Significant Events
3rd Quarter 2015
- Asset swap with Gazprom completed
- Nord Stream pipeline to be expanded
- Carve-out of pigment business announced
- MDI production begun in Chongqing, China
On September 30, 2015, and financially retroactive to April 1, 2013, BASF and Gazprom completed the swap of assets of equivalent value that had originally been planned for the end of 2014. With the swap, BASF is further expanding its oil and gas production and has exited the gas trading and storage business. The transaction gives Wintershall an economic share of 25.01% in blocks IV and V of the Achimov formation of the Urengoy natural gas and condensate field in western Siberia. In return, Wintershall has transferred to Gazprom its share of the formerly jointly operated natural gas trading and storage business, including a 50% share in the gas storage companies WINGAS (Kassel, Germany), WIEH (Berlin, Germany) and WIEE (Zug, Switzerland). Gazprom will also hold 50% of Wintershall Noordzee B.V., which is active in the exploration and production of crude oil and natural gas in the southern North Sea. In 2014, these activities contributed a total of around €12.2 billion to sales and around €260 million to the EBITDA of the BASF Group. In the first three quarters of 2015, the contribution to sales was around €10.1 billion, and the contribution to EBITDA around €650 million. This EBITDA figure includes the special income from the asset swap with Gazprom.
At the beginning of September 2015, we signed a shareholder’s agreement with Gazprom, E.ON, ENGIE, OMV and Shell on the expansion of the Nord Stream pipeline, which transports natural gas via the Baltic Sea from Russia to Germany. Gazprom will hold a 51% share in the project company, Nord Stream 2 AG; after approval from the relevant authorities, E.ON, OMV, Shell and the BASF subsidiary Wintershall will each acquire a share of 10% and ENGIE a share of 9%. Two further lines are to be built with a total capacity of up to 55 billion additional cubic meters of natural gas. The two existing lines, in which Wintershall holds a 15.5% share, have been in operation since October 2012.
Starting January 2016, BASF will combine all of its pigments activities into a new global business unit (GBU). The plan is then to carve out this business and establish separate legal entities. All employees in the pigments business will be part of the new GBU. This reorganization allows for better adaptation to the challenges in the pigment industry.
We began producing methylene diphenyl diisocyanate (MDI) in Chongqing, China, and are ramping up production. MDI is a central component of the plastic polyurethane, a substance that improves insulation and makes vehicle parts lighter. With the MDI plant, BASF will supply these key industries in western China.
Investor Day 2015
At our Investor Day in Ludwigshafen at the end of September 2015, we provided an overview of the implementation of the “We create chemistry” strategy introduced in 2011. Despite a more challenging environment, BASF is on track with its strategy. We have slightly reduced our expectations for the global economic environment from 2015 to 2020 (previous forecast in parentheses):
- Gross domestic product growth: 3.0% (3.2%)
- Growth in industrial production: 3.5% (3.7%)
- Growth in chemical production: 3.9% (4.0%)
Over the next few years, we aim to increase sales at a slightly faster rate than global chemical production; in terms of income from operations before depreciation and amortization (EBITDA), we want to grow considerably faster than global chemical production.
We also announced another project for operational excellence: “DrivE – Drive Efficiency,” which will run from 2016 to 2018 and aims to contribute €1 billion to earnings each year as of the end of 2018.