Gazprom, concerned by Novatek's partnership with oil trader Gennady Timchenko, is considering swapping part of its stake in the company for 51 percent of Sibneftegaz, which it could then merge with Nortgaz and Purgaz to create a third major Russian gas producer. Gazprom and Gazprombank are discussing a buyout deal or exchanging assets, a source close to the bank's management and two officials at Gazprom-controlled companies told Vedomosti. An asset under consideration is 51 percent of Sibneftegaz, the remaining 49 percent of which is controlled by Itera.
The bank received the Sibneftegaz stake in 2006, but it had originally been planning to sell it on to Gazprom. The gas giant, however, has been busy with other acquisitions since then, including power companies, Gazprom Neft and Sakhalin-2. But now the deal with Gazprombank is back under consideration. Throughout 2009, Gazprom was working on a preliminary valuation of Sibneftegaz. But like before, the state company is not willing to pay in cash, which is why the companies are discussing various asset swaps, said the source close to Gazprombank's management. For example, the source said, a number of Gazprom managers have proposed handing over to the bank shares in Novatek, since Gazprom has just 19.4 percent — not enough to control Russia's No. 2 gas producer.
Additionally, it would be beneficial for Gazprom to consolidate Sibneftegaz's production and reserves, said an official from a Gazprom-controlled company. For Gazprombank, however, Sibneftegaz is a problem asset because it is just developing, still requires investment and is currently losing money. After Timchenko stepped up his presence in Novatek — he now controls 18.2 percent and could raise his stake to 23.4 percent — the company began competing with Gazprom, the source said. Gazprombank, on the other hand, could earn stable dividends from a stake in Novatek, which is one of Russia's most profitable energy companies. It pays out more than 30 percent of its profit in dividends, including 7.65 billion rubles ($255 million) for 2008.
Novatek has a market capitalization of $17 billion, annual production of more than 30 billion cubic meters and reserves of about 2.5 trillion cubic meters, according to Russian classifications. Sibneftegaz's proven reserves are 400 bcm, and it expects to produce 10 bcm of gas this year. If it were valued using Gazprom's multipliers, Sibneftegaz could be worth about $2.5 billion, said Artyom Konchin, an analyst at UniCredit Securities. Thus, Gazprombank's stake would be enough to get about 7.5 percent of Novatek.
To date, however, deals with Sibneftegaz shares have valued the company at far less. In 2006, Gazprombank bought control of the company for $131 million, and in September 2009, Itera purchased a 21 percent stake for $132 million — valuing all of Sibneftegaz at $628 million. All three sources told Vedomosti that no decisions on an asset swap had been made. But Sibneftegaz chairman Alexander Krasnenkov, a former senior executive at Gazprom, has said a deal between the gas giant and Gazprombank could come as soon as March, Prime-Tass reported, citing an interview in Gazprom's corporate magazine.
When the deal is reached, Sibneftegaz could be merged with two other small gas companies: Purgaz and Nortgaz, Krasnenkov said. Then Russia would have a new major player on the gas market that could potentially have an IPO, he added.
If combined, the three companies' planned production volumes for 2010 would be about 29 bcm, or nearly 80 percent of Novatek's forecast output. Gazprom controls Purgaz and Nortgaz. Itera has 49 percent stakes in Sibneftegaz and Purgaz, while businessman Farkhad Akhmedov has 49 percent of Nortgaz. Krasnenkov said the idea had been discussed with Akhmedov and Itera chairman Igor Makarov, and both supported it.
Akhmedov declined comment, but a source close to him confirmed that the idea was discussed. But no decisions were made, and a potential decision is far off, both that source and a source close to Itera said. Spokespeople for Itera, Gazprombank and Gazprom declined comment. Nonstate pension fund Gazfond owns 50 percent plus one share in Gazprombank, while Gazprom owns 41.3 percent.