Russian gas giant Gazprom announced an operating profit of $860 million in 1999 but a net loss of $2.86 billion, according to international standard results published last week, figures below expectations.

Although the 1999 results were an improvement on 1998, analysts said the fact that Gazprom again had to write off investments and provide for future losses on guarantees and derivatives contracts showed it had not come to terms with fundamental problems.

"In 1998, Gazprom made provisions for $5.2 billion in possible losses. That suggested it was opting for a ‘big bath' in order to start fresh in 1999," said Steven Dashevsky, an oil and gas analyst at Aton, a Moscow-based brokerage.

"No one expected it to need another $1.2 billion this year," he said, adding that factors like the $400 million to $500 million owed to Gazprom by Media-MOST were probably part of the write-off equation.

Analysts also said the company's balance sheet continued to show areas of weakness, with the ruble figure owed to it increasing 19.5 percent – suggesting Gazprom was still failing to collect on its domestic sales.

"Barter [for gas received] continues to be high," Dashevsky said. "Further, Gazprom's capital expenditure is $1.4 billion, which is unacceptable for a company its size; its debt has also risen from $9 billion to $11 billion."

"It's the same old song. There are still huge problems," he said.

The company, however, talked up the results and said it expected further improvement in 2000.

"Gazprom's performance, as reported in accordance with IAS, showed a strong recovery," the company said in a statement. "Due to the contract pricing lag, it will only reap the full benefit in 2000," it said, referring to increasing international gas prices but a lag between the market and contract price.

Analysts generally agreed that the company's figures are likely to improve this year, with the price for export gas expected to rise 50 percent on 1999 levels.

"That will increase [Gazprom's] revenues by around $3 billion to $4 billion," Dashevsky said. "In addition, we are likely to see higher domestic prices with an increase in tariffs, which will further benefit the company."

The government also announced last Tuesday that it would sell a 3.3 percent stake in Gazprom in the second half of 2001. The starting price for the parcel will be 6.9 billion rubles ($249 million), Russian news agencies quoted a government source as saying.

The program is to be submitted to the State Duma lower house of parliament along with the 2001 draft budget.

Separately, national electricity grid operator RAO UES also announced last week that it had increased sales but that the company's profits had been driven down by higher fuel prices.

According to UES, the company's net profit was $326 million as opposed to $367 million in 1999.

Analysts say increased tariffs and growth in electricity consumption in the economy were the driving force for higher revenue, but fuel costs had reduced profit margins.

Cash collection at the electricity monopoly, which controls almost every regional power utility, rose to 50 percent in the first six months of the year, up from 28 percent a year ago.

UES also said in a statement that it would look at plans for the first stage of a controversial restructuring plan on Aug. 30.