TotalEnergies pulls out of Russia’s Novatek, posts $3.7bn impairment

Jonathan Lopez


MADRID (ICIS)–TotalEnergies is to record a $3.7bn impairment in the fourth quarter as it is deprived of revenues from its 19.4% stake at Russia’s natural gas producer Novatek.

The company’s shares were down nearly 4% in Friday morning trading.

It has taken TotalEnergies nearly nine months to exit its main Russian investment, coming under intense criticism for it.

However, the company said in April it was planning for a large impairment as a consequence of the planned Russia withdrawal. At the time, it valued the impairment at $4.1bn.

In the immediate aftermath of the invasion, on 1 March, TotalEnergies said it would stop funding for new projects in Russia.

The company said, however, the decision was linked to the new set of “principles of conduct” for its activities in Russia approved by its board on 22 March.

However, under the current regime of EU sanctions against Russian companies and individuals, TotalEnergies is not able to sell its Novatek stake for the time being.

“In view of the European sanctions in force since the beginning of the war, the two directors representing TotalEnergies on the board of directors of Novatek are led to abstain from voting in meetings of the board of directors of this company, in particular on financial matters,” it said.

“They are therefore no longer in a position to fully carry out their duties on the board, which might become an issue for the governance of this company.”

Meanwhile, TotalEnergies has decided to withdraw from its board the representatives coming from Novatek with immediate effect.

“As a result, the criteria for significant influence no longer being met within the meaning of the accounting regulations that apply to the company [Novatek], TotalEnergies will no longer equity account for its 19.4% stake in Novatek in the company’s accounts,” the French major said.

“This will lead to record an impairment of approximately $3.7 billion in the accounts for the 4th quarter of 2022.

The company said it would no longer book reserves for its interest in Novatek, resulting in an impact on its reported proved reserves at the end of 2021 of 1.7bn bbl.


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