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 session examined the implementation process of the Gazprom wholly owned subsidiaries such as Gazprom-UGS, Gazpromtransgaz-Kuban, Gazprompodzemremont-North, Gazprompodzemremont-South and Gazprompererabotka.

The meeting specified that Gazprom executed great work on reorganizing the existing subsidiaries. It resulted in the first reorganizing stage completion: the existing subsidiaries (donor companies) donated the relevant core assets to independent legal entities (buffer companies). At present the second reorganizing stage has been started.

The session examined organizing issues relevant to production startup for newly created companies as well as the transition terms for the second reorganizing stage through the consolidation.

The participants discussed also the issues relevant to improvement of the Gazprom intra-corporate governance structure in the investment sector, construction contracts and construction industry as well as marketing of natural gas as a motor fuel.

The participants specified that the reorganizing process is followed by the centralized monitoring relevant to the Gazprom intra-corporate structure improvement. The monitoring is aimed at providing control to maintain major reforming principles such as achieving maximally efficient work of Gazprom as a vertically integrated company due to the core business activities structuring, increasing financial transparency; large-scale operation of the market mechanisms within the supporting and contractual service purchasing; cost minimization; human resources management and social guarantee adherence.

Reference:

Gazprom intra-corporate governance structure is being improved within the 2nd phase 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 unbundle 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 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.