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Russia and Kyrgyzstan Draft Agreement to Handover Gas Facilities to Gazprom OAO-Interfax

Friday, 12 Jul 2013 01:43am EDT 

Interfax reported that Russia and Kyrgyzstan have drafted an intergovernmental agreement to hand over Kyrgyzstan's gas facilities to Gazprom OAO (Gazprom). Kyrgyzstan will set up a wholly owned subsidiary of Kyrgyzgaz in the form of a limited liability company and transfer all of Kyrgyzgaz's assets to it, including gas pipelines, gas distribution stations, underground storage facilities, land and other property, rights and interests. All of the shares in this LLC will then be sold to Gazprom for $1. In exchange, Gazprom pledges to invest at least RUB 20 billion over the next 5 years in the modernization and overhaul of Kyrgyzstan's gas infrastructure. Shares in the new LLC, as well as its assets associated with gas infrastructure can be divested to Gazprom subsidiaries or other legal entities in which Russia holds a blocking stake, but only with the agreement of Kyrgyzstan. Gazprom will be able to do freely manage other assets. Kyrgyzstan will also guarantee the LLC's exclusive right to import natural gas, complete and timely payment for gas by government-funded consumers, and to not use special rights to manage the company that would violate or encroach on the rights of its shareholders. It also guarantees that its regulators will set gas prices at a level that will cover the company's expenditures on gas acquisition, transportation, among others, and provide a profit that will give Gazprom an internal rate of return of at least 12% in real terms for a period of 25 years.