After the clear-out,
Gazprom gropes towards a strategy
by
Simon Pirani
Gazprom
ceo Aleksei Miller may have purged senior management of his predecessor Rem
Vyakhirev’s associates, but on key policy issues such as market liberalisation
and tariff reform he is sending out mixed messages.
The
clear-out has been thorough enough. Of Miller’s eight deputies, five are new
appointments from outside Gazprom and one, Yury Komarov, was promoted to take
responsibility for exports from Aleksandr Pushkin. Two Vyakhirev-era deputies
remain: Vyacheslav Sheremet, who is awaiting trial on “abuse of authority”
charges arising from the Sibur scandal, and Nikolai Guslisty, whose procurement
portfolio has been handed to Sergei Lukash, a federal security service veteran
unknown in business and gas industry circles.
Miller
has put a premium on people he trusts. The new chief accountant, Yelena
Vasilieva, worked previously in two much smaller companies ... alongside Miller.
The new deputy chairman (finance) (Vasily Savelev), and the new heads of
investments and construction (Mikhail Akselrod), property management (Aleksandr
Krasnenkov) and information policy (Aleksandr Dybal), also hail from St
Petersburg, as do Miller and president Vladimir Putin. (Full list of management
changes, see box.)
But
while the door of Gazprom’s skyscraper headquarters has been revolving at
record speed, policy formulation – whether on gas market reform, finance and
investment or corporate issues – has creaked along more slowly.
Gas
market reform
While
the new management team has indicated its support for liberalisation of the
domestic gas market, and for eventual export pipeline access for independent
producers, there is no unified stance on how changes will be implemented.
At
parliamentary hearings on gas market reform on 11 February, Gazprom’s deputy
chairman (marketing and processing), Aleksandr Ryazanov, said Gazprom
understands that “the time will come” when independent producers would have
access to export pipelines – but this would not be granted until “conditions
on the domestic market had equalised” and the differential between Gazprom
prices and the independents’ sales prices removed. (More on independent
producers, see separate article.)
A
Gazprom spokesman said the company would accept, as a first step on
liberalisation, the independents’ proposal that a small proportion of Gazprom
production would be sold at free market prices. He added that Gazprom favours a
tiered price structure, with Russian companies earning export revenues at world
prices (e.g. oil and metals exporters) at one end paying world gas prices and
disadvantaged household consumers at the other end.
But
Aleksandr Anenkov, deputy chairman (production), was far less accomodating to
the independents recently. “If any independent producer thinks that he will
receive a licence, develop a deposit, and then go to Gazprom and say ‘here I
have such-and-such a quantity of gas’, and that Gazprom will then be obliged
to transport that quantity, he is very much mistaken,” Anenkov told the
business newspaper Vedomosti. “What if the transport system is fully committed
at that moment? Then of course we won’t be able to transport his gas.”
Gazprom has “concrete proposals to the independent producers” regarding the
expansion of the transport system, he said, implying that they would be required
to invest in it.
Yury
Komarov, deputy chairman (export policy) – who is regarded, along with finance
chief Vitaly Savelev, as one of Miller’s most influential deputies – takes a
more positive pro-reform stance. In a newspaper interview he said: “It is
worth considering giving the independent producers a choice: to sell gas to
domestic consumers under a domestic price formation system, or to Gazprom at
weighted prices that would reflect both domestic and export prices.”
An
industry source close to Gazprom said: “It is Komarov who is really in charge
of the negotiations with the authorities on market liberalisation and tariffs.
He wants to encourage independents with weighted average prices between export
prices and domestic prices. Komarov will determine the outlines of market
strategy, and consequently also determine the relationship with key partners and
the investment priorities.”
In
practice, Gazprom is apparently negotiating piecemeal with its strongest and
most dangerous competitors, the oil companies. Russian newspapers reported this
month [March] that oil companies are supplying gas directly to power companies
– TNK to Samaraenergo, and Lukoil to Permenergo and Volgogradenergo. Sibneft,
which is controlled by the Millhouse group of Roman Abramovich that also owns
half of Russian Aluminium, the world’s second biggest aluminium compnay, is
reported to be in talks on a gas supply contract with the profitable Moscow
power company Mosenergo.
Finance
and investment
Although
Gazprom last year received a record $14.5 billion in non-CIS export proceeds –
which comprise 60% of its turnover – it expects these to fall to $11-$11.5
billion in 2002. Proceeds of sales to non-Russian CIS customers have fallen as
Itera’s market share rose, and domestic revenues are constrained by the
government’s decision that tariffs will rise by a maximum of 35% this year.
