TotalEnergies to take $3.7 billion hit as it writes down Novatek stake

French energy giant TotalEnergies said it would take a $3.7 billion hit in its fourth-quarter results for the write-down of its stake in Russian LNG producer Novatek.

TotalEnergies holds a 19.4 percent interest in Novatek. It also holds a 10 percent stake in the Arctic LNG 2 development, as well as a 20 percent in Novatek’s Yamal LNG project.

Earlier this year, TotalEnergies said it would continue to supply LNG from the Yamal plant to Europe, but it would not provide any more capital for the Arctic LNG 2 project. The firm also booked a $4.1 billion impairment charge on Arctic LNG 2.

Besides the write-down of the stake, TotalEnergies has decided to withdraw the representatives of the company from the board of Novatek with immediate effect, it said in a statement on Friday.

TotalEnergies said it cannot sell the stake in Novatek given the prevailing shareholders’ agreements, as it is forbidden for TotalEnergies to sell any asset to one of Novatek’s main shareholders who is under sanction.

“In view of the European sanctions in force since the beginning of the war, the two directors representing TotalEnergies on the board of directors of Novatek are led to abstain from voting in meetings of the board of directors of this company, in particular on financial matters,” the firm said.

“They are therefore no longer in a position to fully carry out their duties on the board which might become an issue for the governance of this company,” it said.

Under these circumstances, the board of directors of TotalEnergies has decided to withdraw the representatives of the company from the board of Novatek, TotalEnergies said.

These actions would lead to record an impairment of about $3.7 billion in the accounts for the fourth quarter of 2022.

In addition, TotalEnergies said it would no longer book reserves for its interest in Novatek, with an impact on the company’s reported proved reserves at the end of 2021 of 1.7 billion of barrels.

However, the life duration of the company’s proved reserves would remain above 11 years of production, the company added.

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