By 2017, Russia’s largest natural gas producer and pipeline exports monopolist Gazprom is planning to step up foreign borrowing by 53 percent year-on-year to RUB288.3 billion (USD4.6 billion), while increasing its investment program by 6.8 percent year-on-year to RUB911 billion (USD15.02 billion), the company said on December 19, 2016.

Gazprom’s investment program is under pressure from large-scale international investment projects, such as the Sila Sibiri pipeline to China, the Nord Stream 2 line to the E.U. via the Baltic Sea, and the Turkish Stream pipeline via the Black Sea.

“The increase of capex in 2017 is in line with our expectations and the increase of foreign borrowings from RUB90 billion (USD1.48 billion) to RUB288.3 billion (USD4.75 billion) should not greatly influence the debt burden,” BCS Equity stated on December 20, 2016, seeing the news as neutral.

In 2017, capital construction projects are planned to receive RUB625.5 billion (USD10.32 billion) in investment, while long-term financial acquisitions are planned at RUB285 billion (USD4.70 billion). The investment program in 2016 stood at RUB853 billion (USD14.07 billion), out of which RUB680 billion (USD11.21 billion) accounted for capital investment. The 2016 program did not specify the sources of financing.

The company pledges to run 2017 with no deficit as a result of a financial plan that provides for RUB12.2 billion (USD200 million) of cost-cutting measures.

The Vedomosti daily noted that Gazprom usually revises the investment program by the second half of the year based on oil prices. The net debt-to-EBITDA ratio for the company as of the first half of 2016 remained stable at 1.1x.

The analysts surveyed by the daily expect that Gazprom’s financial results will improve towards the end of the first half of 2017 due to higher gas prices that follow oil price movements with a six- to nine-month lag.

This will help the company recover from a dive that was seen in 2016. According to the deputy head of Gazprom’s board Andrei Kruglov, revenues in 2016 in U.S. dollar terms could decline by 10 percent, with EBITDA’s declining 30 percent in U.S.-dollar terms and 25 percent in rouble terms. The free cash flow could be “considerably lower than in the previous years,” Mr. Kruglov said.

The decline in the free cash flow is negative, BCS Equity said, noting that keeping dividends in 2016 unchanged year-on-year at 25 percent of the IFRS net profits will translate into a dividend yield of five percent. At the same time, some investors expected a payout of 50 percent of the IFRS net profits or a 10-percent yield.