Question

How should a $1.2 billion cash investment in Gazprom be structured (in debt or equity)?

Answer 1

Gazprom is a private and state owned multinational company engaged in the energy sector and is headquartered in the Lakhta Center in Saint Petersburg, Russia. It is the largest company in Russia by revenue and sits as the largest publicly listed natural gas company in the world. As per Forbes Global 2000, it was the 40th largest company in the world. In 1993, Gazprom became a joint stock company after its privatisation with fall of USSR in 1991. It has raised 1% equity stake from Foreign investment with use of Global Depository receipts in 1996. The state to this date retains 38% value in the company.

As per previous Russian regulations, Gazprom cannot be owned more than 9% from foreign investors but this was later removed.

Gazprom owns approximately 18.4% of the world's reserves of natural gas. In 2015 , the reserves of crude oil were recorded as 1.355 billion tons.

2019 : Revenues were more than 120 billion USD.

Investment in Gazprom can be structured in the form of both debt and equity as the company is well established and proves to be a stable investment. The investor needs to assess the required rate of return from investing in Gazprom.

The preferred way of investing in Gazprom can be structured as a convertible note (mix of debt and equity) with a predefined conversion ratio into equity shares and the option to earn a stable interest in the initial years of investment.