About GAZPROM:
GAZPROM Germania belongs to the GAZPROM Group, one the world’s largest natural gas producers headquartered in Moscow, Russia. The GAZPROM Group is a massive conglomerate, and GAZPROM Germania, with headquarters in Berlin, is similarly huge. Founded in 1990, today they are comprised of 40 entities, operating internationally in 20 countries in Europe, Asia and North America. GAZPROM Germania employs around 1,200 people, 200 of them at headquarters in Berlin. As the holding company, they are in charge of marketing and selling gas (mainly from Russia) in Germany and Western Europe. Next to Germany, the entities in England, Switzerland, the Czech Republic and Poland also play an important role. GAZPROM Germania acts as both a trading company (in particular in England) and a genuine holding company for some countries. Recent acquisitions, such as the one of the gas station network VNG-Erdgastankstellen GmbH in Germany, or the much publicized asset exchange with BASF (for a 100% share in the European gas trading and storage businesses WINGAS, WIEH and WIEE) illustrate that the group is growing steadily.

Treasury Profile

ADaily Cash Management

BCash Pooling

CPayment Processing

DPayment on Behalf of

ECollection on Behalf of

FSWIFT

GeBAM

HLiquidity Planning

IContract Management for Interest, Currencies

JManagement of Commodities

KTrade Finance Contracts

LCapital Markets

MRegulatory Requirements

NGeneral Risk Management

OTreasury Accounting

PStandard / Individualized Reporting

QNetting & Reconciliation

RInsurance

SMergers & Acquisitions

TInvestor Relations

 

When Dieter Linke looks up from his desk, he has the “World of GAZPROM” in front of him. This map, pinned to his wall, is truly unique. Russia is in the center and all other countries and continents vie for space to the right and left of it. Looking at the world from this angle reveals just how large Siberia but also countries such as Kazakhstan or Uzbekistan are compared to some countries in Western Europe. You can also see just how small GAZPROM’s main market Western Europe is when you only consider the surface area. In addition to the different countries and regions, the map also shows the pipelines that transport gas from Russia to the west: an impressive network that runs through a number of regions of geopolitical relevance. For Dieter Linke, Head of Treasury at GAZPROM Germania, they’re more than just pipelines – they’re also the lines along which his treasury runs.

A network of networks

As the holding company of different entities, GAZPROM Germania is responsible for acquisitions, financing, centralized payments processing and other typical overlay structures. In 2015, an asset swap deal between BASF WINGAS and GAZPROM Germania in exchange for gas production rights in Russia caught the attention of the media and was widely publicized. This acquisition will see the turnover for 2016 soar to a staggering EUR 30 billion. Arranging such a deal is a serious undertaking, especially considering the political dimension that accompanies all of GAZPROM’s activities in the background. After the contract had been signed in August 2015 and before the deal was closed on 1 October, there were certainly nights when Dieter Linke lay awake wondering just how exactly he was going to manage this integration.

"We needed to integrate the entire WINGAS Group, all entities, all processes, all activities BASF had previously been in charge of. It was a mountain of work, and many things needed to be consolidated because suddenly they existed twice. At the same time, we were under great pressure to sort everything out by the cut-off date."

There were many challenges: GAZPROM Germania had no more than six weeks to integrate the new companies in their cash management operations and several cash pools, and this for a sales volume of EUR 15 billion. Parallel to this, existing payments needed to be integrated in the standardized GAZPROM Germania payment system, which for the treasury department included re-negotiating around 150 bank contracts. GAZPROM Germania does not directly market gas and energy, which is why the trading company in the UK is responsible for FX hedging and the corresponding risk management, rather than the central treasury department. In order to make sure that this data is integrated in GAZPROM Germania’s central treasury system, they introduced 360T as a joint FX trading platform.

Complexity & large numbers – everyday business at GAZPROM

One would think that with the merger completed and all activities integrated, it would be back to business as usual for the GAZPROM Germania treasury team. However, routine treasury tasks are rarely on the agenda at GAZPROM Germania. The way operations are organized in Switzerland for example illustrates the kinds of topics GAZPROM Germania deals with on a daily basis: the company in Switzerland uses their systems on servers in St. Petersburg in Russia and concentrates on selling gas from Azerbaijan and Uzbekistan. Any payments are processed by the central treasury, i.e. Dieter Linke and his team, via the holding company in Berlin. This complex setup works very well as all accounts are listed as non-resident accounts in Germany, meaning they can be included in GAZPROM Germania’s standardized payments system. The Swiss entity’s main payments are made in EUR and GBP. Interestingly, CHF plays virtually no role. The cash pool for the main currencies is organized via two banks in Germany, and the Swiss group company is fully integrated. Other group entities are connected to the central organization in a similar fashion – integrated in the payments process and the joint cash pool.

