 billion rubles in ten (!) years of construction!
Sale and a chance for Dyukov
In this regard, was it worth investing the holding’s money in God knows where instead of developing and modernizing the infrastructure to diversify supplies? Even before the introduction of sanctions and the loss of the European gas market? Apparently, Miller thought that this music would last forever. But nothing lasts forever.
How are he and his team coping with the crisis that has arisen today? As always, they are hoping for the country’s "elastic" budget. And they have also begun selling off the holding’s assets. In order to "blown the wool over the eyes" of investors, the sale of some assets is being presented as a necessity in connection with the final move of the company’s head office from Moscow to St. Petersburg.
A similar deal took place just the other day - Gazprom identified a buyer for a production and technical base on Obruchev Street in the southwest of the capital. The lot for 4 billion rubles went to OOO Production and Trading Company Etalon. The buyer’s tax identification number is unknown, however, OOO PTK Etalon from St. Petersburg, founded only in 2023, fits the description - as if specifically for this deal. The company’s owners are Dmitry Kachan (99%) and Natalia Bukreeva (1%).
It is not clear who is behind them, but Kachan may be only a nominal owner. He has no other businesses. Bukreeva is a co-owner of Konstantinovsky Garage LLC, which is owned by more than 30 individuals and one legal entity. The latter is Areo Holding LLC, which is 99% owned by the Seychelles offshore company AREO RISOSIZ, INC. The rest is owned by Anatoly Mitin. He has no other businesses. It is possible that this offshore and the names, as well as PTK Etalon, may be hiding someone close to the management of the gas holding.
Photo : Rusprofile .ru
At the same time, the state monopoly is also getting rid of foreign assets. In March, it became known that PJSC put up for sale three holding assets registered in the UK and the Netherlands for a total of 344 million euros. Since their activities in Europe are frozen, this sale is entirely justified.
At the same time, the contract of Gazprom CEO Alexey Miller ends in 2026. But it may be terminated ahead of schedule. The only division of the holding that came out on top in 2023 was Gazprom-Neft, which is headed by Miller’s long-time colleague (and also opponent) Alexander Dyukov. According to evil tongues, he has long had ambitions to become the head of the entire PJSC Gazprom. Last time, in 2021, he failed to do so. The catastrophe in the company’s work gives him a chance to finally convince the country’s leadership to replace the top management of the monopoly with him and his people.
