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. Last Updated: 07/27/2016

Deal to Link Gazprom Head's Salary To Earnings

COMBINED REPORTS


The Russian government said Monday it is readying a draft agreement with gas giant Gazprom that would tie the company chairman's future compensation to dividends paid to the state, its largest shareholder.


In a move designed to transform the gas monopoly into a more transparent company, the government says it will finish in the next few weeks an agreement tying Gazprom Chairman Rem Vyakhirev's salary "directly" to the size of dividends derived from the government's 40 percent stake in the company, Interfax reported Monday.


The report comes as one of two foreign banks representing Gazprom internationally told Reuters that the company plans to raise as much as $2 billion to $3 billion on Western capital markets over the next six months to help pay off debts to the government.


First Deputy Prime Minister Boris Nemtsov, who also serves as Russia's fuel and energy minister, told The Financial Times over the weekend that Vyakhirev will remain manager of the government's 40 percent stake but will coordinate with a 10-member board of government representatives led by Nemtsov.


Vyakhirev will also have to file quarterly reports and submit to an annual audit, Interfax reported.


The agreement will bind Vyakhirev to guarantee equal access to pipelines for all gas extractors, which Nemtsov said would reduce Gazprom managers' power.


The draft agreement replaces a 1993 deal that handed Vyakhirev personal control over the government's stake and Gazprom managers options to buy a controlling stake in the company at a fraction of the market price.


Gazprom controls virtually all of Russia's natural gas pipelines, produces 95 percent of its gas and is building the multibillion-dollar Yamal pipeline to Europe.


But the company owes the government $2.5 billion in back taxes and over the past two years has paid the Russian Treasury just 20 billion rubles ($3.5 million) in dividends.


Gazprom has contracted Dutch bank ABN-Amro and U.S. investment bank Goldman Sachs to arrange an issue of at least $1 billion in Eurobonds and another $500 million to $1 billion in convertible bonds, ABN-Amro's Russia manager Frank Kuijlaars said.


Gazprom will also look for $500 million to $1 billion in short-term bridge financing within the next month, ABN-Amro officials said.


"Gazprom would like to receive proceeds from these [short-term bridge] issues, at least partially, earlier than it can go to the market" for Eurobonds or the convertible bonds, ABN-Amro managing board member Jan Maarten de Jong told Reuters. He said Gazprom and the banks had "more or less" finalized a mandate for the package last Friday.


Gazprom's local financial adviser said the $2 billion to $3 billion in financing was being planned but declined to comment further.


Gazprom's entrance into the Eurobond market could be larger than the Russian Federation's first post-communist bond last fall of $1 billion, and will be issued along with convertible bonds within six months, Kuijlaars told Reuters. ()