BASF gives up Wintershall Dea business in Russia
Dhe chemical company BASF has hopes that its subsidiary will be able to withdraw without harm Wintershall Dea abandoned from Russia. The actual possibilities of influence are largely gone, the group is therefore “economically expropriated,” said the BASF board of directors in a mandatory announcement on Tuesday evening.
The financial consequences are significant: instead of the average analysts expect, the chemical giant will not report a profit of almost 5 billion euros in 2022, but a loss of almost 1.4 billion euros. The main reason is the depreciation on Wintershall Dea, which increased by 5.4 billion to 7.3 billion euros in the fourth quarter alone.
The Russian activities have been deconsolidated, i.e. they have already been separated from the company in the balance sheet. The group has also completely written off its stake in Nord Stream AG. Wintershall Dea plans “a complete orderly withdrawal from Russia in compliance with all applicable legal provisions”.
Most important Gazprom partner for many years
In the mandatory notification, the Executive Board left open how Wintershall will continue. Shortly after the start of the Russian war in Ukraine, the concern took the position that retreat was out Russia only play into the hands of the Russian state, which would revert to the state without compensation for production licenses worth billions in Siberia. Although Wintershall condemned the attack at the time, it only stopped new business and announced that it would concentrate on activities outside of Russia in the future. Now the board is drawing a line.
Winterhall CEO Mario Mehren also spoke briefly on Tuesday evening and let it be known that the company was prepared for this difficult moment. Since the beginning of the war, Wintershall has “carefully adjusted” its financial framework and removed the Russian activities from the planning. Continuing business in Russia is not sustainable: “Russia’s war of aggression is not compatible with our values. He destroyed cooperation between Russia and Europe.”
The Ludwigshafen chemical giant was the most important partner of the Russian gas giant for many years Gazprom and advocate of gas supplies from Russia. The relationship originally arose from the consideration of doing something to counter the German gas monopoly Ruhrgas. The BASF subsidiary not only produced gas in Siberia, the group is also involved in both strands of the Baltic Sea pipeline as a co-owner of Nord Stream 1 and as a financier of Nord Stream 2.
Swapped a few years ago BASF and the Russian group acquired assets in a deal that was heavily criticized today, which, according to information at the time, contributed more than 12 billion euros to BASF sales: the chemical group received further production licenses in Siberia. In return, Gazprom received a stake in the natural gas trading and storage business that had previously been operated jointly, specifically in the gas trader Wingas and the natural gas storage facilities in Rehden, Jemgum and Haidach in Austria.
For Wintershall, Russia is the most important producing country
This connection is now apparently over once and for all. BASF has already indicated that it will spin off Wintershall’s Russian business and list such a “liberated” subsidiary after all. The previous stock exchange plans had not only failed because of the war, the Wintershall Dea minority shareholder – the Russian oligarch Mikhail Fridmann – had also surprisingly opposed the plans at the beginning of February, even before the start of the war.
The market environment was difficult, he said at the time. There is a risk that Wintershall will sell itself below value. Now he could still get the production licenses cheaply via detours. However, the BASF board did not comment on the next steps.
For Wintershall, Russia is the most important producing country, half of the production comes from gas fields in Siberia. According to the company, more than 60 percent of the secured oil and gas reserves are in Russia.
BASF pointed out that the other key figures for the 2022 financial year were in line with its own expectations. Sales are expected to have increased by 11 percent to EUR 87 billion, while operating profit fell by EUR 890 million to just under EUR 6.9 billion.