Gazprom Neft Endorses Development Strategy for Serbia’s NIS up to 2010

Gazprom Neft, holding a controlling interest in NIS, has endorsed a long-term development strategy for the Serbian company. The strategy is to be approved by the NIS Board of Directors in the near future.

The main parameters of the strategy stipulate that the volume of NIS oil product sales via premium channels will reach 5 mln tons by 2020, the increase being 91% as compared to 2010; refining throughput and oil production will grow by 75% and 306%, respectively

Within the framework of Chairman of the Government of the Russian Federation Vladimir Putin's visit to Belgrade on March 23, the results of NIS activities in 2010 were reviewed and positively assessed. During this period, oil production by NIS within Serbia increased by 33% as compared to 2009, and the growth of refining throughput and reserves was by 9% and 6.7%, respectively.

Steady growth was observed not only for performance indicators, but also for financial ones. EBITDA (earnings before interest, taxes, depreciation and amortization) increased by 212% up to $417 million; the net profit was $212 million (a 475% increase). It was the first time since 2007 that NIS has made a profit.

Chairman of the NIS Board of Directors, Gazprom Neft First Deputy CEO Vadim Yakovlev said: "The last year was critical for the company, and the achieved results have formed a basis for further development and fulfillment of the strategic goals set before NIS. A priority task of the management led by the company's Chief Executive Officer Kirill Kravchenko for 2011-2012 is to implement successfully the NIS refinery modernization project, which will improve quality of produced oil products to the all-European Euro 5 standard. The NIS strategy assumes a significant increase in the scope of activities, which will allow the company to take up a leading position in the Balkan market."

Reference

NIS is the only vertically integrated company in Serbia. It owns two refineries in Pancevo and Novi-Sad with a total capacity of 7.3 million tons per year. Within NIS, there is also a plant for the production of liquefied petroleum gas in Elemir. The company produces around 1.5 mln tons of oil equivalent per annum, and operates in Serbia, Angola and Bosnia-Herzegovina. The company owns 480 filling stations and oil bases. NIS is Serbia's leading supplier of oil products. The company has 11,000 employees.

Gazprom Neft bought a 51% stake in NIS in 2009, acquiring its shares from the Republic of Serbia, which was the company's only shareholder. Gazprom Neft paid €400 mln for its controlling stake. The agreement with the government also set out Gazprom Neft's obligations to invest at least €500 mln in modernizing NIS businesses by 2012.

In 2009, the government of Serbia decided to distribute a proportion of its NIS shares among Serbian citizens, as a result of which the government now owns slightly less than 30% of NIS shares. In 2010, the company was restructured from a closed joint-stock company into an open joint-stock company. The Serbian company became one of the world leaders with regard to the number of minority shareholders – they comprise more than 4 million people, nearly all residents of the country. Since August 30, NIS shares have been trading on the Belgrade stock exchange. In March 2011, Gazprom Neft increased its stake in NIS to 56.15%.