Wintershall Dea announces intention to exit Russia following regulation on JV products, services being implemented

MOSCOW. Jan 18 (Interfax) - Germany's Wintershall Dea AG has announced its intention to exit Russia following the decision by the Russian president and government to implement regulated prices for the products and services of joint ventures, which it described in a press release as "economic expropriation."

Wintershall Dea has not provided details on the exit strategy, though has indicated the general direction.

"The Wintershall Dea supervisory board has approved a principle decision by the management board to exit Russia. As a consequence, Wintershall Dea intends to exit Russia fully in an orderly manner, complying with all applicable laws and regulations," the company said in the press release.

"The fair value of the Russian joint ventures is significantly impacted by the external interference into the business models, namely, among others, Russian presidential decree No. 943, dated December 22, 2022, and decision No. 2544 of the Russian government, dated December 30, 2022, that retroactively reduce the prices at which the joint ventures can sell their produced hydrocarbons to Gazprom. Consequently, the company expects to record a non-cash loss from the deconsolidation of the Russian joint ventures that, together with other Russia-related impairments, in particular on its participating interests in Nord Stream AG and WIGA Transport Beteiligungs-GmbH & Co. KG, amounts to a total of approximately 5.3 billion euros," according to the press release.

"Wintershall Dea has concluded that it no longer meets the criteria set out under International Financial Reporting Standards (IFRS) for having control or significant influence over its Russian joint ventures. Therefore, in Q4, Wintershall Dea deconsolidated all its Russian participations. Until the intended exit is completed, the Russian participations will be accounted for as financial assets measured at fair value according to IFRS 9," the company said.

"Following the deconsolidation, Wintershall Dea will no longer report financial or operational KPIs, including production and reserves, of the Russian joint ventures in its group financial statements, other than changes in fair value of the financial assets," according to the press release.