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Gazprom's EUR 2bln (RUB162bln) five-year loan from the Bank of China will only go a small way to covering its funding needs over the next few years, as debt maturities and operating funding needs are likely to eat into the group's large cash buffer, Fitch Ratings said in its press release.
The loan represents around 12% of the RUB1.3trn the agency estimates Gazprom will need in the next two years, comprising RUB900bln in debt maturities and RUB400bln to cover Fitch's negative free cash flow (FCF) forecast, according to Fitch.
Gazprom's current liquidity is strong, the agency says. But with reduced access to international capital markets, insufficient scale and depth of domestic capital markets and still high domestic borrowing costs, Fitch expects the company’s liquidity to weaken gradually in 2016 and 2017.
Gazprom may respond by cutting capex or delaying projects, such as liquefied natural gas (LNG) plants, and lowering dividends, as noted in the agency’s statement.
According to the report, Gazprom's key investment projects include modernizing existing pipelines and constructing new ones in Russia, as well as its Eastern gas program – developing two Eastern Siberia gas fields and constructing a 38 billion cubic meters (bcm) capacity gas pipeline to China.
"While we believe the Eastern gas program will go ahead as planned, other projects are likely to be postponed or even cancelled. Projects that could be affected include the planned Baltic LNG plant and potentially even the Nord Stream 2 pipeline," the agency said.
Gazprom's domestic gasification program may also be scaled down, according to the report.