Good organization is everything – ideally backed up by a good system. When Dieter Linke took charge of the GAZPROM Germania treasury more than eight years ago, an implementation project for a TMS had been started but little progress had been made. Both the treasury department and commercial management team were recording their financial status in Excel. Dieter Linke was surprised that this wasn’t generated in one centralized system and vowed to move forward with the implementation project as a top priority. His goal was to achieve fast and group-wide visibility for liquidity.

"When I started working for GAZPROM Germania, I was faced with a real ‘document jungle.’ There were many different Excel sheets and other documents, and while they did include the required information, I needed to piece things together manually. This was the reason why I desperately wanted to introduce a TMS, to disentangle this heap of information and to make it visible and easy to represent – so you could actually interpret it."

It didn’t take long for Dieter Linke to celebrate his first and fundamental success: a financial status report that included all data, up-to-date figures at all times and a planning horizon of several months. Today, this financial status report has become the basis for any decision-making and the management of the group. It has become indispensable.

Patience is a virtue: visibility within the complex Russian company network

Dieter Linke’s objective is the optimization of processes in order to boost efficiency group-wide. What is probably true for many corporate groups is particularly true for the corporate culture in Russia: subsidiaries are often reluctant to “show their hand” to the holding company by making their data available on a joint platform. It took a lot of patience and persuasion to get the group companies to share the relevant data with the holding company in real time, even with the local entities in charge of the respective responsibilities.

"You need three things to enable a cost-effective solution for a transparent and fast treasury: patience, time and know-how. Patience and time go without saying – for example, you need to think long term in order to push changes. But you also need know-how: numbers are only numbers until you fill them with life, know how to read and interpret them and take into consideration cultural differences. This is how you achieve visibility for management and partners."

A transparent banking environment

For GAZPROM Germania, achieving group-wide efficiency is not limited to the collaboration of group companies. It also includes visibility when it comes to banking relationships: they have two main banks with group-wide cash pools and another 80-90 banks in the group. Dieter Linke does see room for further improvement when it comes to optimizing the banking environment and the number of banks. But the treasury department does not want to curtail the freedom of the individual companies: the focus is on self-monitoring, and Dieter Linke’s team constantly appeals to the group companies to use their flexibility in the best interest of the group. Relationship management takes a lot of effort given the large number of banks and the political background of the group. Regulatory requirements the banks are faced with (such as Know Your Customer) and the checking of sanctions lists in connection with foreign trade and payments are of great importance. While GAZPROM Germania is not listed on any sanctions list, it does occasionally happen that payments are held up and go through several loops before reaching the beneficiary or GAZPROM Germania.

“Settlement day” – preparation is money!

Dieter Linke considers himself the “custodian” of the complex GAZPROM network. In addition to managing a large number of guarantees (something that is very important for GAZPROM Germania), he also monitors outgoing and incoming cash volumes, and of course he has a particular focus on what remains at the holding company at the end of each day. There are many particularities that are linked to the specifics of gas trading and these make cash management and payments complex. For example, in the gas trade industry, the 20th of each month is payment day. On this day, energy imports are settled and the corresponding accounts balanced.

"We have a very special business day each month – usually the 20th – our ‘payday.’ This is when all incoming and outgoing payments are made in all currencies – whether it is EUR, GBP or USD. My treasury team needs to ensure that we have sufficient liquid funds in the different currencies to make all these payments. And we’re talking about several hundred million figures per payment."

With an annual turnover of EUR 30 billion for GAZPROM Germania alone, over 2 billion fall on each payment day. All upcoming payments must be entered in the system in good time and be checked thoroughly, so they can guarantee their processing by the bank the next day. GAZPROM Germania needs sufficient intraday limits to ensure payments can be made because the corresponding incoming payments will not appear in the current accounts until hours later. Even if no one involved in gas trading would ever really dare to be late with a payment, ‘paydays’ are sensitive days in the life of a treasurer. In light of these dimensions, Dieter Linke checks every payment not just twice but three times before signing it and sending it to the bank.

Dieter Linke has been a treasurer in “east and west” for three decades and is not easily ruffled. He got to know the commercial side of FX and commodity trade even before the fall of the iron curtain. Back in the 90s, before he joined GAZPROM Germania, he was responsible for sending checks as part of the payments process. This regularly involved making formal declarations to the US embassy in connection with checks with a forged signature that had been wrongly cashed. Against the backdrop of this experience, he makes extra sure that GAZPROM Germania’s high volume payments are handled with great care and that all data is always accurate. He certainly has the patience and the know-how. If there’s ever an issue, then it’s simply the lack of time.

 

Treasurers are all-around managers. There are so many interfaces, internally for example to other departments, to subsidiaries, and externally to banks or partners. Everything needs to be a concerted effort and we need to make sure the collaboration works – this can often be an exciting challenge, not least because of the different cultural backgrounds!

Dieter Linke | Head of Treasury, GAZPROM Germania