All
this implies considerable borrowing to finance capital expenditure – to which
is added an even larger requirement, to refinance expensive ruble debt (largely
promissory notes) that the new finance team under Vitaly Savelev is anxious to
leave behind. A total figure of $5.8 billion to balance this year’s budget has
appeared in the Russian press.
Where
will the loans come from? A research report issued last month by Deutsche Bank,
a key lender to Gazprom, estimated that more than 85% of hard-currency revenues
are already used as collateral for existing debt. Two secured hard-currency
loans taken out earlier this month ($150 million syndicated by Deutsche and $200
million syndicated by HypoVereinsbank) increase that figure further. So extra
foreign borrowing will likely have to be mainly unsecured, and this month the
Gazprom board approved issue of a $500 million eurobond that was first discussed
last year and postponed at the Russian government’s insistence, and is now
expected to go ahead in May or June.
But
Gazprom has also received substantial loans from Russia’s state-owned banks
that are interpreted as a confirmation of the government’s strong support for
Miller and his new team. In December last year the Central Bank lent
Vneshtorgbank, Russia’s second largest state-controlled bank, $800 million;
Vneshtorgbank in turn extended an enormous $670 million loan to Gazprom. To
finance the bumper loan, the Central Bank went on a dollar buying spree that
alarmed the money markets until they learned the cause; the transaction was so
big that Vneshtorgbank was taken to its legal limit for loans to a single
customer.
A
financier who works closely with Gazprom said: “Previously Gazprom’s
negotiations with government about financial strategy were like discussions
between equal partners. Now the government has a majority on the board and is
clearly deciding strategy. In October last year the government asked Gazprom to
hold back its eurobond issue [until 2002], and promised to come up with
alternative sources of funding. The Vneshtorgbank loan did this, and also
signalled support for the positive changes in management.”
The
government’s approval this month of Gazprom’s investment programme for this
year – which was set at 140 million rubles, and pruned far less than those of
the railways ministry and power company United Energy Systems – could be
regarded as a similar gesture of support.
Corporate
issues
Perhaps
the most tangible progress made by the Miller team is with its corporate
clean-up. In answer to president Putin’s now famous question “where’s the
money?” – asked at a ceremony in November last year at Novy Urengoy to mark
10 trillion cubic metres of production from Yamal – a report on Gazeksport
revenues has been internally circulated and leaked to journalists.
Management
is still planning to exercise its option to take back control of Purgaz,
Itera’s main production asset, and has put a stop to attempts to alienate
assets from Sibur, the petrochemicals subsidiary, and Zapsibgazprom, a
production unit. Stephen O’Sullivan, analyst at United Financial Group, said:
“The trend is all in the right direction. Eventually the company will get
around to dealing with fundamental issues such as stabilising production and
coping with the effects of market liberalisation.”
At
a board meeting last month, Gazprom adopted a corporate governance charter that
provides for two-thirds of board members to be “independent”, i.e. not
management. The current board, with six government representatives, one from
Ruhrgas, one independent and three managers, would comfortably qualify.
The
make-up of the board is unlikely to change drastically this year. The state’s
list of candidates is similar, with the notable addition of Miller. The
management has also nominated Miller, along with Savelev, Ryazanov, Gazprombank
president Yury Lvov, head of property management Aleksandr Krasnenkov, head of
administration Mikhail Sereda, and Rem Vyakhirev.
Burkhard
Bergman of Ruhrgas is nominated again. But a split among minority portfolio
investors means that a list headed by former deputy prime minister Boris
Fyodorov, currently minority shareholders’ representative on the board, is
being opposed by William Browder, head of Hermitage Capital Management
investment fund.
The
competition has already generated a disproportionate volume of publicity. In the
wake of the Enron scandal, Browder, who is nominated for the board seat by
holders of 3.13% of Gazprom shares, returned to the issue of
PricewaterhouseCoopers’ relationship with Gazprom, accusing Fyodorov and
others of having let the accountancy firm off the hook too easily. Browder was
widely quoted by American journalists who obtained extra documentation on
PwC’s dual accountancy/consultancy role.
Fyodorov
is nominated for the board by holders of 2.5% of Gazprom. But United Financial
Group, of which he is one of the owners, is believed to manage up to 6% of the
shares. According to the Financial Times, up to half of this amount comprises a
holding by Richard and Christopher Chandler, the Monaco-based brothers who have
specialised in buying into Russian companies, campaigning to improve corporate
governance, and exiting at a profit.
Fyodorov,
in the past the most vocal critic of the Vyakhirev management, is an
enthusiastic supporter of Miller. His assertions about company policy, often a
source of information for journalists frustrated by Gazprom’s past opacity,
have sometimes mistakenly been reported as official statements.
