Russian natural gas monopoly OAO Gazprom plans to raise 90 billion rubles ($2.6 billion) in the financial markets this year to finance its investment program, and it may also consider acquisitions of assets battered by the financial crisis.
Gazprom's market transactions are "driven by [the] need for funding of our investment program and our long-term strategy," said Andrey Kruglov, deputy chairman of Gazprom's management committee, on Thursday at a press conference in New York, where the company held meetings with investors.
Gazprom has the world's largest natural gas reserves. The Russian government owns a 50% controlling stake.
"We intend to raise 90 billion rubles" this year, Kruglov said. "We believe a fair market opening ...won't be there before the fall of this year."
"We hope to maintain out investment grade rating and we expect our debt/EBITDA [Earnings Before Interest, Taxes, Depreciation and Amortization] ratio won't be higher than 1.5% to 1.6%. Now, it's at 0.9%," Kruglov said.
EBITDA is an indicator of a company's financial performance.
If Gazprom (OGZPY) finds assets at attractive prices due to the ongoing financial turmoil, it would be willing to consider acquisitions, Kruglov said.
Gazprom executives didn't want to specify what acquisition opportunities they might consider.
Sergei Kupriyanov, Gazprom spokesman, said that any acquisitions will be in line with the company's long-term strategy.
"Such projects definitely won't be named before we go ahead with them," he said.
Kupriyanov also said that Gazprom doesn't plan to delay or cancel any of its already announced projects.
"For the projects that were covered by the press and known to investors, they won't be delayed or put off," he said.
Gazprom executives also denied market speculation that the company may acquire British utility Centrica.
"We haven't had any talks with Centrica about a possible acquisition," said Alexander Medvedev, Gazprom's deputy chief executive. "We don't have plans for acquiring Centrica."
Over the last year, as Russia has struggled to contain its worst financial crisis since 1998 and global energy prices have declined, the share price of Gazprom has fallen sharply.
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The company's London-listed global depositary receipts have tumbled 72% over the last 12 months. In comparison, shares of U.S. oil giant Exxon Mobil Corp. (XOM) are down only 13% in the same period.
"The sharp decline in the share price we consider something unavoidable due to the situation in financial markets," Kupriyanov said.
The current weakness presents "one of the best opportunities to buy into Gazprom at attractive price levels," Kupriyanov said, adding that the company has expressed confidence in its presentations to investors.
Analysts expressed mixed views on Gazprom.
"We do not have a long position in Gazprom right now - growth slowing, debt high, and gas prices soft," said James Fenkner, principal and portfolio manager of Red Star Asset Management, a hedge fund that invests primarily in Russian assets.
"Long-term, it is a fantastic investment, but [I] would first like to see growth bottoming out," Fenkner said in emailed comments.
Chris Osborne, chief executive officer at Troika Dialog USA, thinks that Gazprom is a "buy" on valuation.
"The tricky thing with Gazprom is what's the long-term investment case -- what they'll do with capex [capital expenditures]," Osborne said in a briefing at his office in New York earlier this week. At current oil and gas prices, "they'll have to cut capex or secure additional funding," Osborne said.
Relations with Ukraine
Gazprom was thrown into the spotlight in January when its bitter natural-gas dispute with Ukraine cut off gas supplies to nearly 20 countries in Europe at a time of freezing temperatures. Russia supplies about a quarter of the European Union's natural gas, with 80% of it shipped through Ukraine.
Gazprom and Ukraine eventually resolved their two-week standoff after Russian Prime Minister Vladimir Putin and his Ukrainian counterpart Yulia Tymoshenko brokered a deal.
Ukraine has been plagued by its own economic crisis as well as by political instability. The situation has been further complicated by a power struggle between Tymoshenko and President Viktor Yushchenko, once a close ally.
At the press conference Thursday, Gazprom's Medvedev brought up the political situation in Ukraine.
"We have now two contracts with Ukraine," Medvedev said. "However, the political struggle in Ukraine is still in full swing and it actually explains the nature of the crisis in the gas standoff."
"[President] Yushchenko continues to question the fairness of contracts that Ukraine itself signed," Medvedev added. "I hope they'll abide by the contracts. The statements of the president in this sense are simply groundless. I hope common sense will win."
Ukraine is a key transit route for Russian gas to Europe, while Russia is a key trade partner for its smaller neighbor. However, relations between Russia and Ukraine have been strained in part because of Ukraine's desire to pursue closer integration with Western Europe and to join the NATO military bloc.
Gazprom is intimately connected to the highest levels of Russian political power. Russian President Dmitry Medvedev was chairman of Gazprom before he assumed the presidency last May.
Viktor Zubkov, Gazprom's current chairman, is also first deputy prime minister. Zubkov is also a former Russian prime minister.
Gazprom's tax payments account for around 25% of Russian federal tax revenues, according to the U.S. Energy Information Administration.