Russia's Gazprom seeks to raise financing in Hong Kong
Russian gas giant to issue depository receipts in the city to raise loan and bond financing as well as to broaden its investor base
Russia's Gazprom is seeking to tap Hong Kong's financing platform to raise loan and bond financing along with broadening the investor base for its shares trading at depressed values after the Kremlin-backed firm's oil subsidiary was subjected to European Union and United States sanctions.
The world's largest natural gas producer plans to issue Hong Kong Depository Receipts - repackaged shares already listed overseas - to broaden its investor base, after Russia's Federal Commission of Securities Market's likely admission to the International Organisation of Securities Commissions later this year. This would allow Russia-registered firms to be listed in Hong Kong.
"We are in dialogue with Hong Kong's stock exchange ... we see also in our plans to be listed in Hong Kong as well," Andrey Kruglov, Gazprom's deputy chairman and head of its financial and economic department told the
Gazprom shares are listed in Moscow, New York and London. Its American Depository Receipts were listed in Singapore in June.
Its shares are trading at around 2.8 times their forecast earnings per share for this year, much lower than the eight to 12 times commanded by many state-backed energy firms including those on the mainland.
Depositary receipts are securities issued by a bank representing underlying shares of a corporation. The shares will then be placed with the bank or its nominated custodian to trade in overseas markets.
Kruglov said a Hong Kong listing is aimed primarily at broadening Gazprom's shareholder base instead of raising equity financing, but added it wants to cooperate with financial institutions in the city on raising bilateral loans, syndicated loans, bonds and dim sum bonds - yuan-denominated bonds issued outside the mainland.
"We do not exclude the probability that next year we will be more active in the region," he said, adding Gazprom is seeking opportunities to issue bonds denominated in Hong Kong dollars, Singapore dollars or the yuan.
It had previously issued yen bonds. But Kruglov noted the lack of a double taxation treaty between Hong Kong and Russia means its bond investors will be subject to a 20 per cent withholding tax on interest income.
Gazprom raises some US$3 billion to US$4 billion annually from the capital market to finance its capital expenditures.
The US and the EU earlier this month imposed sanctions that prohibit the financing provision and other dealings in new debt of greater than 90 days maturity issued by firms including Gazprom's oil unit Gazprom Neft to punish Russia for its role in the Ukraine conflict.
Meanwhile, Kruglov said Gazprom hopes to seal before the end of the year a second gas supply deal with the mainland so a 30 billion cubic metre (bcm)-a-year pipeline will be built to link China's northwest to existing gas fields in West Siberia.
A US$400 billion 30-year gas export deal was signed in May for a pipeline to send 38 bcm of gas annually to northeast China from new fields in East Siberia. He said the pipeline will deliver gas in 2018 in the "best case" and in 2020 in the "conservative case".