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WHO’S
WHO IN GAZPROM MANAGEMENT
NEWCOMERS
Members
of the management board appointed since May 2001
Aleksei
Miller
Chairman
of the management board (equivalent to ceo). Worked in the department of foreign
economic relations of the St Petersburg mayor’s office (1991-96) alongside
Vladimir Putin, in senior management positions at the St Petersburg port and
Baltic Pipeline System, and as deputy energy minister (2000-01)
Vitaly Savelev
Deputy
chairman (finance). A Miller appointment from St Petersburg; replaces Sergei
Dubinin. Worked as ceo of Menatep-St Petersburg bank, of which Gazprom is a key
client
Aleksandr
Ryazanov
Deputy
chairman (gas marketing and processing). A Miller appointment; replaces
Aleksandr Pushkin. Worked as deputy general director (1988-94) and general
director (1996-99) of the Surgut gas processing plant, in the US representing
the atomic energy ministry and as a parliamentary deputy (1999-2001)
Sergei Lukash
Deputy
chairman (procurement). A Miller appointment; took on Guslisty’s
responsibilities. Unknown to the Moscow business world. Graduated from the
Russian Presidential Academy of State Service and worked in the federal security
service
Aleksandr
Anenkov
Deputy
chairman (production). A Miller appointment; replaces Pyotr Rodionov. Worked in
gas industry since 1969, latterly as deputy general director (1989-97) and
general director (1997-2001) of Yamburggazdobycha,
a key Gazprom production subsidiary
Yelena
Vasilieva
Deputy
chairman and chief accountant. A Miller appointment from St Petersburg; replaces
Irina Bogatyrova. Worked alongside Miller as chief accountant at the St
Petersburg port and Baltic Pipeline system
Mikhail
Akselrod
Head
of investments and construction. A Miller appointment from St Petersburg;
replaces Yuri Goryainov. Worked as ceo of the St Petersburg power grid
Aleksandr
Krasnenkov
Head
of property management. A Miller appointment from St Petersburg; replaces
Aleksandr Kazakov. Has studied at Cornell University (USA); rose from
interpreter to general manager of the Astoria hotel
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SURVIVORS
Members
of the current management board who served on it under Rem Vyakhirev
Vyacheslav
Sheremet
First
deputy chairman. Arrested in January and charged with abuse of authority in
connection with scandal at Sibur, of which he is chairman. Once considered
Vyakhirev’s likely successor.
Yury Komarov
Deputy
chairman (export policy). Promoted by Miller to deputy chairmanship; took
responsibility for exports from Aleksandr Pushkin. Worked as Gazprom’s deputy
head of foreign economic relations (1991-92) and general director of Gazeksport
(1996-98)
Nikolai
Guslisty
Deputy
chairman. Left without substantial responsibilities by the appointment of
Lukash. Apart from Sheremet, the only close Vyakhirev associate to remain in a
senior position
Aleksandr
Semenyaka
Head
of securities and long-term credit. Prominent in Gazprom’s dealings with
western financiers
Bogdan
Budzulyak
Head
of transport, underground storage and deployment of gas
Boris
Nikitin
Head
of drilling and offshore development; chairman of Rosshelf
Vasily
Fadeev
Head
of gas, oil, condensate and processed products marketing
Viktor
Ilyushin
Head
of relations with Russian regions
Vladimir
Rezunenko
Head
of department for development perspectives
Mikhail
Dokuchaev
Head
of finance department
--
THOSE
WHO’VE LEFT
Former
management board members who have departed since May 2001
Aleksandr
Pushkin
Former
deputy chairman and close Vyakhirev ally.
Pyotr Rodionov
Former
first deputy chairman and chief financial officer. Promoted by Miller to replace
Sheremet as first deputy chairman, but resigned in November last year.
Irina
Bogatyrova
Former
deputy chairman and chief accountant.
Sergei Dubinin
Former
deputy chairman (finance). Moved to a senior post at United Electricity Systems.
Goryainov,
Yuri
Former
head of investments and construction.
Aleksandr
Kazakov
Former
head of property management.
--
OTHER
APPOINTMENTS
Some
senior managers, not members of the Gazprom management board, appointed since
May 2001
Yuri Lvov
Ceo
of Gazprombank. From St Petersburg; replaces Viktor Tarasov
Oleg Sienko
General
director of Gazeksport; replaces Yuri Vyakhirev
Stanislav
Tsygankov
Head
of department for foreign relations; appointed in February 2002 to fill a job
left vacant by Komarov’s promotion. Has worked in Chukhotka regional
administration
Nikolai
Gornovskii
General
director of Mezhregiongaz, Gazprom’s domestic distribution subsidiary
Aleksandr
Dybal
Head
of information policy department. From St Petersburg
--
Source:
Gazprom, independent research
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