Gazprom’s Management Committee approved SIBUR’s Development Strategy between 2004 and 2011 and ordered to submit it for Gazprom’s Board of Directors’ consideration.

The Management Committee also ratified SIBUR’s development scenarios prescribing SIBUR’s debt to Gazprom and its subsidiaries being settled by shares of a newly founded joint-stock company.

Reference:

SIBUR’s Development Strategy was developed pursuant to a Gazprom’s Board of Directors’ order. The Strategy includes output and market strategies in the feedstock, petrochemical and tire business as well as competition and production strategies. The production strategy is largely focused on the implementation of an investment program targeted at re-equipment and optimization of SIBUR’s manufacturing facilities.

The Development Strategy covers the principles of interaction between Gazprom and SIBUR.

The Strategy takes into account SIBUR’s financial standing, its debt servicing options and methods as well as its investment program funding.

As of 2004 year start, SIBUR’s consolidated debt with interest accrued accounted for RUR 67.86 billion. The analysis conducted shows that the most efficient and least risky way of restructuring SIBUR’s indebtedness is by means of founding a new publicly-run joint-stock company. Capitalized in a such a way into the new company’s shares, a part of SIBUR’s debt (RUR 40.1 billion) will be channeled into SIBUR’s petrochemical business promotion, supply risk and asset loss minimization.

To be wholly-owned by Gazprom, the new business is proposed to receive all SIBUR’s liquid assets. The new company will be formally exempt from SIBUR’s liabilities, won’t have negative history and will he able to run activities without Gazprom’s financial resources. At the same time, the old SIBUR company will continue its activities as financial operator. The old company will supply feedstock to and process it at the new company’s facilities as well as be involved in output marketing until fulfils its committments to creditors.

SIBUR will be handing over its assets to the new company on a gradual basis. SIBUR’s debt capitalization and foundation of the new business will foster, at maximum, the development of a vertically integrated structure able to dominate the Russian petrochemical industry.

SIBUR is the largest Russian producer of petrochemical output, in particular, rubbers, tires, polymers and liquefied gases. The company’s share in the Russian production of synthetic rubbers, tires, liquefied hydrocarbon gases and polyethylene averages 47%, 48%, 23% and 25%, respectively. In addition, SIBUR produces various types of plastics, high-octane gasoline components and many other products necessary for manufacturing and operating automobiles, agricultural machinery and building equipment, planes, space ships, packing and finishing materials.

SIBUR is almost wholly-owned by Gazprom.

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