“Yamal LNG” felt the exchange rate difference

According to Kommersant, NOVATEK’s Yamal LNG project faced an increase in income tax for 2022 by 40 billion rubles. due to new clarifications from the Ministry of Finance regarding the accounting for exchange rate differences. This amount may be withdrawn in addition to an increase in the income tax rate for LNG projects to 34% from 2023, which, according to NOVATEK, threatens the financing of promising Arctic LNG-2 and Ob LNG projects. The head of NOVATEK, Leonid Mikhelson, according to Kommersant’s interlocutors, suggested that the government give the project a delay in paying this additional payment and at the same time reduce it.

The head of NOVATEK, Leonid Mikhelson, has approached the government with a proposal to grant his key Yamal LNG project a deferment to pay an additional amount of income tax for 2022, which was formed due to the changed approach of the Ministry of Finance to accounting for exchange rate differences. On December 22, 2022, the Ministry of Finance issued clarifications regarding the application of the FZ-67 law on the temporary procedure for recognizing profit from exchange rate differences, according to which, when calculating the income tax base for 2022, only the excess of negative exchange rate differences over positive ones is taken into account. The head of the RSPP, Alexander Shokhin, told Interfax on February 8, referring to expert estimates, that as a result of these clarifications, companies would be forced to pay an additional 268 billion rubles to the budget. income tax for 2022.

According to Kommersant’s interlocutors, in the case of Yamal LNG, the amount of the additional payment for 2022 could amount to 40 billion rubles. At the same time, starting from 2023, the income tax rate for Yamal LNG has already been increased from 20% to 34% (of which half goes to the federal budget), as a result of which the project in 2023–2026 can additionally pay 200 billion rubles The newly arisen one-time surcharge “will significantly negatively affect the free cash flow of NOVATEK in 2023 and the possibility of financing LNG projects,” follows from a letter from Leonid Mikhelson to Prime Minister Mikhail Mishustin, Kommersant’s interlocutors say. Thus, due to difficulties in attracting external financing in the required volume, NOVATEK is forced to independently finance the bulk of the costs for Arctic LNG 2 and Ob LNG, the total need in 2023 is about 400 billion rubles.

Therefore, Leonid Mikhelson asked Mikhail Mishustin to give Yamal LNG a deferment to pay these additional 40 billion rubles. until the end of 2023. Also, the head of NOVATEK proposes not to take into account in the tax base for 2022 positive exchange differences for those companies that have to pay income tax to the federal budget at an increased rate of 17% from 2023 (Yamal LNG also belongs to them). If such amendments to the Tax Code are adopted, the amount of income tax for the project in 2022 will be reduced.

NOVATEK and the Ministry of Finance did not respond to Kommersant’s requests.

2022 was a record year for the global LNG industry due to the rise in gas prices, and Russian LNG plants were no exception, reminds Sergey Kondratiev from the Institute of Energy and Finance. Thus, according to preliminary estimates of Rosstat, the profit of Yamal LNG in 2022 could amount to 1.04 trillion rubles, an increase of 2.2 times over the year. This means that the current income tax could amount to 172 billion rubles, according to his estimates. “And the exclusion of income from positive exchange rate differences from the income tax calculation base can lead to a serious reduction in the accrued tax – by 23%,” says Mr. Kondratiev.

Independent expert Alexander Sobko also notes that Yamal LNG is characterized by significant profit fluctuations due to the revaluation of foreign currency debt, and NOVATEK has already raised the issue of these “paper” fluctuations not being taken into account in the tax base. Now, due to a temporary increase in income tax for Yamal LNG, the issue is becoming even more relevant: the strengthening of the ruble in 2022 led to additional “paper” profits, although the situation may change in 2023.

Alexander Sobko notes that an additional tax of 40 billion rubles is directly for NOVATEK. for Yamal LNG is translated into a loss of approximately 20 billion rubles. dividends, according to the share of its ownership. “This is not a very large amount compared to the company’s profit under IFRS for 2022, which can be indirectly estimated at 650 billion rubles,” he states. At the end of March, NOVATEK’s Board of Directors recommended that shareholders pay dividends for 2022 in the amount of RUB 105.58. per share (including interim dividends for the first half of the year), or about 320 billion rubles.

Tatyana Dyatel, Dmitry Kozlov