BASF Takes €7.3 Billion Writedown Due to Wintershall Dea’s Russia Exit
- January 19, 2023
- Posted by: Quatro Strategies
- Category: Energy
German multinational chemicals giant BASF will take a €7.3 billion writedown as a result of its energy unit Wintershall Dea exiting Russia, triggering a net loss for 2022. Wintershall Dea has been deeply involved in Russian energy sector, with stakes in the Nord Stream pipelines and joint ventures with Russia’s Gazprom. Wintershall Dea CEO Mehren said limitations imposed by Moscow on Western-owned assets had made operating in the country impossible, and resulted in an expropriation of joint ventures in Russia. The company pointed out that Russian presidential decrees had retroactively slashed the prices at which joint ventures can sell their oil and gas to state-controlled Gazprom.
“Continuing to operate in Russia is not tenable,” Mehren said.
“Russia’s war of aggression in Ukraine is incompatible with our values and has destroyed cooperation between Russia and Europe,” he added in a statement on Tuesday.
Most other Western energy firms have already left Russia and had been quicker to face losses. BP last May took a $24 billion writedown from its exit, while TotalEnergies in October took and impairment of $3.1 billion on top of an earlier $7.6 billion provision.
BASF’s write-down comes almost a year after Russia invaded Ukraine, triggering sweeping Western sanctions and an exodus of Western firms from Russia.
The energy company had previously said it was trying to legally separate its Russian business.
According to BASF’s statement, €5.4 billion of the writedown for 2022 were new charges to be taken in the fourth quarter.
Wintershall Dea said it had to write off Russian joint venture stakes and Russian-related activities, including its 15.5% holding in the damaged Nord Stream pipeline and the WIGA Transport joint venture with Sefe, formerly known as Gazprom Germania.
As a result, BASF flagged a €1.38 billion net loss for 2022, after a €5.52 billion profit in 2021. The company had been expected to make a net profit of €4.77 billion.
Wintershall Dea’s Russian activities include a 35% stake in the Yuzhno-Russkoye gas field, in which Gazprom had 40% and Austria’s OMV had 25% stakes.
The company also co-owns two Achimov natural gas production projects in Siberia, including a 50% stake in the Achimgaz joint venture with Gazprom and a 25% holding in the Achim Development venture.
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