Gazprom Launches Charm Offensive as It Meets Asian Investors
(Bloomberg) -- It’s a long-distance relationship that’s never really taken off.
Executives from Gazprom PJSC in Moscow flew thousands of miles east this week to Singapore and Hong Kong for the first time since 2015 in a bid to drum up interest in the world’s largest natural gas producer. Even after last year’s commodities rally and a revival in Russian stocks, Asian money managers have yet to be persuaded that Gazprom is worth adding to their portfolio.
“It’s still not our choice,” said Alex Wong, a fund manager at Ample Capital Ltd. in Hong Kong, with about $130 million under management. “Investors actually don’t know much about Gazprom, or most of the Russian companies.”
Gazprom is weighing a possible share placement at a major Asian stock exchange, Deputy Chief Executive Officer Andrey Kruglov told investors in Singapore Tuesday without elaborating. The Hong Kong meeting is set for Thursday.
The state-controlled producer joined the Singapore stock exchange in 2014. For the past three years it has also targeted a listing in Hong Kong after turning its attention to the Asia-Pacific region as relations with the European Union and the U.S. soured over the Ukraine conflict. Gazprom has said it would expect strong interest from Chinese investors after signing a 30-year gas-supply deal worth $400 billion almost three years ago.
Trading on the Hong Kong exchange may also help attract investors in mainland China because of electronic links with markets in Shanghai and Shenzhen. The Singapore listing was secondary and raised no funds, with executives seeing it more as good for the company’s image. There is no history of any trades on the exchange’s website.
Gazprom didn’t provide any details on a possible share placement in Asia. Its units hold 6.6 percent of the parent company, a stake that has a market value of about 211 billion rubles now ($3.6 billion) and could be sold or used for convertible bonds, according to Kruglov’s statements last year.
European and U.S. investors owned more than 85 percent of Gazprom’s depository receipts, which represent 27 percent of its share capital, according to most recent data from end of 2015. Asian ownership accounted for about 10 percent, compared with 4 percent in 2008. The company declined to provide updated information.
Oil, LNG exports
While Europe “was, is and will remain Gazprom’s priority market,” China will be the company’s key partner in Asia, Deputy Chief Executive Officer Alexander Medvedev said in Singapore. There’s a slight delay in talks to provide more gas supplies from West Siberia to China because of energy market reforms in that country and Gazprom remains optimistic about the deal, he said.
Russia’s natural gas supplies to China -- the East Siberian flow agreed on three years ago -- won’t start until 2019 at the earliest, while Gazprom is exporting liquefied natural gas and oil already. It also signed some loan deals with lenders there last year.
Given Gazprom’s strategy for Asia, getting a listing closer to one of its main customers and financiers “seems to make sense,” said Hao Hong, chief strategist at Bank of Communications International Holdings Co. in Hong Kong.
Even so, foreign listings in Hong Kong typically have difficulty in gaining traction with local investors, he said.
“People are more likely to stick with local Hong Kong or Chinese names first, before moving to those less familiar foreign names,” Hong said.
Just one Russian company has held an initial public offering on Hong Kong’s stock exchange. United Co. Rusal, the largest aluminum producer outside China, raised $2.2 billion in 2010.
“Hong Kong investors are not clear about the risk of investing in Russian companies, with many of them being state-owned enterprises with unmeasured political risk and currency risk,” said Ample Capital’s Wong. “Maybe Rusal will be the only Russian stock investment choice of Hong Kong institutional investors.”