The Gazprom Headquarters has hosted a session of the Working Group for Gazprom intra-corporate governance structure improvement led by Alexander Ananenkov, Head of the Working Group and Acting Chairman of the Gazprom Management Committee.

The meeting examined the progress with stage two of the reorganization of the existing subsidiaries.

The meeting specified that at present Gazprom was conducting comprehensive work to consolidate Gazprom UGS, Gazprompodzemremont-North, Gazprompodzemremont-South, Gazprompererabotka, core business activities and assets unbundled earlier from the existing gas transportation and processing companies (donor companies) into core business legal entities (buffer companies).

The consolidation process implies reorganization of the relevant buffer companies in the form of merger with Gazprom UGS, Gazprompodzemremont-North, Gazprompodzemremont-South, and Gazprompererabotka.

The participants discussed issues related to utilization of a single corporate style in the business names of both the existing and new subsidiaries set up in the frames of Gazprom intra-corporate governance structure improvement as well as to reorganization of Gazprom security services and its subsidiaries.

Reference:

The Gazprom intra-corporate governance structure is being improved within stage two of the Company’s restructuring mainly targeted at enhancing Gazprom operating efficiency as a vertically integrated organization and optimizing its subsidiaries’ core businesses.

The intra-corporate structural changes are expected to result in the work completion aimed to divide financial flows in the extraction, transmission, processing, underground storage and marketing of gas and liquid hydrocarbons.

The basic principle of intra-corporate structure improvement intends to single out Gazprom multi-field companies and optimizing core businesses as separate legal entities of services and social infrastructure.

On March 29, 2006, the Gazprom Board of Directors approved proposals on the reorganization of the subsidiaries where Gazprom is the only stockholder. The reorganization process will result in the foundation of the Gazprom wholly owned subsidiaries (specialized core business companies): Gazprom-UGS, Gazprompererabotka, Gazprompodzemremont-North, Gazprompodzemremont-South, Gazpromtransgaz-Kuban. In addition, Gazprom will become a 100 per cent stockholder in Gazpromtrans.

The reform implementation scheme contemplates reorganizing the existing subsidiaries and includes two stages:

• setting apart of core businesses and assets – non-core businesses and assets of the existing subsidiaries (donor companies) are unbundled into core business legal entities (buffer companies);
• consolidation of core businesses and assets – the unbundled buffer companies are consolidated by business type through their merger to a relevant specialized core business company.

The first stage of reorganization has been completed: non-core businesses and assets of the existing subsidiaries (donor companies) are unbundled into core business legal entities (buffer companies).