Liquidity management

As part of its efforts to improve the quality of intra-Group liquidity management, Gazprom implements the centralized intra-Group liquidity management system (cash pooling).

Basic terms

Cash pooling is a system for centralized management of the Group cash flow. The system enables the parent company to promptly manage and control cash flow within the companies of the Group. This allows to minimize the Group's need for additional short-term borrowings and, therefore, to cut down expenses for interest rates. Besides, cash pooling provides for the enhancement of the efficiency of temporary surplus funds placement, as well as facilitates cash flow accounting inside the Group.

The system participants’ cash can be consolidated in either a virtual (notional) pool or a real pool. When arranging a virtual pool, the participants’ accounts are combined without actual accumulation on a master account. A real pool requires funds transfer from the participants’ accounts to the master account in the end of the banking day with further funds distribution among the participants on their accounts and according to their needs.

Implementation history

Gazprom started working on the cash pooling system creation in spring 2008. A decision was made to split the project up into a cash pooling system for Gazprom Group’s foreign companies and a cash pooling system for Russian subsidiaries.

As cash pooling implies funds accumulation on the accounts of one or several banks, selection of banks became one of the key project objectives. The study of offers for foreign pools resulted in selecting two banks – Deutsche Bank and BNP Paribas. Gazprombank was chosen as the clearing bank to form the notional pool for Gazprom Group companies.

Current state

At the moment, the centralized liquidity management system comprises a number of cash pools.

In 2009, the cash pooling system for foreign companies of the Group was supplemented with a real multi-currency pool, covering Gazprom Germania Group. There is also an operating notional multi-currency pool, involving Gazprom E.P. International, Gazprom Sakhalin Holdings, Gazprom Finance.

In Russia, the notional multi-currency pool is in successful operation, consolidating cash flows (in rubles, euros and dollars) of 84 subsidiaries and separate structural units of Gazprom Group.

Having introduced the system, Gazprom improved the short-term planning in the Company's subsidiaries and increased the profitability of the Group's funds placement operations. The system enhanced the efficiency of the Company’s temporary surplus funds placement by some 40 per cent. Moreover, favorable conditions were created for raising Gazprom's concessionary rate short-term loans in the frame of pool liquidity. The maximum amount of such a loan at the moment is RUB 60 billion.

System development

Gazprom constantly carries out work aimed at improving and developing the intra-Group liquidity management system in several directions:

  • pool expansion by means of joining the new accounts of participants and increasing the number of participants;
  • optimization of the cooperation scheme with the banks where pools are formed;
  • introduction of new IT technologies in the sphere of cash flow management.

Moreover, work is underway to develop a centralized liquidity management system on the basis of the Rossiya bank servicing some large subsidiaries of Gazprom, like Gazprom Mezhregiongaz and Gazprom Komplektatsiya.