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Affiliated Party Transactions Examples at Gazprom

Affiliated Party Transactions Examples at Gazprom. William Browder Chief Executive Officer Hermitage Capital Management November 12, 2004. Construction write-off ($889) m. Construction write-off ($694) m. Profit. Profit. Loss. Construction write-off ($1,052) m. Stroytransgaz Example.

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Affiliated Party Transactions Examples at Gazprom

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  1. Affiliated Party Transactions Examples at Gazprom William Browder Chief Executive Officer Hermitage Capital Management November 12, 2004

  2. Construction write-off ($889) m Construction write-off ($694) m Profit Profit Loss Construction write-off ($1,052) m Stroytransgaz Example Construction write-offs had materially hurt the profitability of Gazprom Source: PWC Audit of Gazprom 1998-2000

  3. Stroytransgaz Example A company called Stroytransgaz had been contracted to do largest share of Gazprom construction Stroytransgaz Source: PWC Audit of Gazprom 1998-2000, Stroytransgaz prospectus

  4. Stroytransgaz Example It appeared that there was a strong correlation between Gazprom write-downs and services provided by Stroytransgaz Source: PWC Audit of Gazprom 1998-2000, Stroytransgaz prospectus

  5. Stroytransgaz Example Furthermore, in 1995 Stroytransgaz had been basically given 4.83% of Gazprom Source: Gazprom and Stroytransgaz securities reports

  6. Stroytransgaz Example That gift transferred huge value away from Gazprom Source: Gazprom and Stroytransgaz securities market reports, Plan of Privatization, Reuters, Vedomosti Valuation of 4.83% Gazprom shares block “sold” to Stroytransgaz

  7. Stroytransgaz Example Through the affiliated party disclosure it was discovered who truly owned Stroytransgaz 57.04% of Stroytransgaz Source: Gazprom and Stroytransgaz securities reports

  8. Stroytransgaz Example As a result of the public pressure, 4.83% of its shares were returned to Gazprom Source: Interfax, November 27, 2002, Vedomosti, March 12, 2003, Preliminary Offering Circular February 14, 2003, Loan Participation Notes

  9. Stroytransgaz Example Stroytransgaz has also seen its share in Gazprom’s construction budget decline Source: Gazprom disclosure

  10. RegiongasHolding Example After the 1998 crisis, Gazprom decided to acquire gas retailers (about 80) by swapping their debt for equity and creating a holding company RegiongasHolding But surprisingly Gazprom only received 25% of the new holding company 80 retailers Source: Hermitage Analysis, Federal Securities Market Commission

  11. RegiongasHolding Example Instead of Gazprom owing RegiongasHolding, 75% of it ended up in the hands of former management of Gazprom and Mezhregiongaz Regiongas Holding shareholders structure Source: Hermitage Analysis, Federal Securities Market Commission

  12. RegiongasHolding Example As a result of public pressure, Gazprom recovered control over RegiongasHolding Source: Federal Securities Market Commission, Regiongasholding 4Q 2002 securities market report

  13. Sibneftegaz Example First dilutive issue took place in July 1997.

  14. Sibneftegaz Example Second issue bring Gazprom down to only 21% to the benefit of two Itera affiliated companies (38%) and Ingeneeringoil (5%) owned by Vyakhirev kins.

  15. Sibneftegaz Example Sibneftegaz intrinsic value is between $78 mln and $627 mln based on 1.57 BOE of hydrocarbon reserves

  16. Sibneftegaz Example Gazprom management related parties benefited from Gazprom dilution

  17. Sibneftegaz Example In light of these and other discoveries, president Putin fired Gazprom’s CEO Rem Vyakhirev Gazprom Share Price (US$) May '01: Putin sacks Rem Vyakhirev as CEO of Gazprom. Source: Bloomberg

  18. Disclaimer The information is based on data obtained from publicly available sources, which have not been verified by Hermitage Capital Management Limited, or any of its respective associates or affiliates. As a result of the difficulty in obtaining reliable data in Russia, we do not represent this information to be accurate and complete and we do not accept any responsibility for the reasonableness of any conclusions based upon such information.

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