Kommersant, Russia
June 17 2005

Gazprom Returns to the State

// A controlling interest in the company is nationalized in the
course of work

Government and business

Gazprom’s board of directors met once again in the Kremlin yesterday
and agreed on a deal for the sale of 10.74 percent of Gazprom’s
shares by four of its subsidiaries. The historic decision was made in
the absence of CEO Aleksey Miller, who had flown to Yerevan, and the
board was unable to agree on the procedure for paying Gazprom for its
property. Nevertheless, the chances of the state arriving at the
meeting of Gazprom shareholders on June 24 with a controlling
interest have sharply increased.

We remind our readers that, when it met on Wednesday evening,
Gazprom’s board of directors was supposed to approve the alienation
of 2.5425 billion of the company’s shares by four of its subsidiaries
~V ZAO AB Gazprombank, OOO Gazprominvestholding, the Gazfond
nongovernmental pension fund, and AO Gazpromfinance B.V. However, the
board was unable to make a decision, because the instructions to the
state representatives for voting on this question never arrived from
Prime Minister Mikhail Fradkov’s office.

Around midnight, the meeting was held over until the following day.
According to Kommersant’s information, it opened in the Kremlin at
15.00. According to an anonymous Gazprom official, it was much easier
to assemble all the state representatives there. Within an hour, the
board approved the purchase price of the shares ~V 203.5017 billion
rubles, or about $7.11 billion. And since this question was the only
item on the agenda, the meeting adjourned.

It is unknown what happened to the state’s plan to buy out the
Gazprom shares on the night of June 15 or why Prime Minister
Fradkov’s office could not prepare the document on time. According to
Kommersant’s information, the voting instructions for the state
representatives stipulated this exact buyout price and been approved
three days before by the Federal Property Management Agency
(Rosimushchestvo), the Ministry of Economic Development and Trade,
and the Ministry of Industry and Energy. We can only assume that on
the evening and night of June 15, the prime minister, having learned
from the bitter experience of constant changes in the merger plan for
Gazprom and Rosneft, was waiting for final approval of the deal from
President Vladimir Putin.

Somehow or other, by midday, the document was signed. We note that
Gazprom CEO Aleksey Miller was not present at the historic board
meeting, which approved the legal nationalization of the state
shareholdings in Gazprom. First Deputy CEO Aleksandr Ananenkov and
Elena Karpel, the head of the economic examination department,
represented Gazprom in the kremlin, while Konstantin Chuichenko, the
head of Gazprom’s legal department, gave a report at the meeting.
However, one should not look for political motives in Miller’s
gesture ~V on Thursday morning, he flew out to a planned meeting with
Armenian President Robert Kocharian.

And there was hardly any discussion at the meeting; the format and
location of the meeting apparently did not anticipate any. Moreover,
according to Kommersant’s information, the board of directors did not
discuss the procedure for paying Gazprom the $7.11 billion. According
to the plan, the official buyer of the shares is AO Rosneftegaz.
According to Kommersant’s information, Dmitry Medvedev, the chairman
of Gazprom’s board of directors and head of the presidential
administration, announced only that payment would be made in
installments in several tranches.

The Gazprom share market did not react to the events; everyone was
already resigned to the fact that the amount paid for the
10.7-percent share package would be less important to foreign brokers
and would not imply a premium for consolidating the controlling
interest. Thus, Ilya Shcherbovich, the president the United Financial
Group, a minority Gazprom shareholder, told Kommersant yesterday that
~SOverall, I support the board’s decision, since it will impact
favorably on the process of liberalizing the Gazprom share market.~T
And Rosimushchestvo has already announced plans to transfer the
Gazprom shares to the fixed assets of Rosneftegaz before June 24, the
day of the annual meeting of Gazprom shareholders.

So far, Gazprombank looks like the only victim of the deal. According
to Kommersant’s information, alienating 1.25 percent of Gazprom’s
shares from its fixed assets would cause a hole to appear in them.
However, information appeared yesterday on the appointment of Nikolai
Senkevich, the head of OOO Gazprom Media, as vice president of
Gazprombank. A source from Senkevich’s circle associated this
appointment with the possible transfer of media assets from Gazprom
Media to Gazprom bank in order to close this hole. The same source
estimated that the value of these media assets was exactly equal to
the values of the Gazprom shares belonging to the bank.

Yesterday, a hastily assembled general meeting of Rosneftegaz
shareholders approved the purchase of the Gazprom shares. Now we have
only to wait for two events ~V a favorable conclusion of the deal
before June 24 and the signing of the documents liberalizing the
Gazprom share market. On the assumption that the deal was approved on
June 15 and 16, we can predict that both events will occur, but the
investors will still have something to worry about in the approval
procces.

by Dmitry Butrin, Natalia Grib, Elena Kiseleva