OAO Gazprom (GAZP), the world’s biggest natural-gas producer, said net income will drop as much as 10 percent this year because of repayments to European customers and higher taxes.
Gazprom has earmarked as much as 200 billion rubles ($6 billion) for potential rebates to European companies in 2013, with RWE AG (RWE) the latest to win concessions today following arbitration.
The estimate is “somewhat higher” than the 114 billion rubles set aside last year, Chief Financial Officer Andrey Kruglov told reporters in Moscow today. It will be “sufficient” to meet all necessary payments, he said.
European buyers including EON SE and Eni SpA (ENI) have pressured the state-controlled exporter for discounts since its average gas price reached a record in 2008 while a recession cut demand for the fuel and made gas available at reduced market prices. Gazprom, the supplier of about a quarter of Europe’s gas, posted net income of $38 billion in 2012.
Gazprom will reimburse Germany’s second-biggest utility for payments made since May 2010, while introducing a gas market indexation in the supply contract’s pricing formula, RWE said in a statement after the court ruling. Higher mineral taxes in Russia will also weigh on earnings, according to Gazprom.
Shares of the Moscow-based gas exporter fell 2.2 percent to 107.75 rubles. The stock is down 25 percent this year.
Gazprom renegotiated contracts with utilities including EON last year with retroactive discounts ranging from 7 percent to 10 percent. Following the outcome of the RWE case, Gazprom remains in negotiations with GDF Suez (GSZ), EconGas, Wingas and WIEH.
Gazprom Export’s press service declined to comment on the amount RWE will receive back or the size of the spot indexation in the pricing formula to be adjusted.
Eni secured a price discount of less than 7 percent for this year, according to an agreement last week. It’s continuing to renegotiate other contract terms, Eni Chief Executive Officer Paolo Scaroni has said.
Gazprom has already paid 23 billion rubles in retroactive payments in the first quarter, Mikhail Rosseev, its deputy senior accountant, said.
Revenue and earnings before interest, tax, depreciation and amortization will probably stay at the same level as last year, Kruglov said. Gazprom expects exports to Europe to rebound this year after a slump in 2012, supported by colder weather on the continent last winter.
As the government studies holding back domestic rate increases, Gazprom is reviewing investment plans, Kruglov said.
Projects aimed at maintaining the gas pipeline network and meeting supply obligations will remain intact, though some production and transportation projects could be curbed, he said, without elaborating.
The government may limit increases in regulated domestic prices to 5 percent a year from 15 percent planned for next year as President Vladimir Putin considers rate caps to fight inflation.
“If there are cuts, then we can expect some scaling back of the projects that were aimed for development,” Kruglov said.
To contact the reporter on this story: Anna Shiryaevskaya in Moscow at firstname.lastname@example.org