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Certain Statements by First Vice President of Transneft Maksim Grishanin at Teleconference with Investors and Analysts

Date of publication: 1 June 2021

First Vice President of Transneft Maksim Grishanin has answered topical questions of investors and analysts during a teleconference organised to discuss the Company's newly published IFRS statements for the Q1 of 2021.

Settling the Issue of Indemnification

Transneft continues settling the issue of indemnification for contamination of the Druzhba oil pipeline, said the First Vice President of the Company Mr. Grishanin during the teleconference.

According to him, the Company has resolved two cases with Rosneft deliveries to Total and Mozyr Refinery, as well as LUKOIL deliveries to Mozyr Refinery.

He specified that the settlement with Rosneft occurred on 31 May 2021.

Mr. Grishanin added that RUB 13.8 billion has already been allocated from the reserve formed for settling the indemnification of the Druzhba force-majeure issue.

In his words, Transneft hopes to complete the process of indemnification for the contamination of the Druzhba oil pipeline by 2022. He added that the Company would not further increase the reserve, as it was at the end of 2019.

Turnover Prediction

First Vice President informed that Transneft sees burgeoning demand for crude oil in the world and feels moderately optimistic about the turnover growth in 2021 relative to 2020.

“We saw stabilisation and gradual relative recovery of demand in the crude oil market. And we see stabilisation of the turnover that kept falling in 2020. For now, it’s at the level of last year, but we remain cautiously optimistic about its moderate rise,” he said.

Mr. Grishanin explained that this forecast is driven by the growing global consumption, rapidly changing situation with COVID-19 and decisions made by OPEC+ participants.

Vice President of Transneft Sergey Andronov added that the Company expects oil pumping in 2021 in the amount of 439-440 million tonnes and petroleum products transportation in the amount of 37.1 million tonnes.

Dividend Policy

During the teleconference, First Vice President informed that Transneft is waiting for instructions from the Ministry of Finance to amend the dividend policy but is already paying out 50% of the net profit as dividends de-facto.

“We’ve stated repeatedly that there’s a need to change the dividend policy, but so far the Ministry of Finance has not sent any documents; yet we’ve already amended the policy de-facto,” he said.

Mr. Grishanin expressed his hope that the Company would not make any more reserves as it did in the past to pay recompense for the contamination of Druzhba and pipeline depreciation in view of the load reduction.

“We definitely won't be doing that in the next five years. We’ll only bring back to normal our expenditure and revenues from financial investments and exchange rate differences, with half of it being earmarked for dividends. This is what actually happened in payouts for 2020,” he noted.

Speaking about the dividends of Novorossiysk Commercial Sea Port (NCSP), Mr. Grishanin explained that their amount is a result of undersupply of the port capacity and a large investment programme planned in its development strategy.

Capital Expenditures

In 2022, the capital costs of Transneft may come to RUB 250 billion, excluding construction of new facilities,” said First Vice President of the Company.

Mr. Grishanin also added that the optimal capital outlay for Transneft is RUB 250-270 billion per year. “Given that our Company operates a system of trunk pipelines whose length reaches 75,000 km, we have to focus on their safe operation and timely replacement of pipes,” he pointed out.

Adapted from Interfax IA, TASS and Prime
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