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Preliminary financial results of Transneft Group in 2021, plans for 2022

Date of publication: 13 January 2022

Key results of 2021. According to the results of 2021, the expected consolidated revenue of Transneft under IFRS is RUB 1,077.5 billion.

Last year, as well as according to the results of 2020, the dynamics of the Company’s key financial indicators were significantly affected by the coronavirus pandemic, crude oil production cuts in Russia, and, as a result, transportation drop via the Transneft system.

The gradual recovery of 2021 key financial results is primarily due to the gradual easing of the OPEC+ deal terms with a corresponding increase in the volume of oil transportation via the Transneft system and indexation of oil transportation tariffs by 3.6% (99.9% of the projected level of the consumer price index).

Financing of the Company’s Development Programme in 2021, which is currently almost entirely represented by projects for the technical re-equipment and revamping of industrial facilities, amounted to RUB 167.3 billion*.

In June 2021, the annual general shareholders’ meeting of Transneft decided to allocate RUB 66.9 billion for the 2019 dividends, which is 8% higher than the dividends for 2020. Dividends were paid in July - August 2021.

Plans for 2022. In 2022, the Company expects the gradual lifting of the remaining restrictions on oil production in Russia and an increase in the volume of oil transportation via the Transneft system by Russian oil companies compared to the level of 2021 year-end.

Taking into account the indexation of 2022 oil transportation tariffs at the level of 4.3%, the Company's planned revenue under IFRS in 2022 will increase by 3.5% y-o-y. The adjusted IFRS revenue (excluding revenue from crude export sales) will increase by 5.1%.

At the same time, a significant increase in inflation rates starting from the 2H 2021 and inflation expectations for 2022 compared to the indexation level of oil transportation tariffs for the coming year may lead to a significant pressure increase on the dynamics of operating costs.

Financing of the Company's 2022 Development Programme is planned at the level of RUB 175.6 billion*. Investments will primarily be aimed at technical re-equipment and improving the operational reliability of the Company's pipeline system.

In 2022, Transneft Group plans to redeem exchange-traded bonds for a total of RUB 62 billion and partially repay loans of NCSP in the amount of RUB 16.4 billion**, while maintaining a moderate debt burden and credit ratings at a level not lower than sovereign one.

In December 2021, Transneft’s Board of Directors supported the proposal to switch to paying dividends twice a year. Subject to the approval of this decision at the extraordinary general meeting of shareholders, the Company will proceed to the payment of interim dividends starting from dividends for 6M 2022.

The Company plans to publish its IFRS consolidated financial statements for 2021 at the end of March 2022.

* excluding capital expenditures by NCSP Group

** data on borrowed funds are presented without taking into account interest payments. The amounts required to repay NCSP's foreign currency loans are calculated at the rate of 72.1 RUB / USD

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