. Last Updated: 07/27/2016

Gazprom: Tax Savings to Pay Debt

Gazprom said Wednesday that the new Tax Code should bring it more tax savings in 2003, which should help the natural gas monopoly pay off part of its $6 billion debt this year.

"In 2003, we will have some tax savings as well [as in 2002]. We plan to reduce our taxation base [due to accelerated depreciation] in the next 10 years. This money will go mainly for debt repayment," chief financial officer Boris Yurlov said during a conference call.

Gazprom executives are meeting investors in Europe in a road show to sell a $1 billion eurobond.

Brunswick UBS Warburg on Wednesday upgraded Gazprom to buy from hold, saying it expected the company to realize billions of dollars in tax savings due to the new Tax Code.

Brunswick said Gazprom could save up to $1.4 billion in taxes in 2003, $1.1 billion in 2004 and $900 million in 2005 due to the new code, which allows companies to accelerate depreciation, thus reducing tax payments and boosting cash flows.

The new Tax Code became effective as of January 2002. But Brunswick said Gazprom decided to use the accelerated depreciation method only in the third quarter of last year.

Gazprom, in its third-quarter report to international accounting standards last week, showed a current tax benefit of $19 million. Brunswick had expected the firm to have a tax expense of $210 million.

"It was a clear sign that Gazprom is now beginning to use the accelerated depreciation method," said Paul Collison, an analyst at Brunswick UBS Warburg.

Yurlov declined to predict how much Gazprom could save on the new Tax Code this year.