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Businessneweurope.Eu June 30, 2009 June 30, 2009 This is bne's Russia daily newsletter, a list of the top stories and analysis. You can receive the list as a plain text or html email or as a pdf file. Manage your delivery options here: http://businessneweurope.eu/users/subs.php RBL TOP STORY 1. Gazprom to begin purchasing gas from Azerbaijan 2. Government takes measures to encourage bank lending 3. Norilsk Nickel - AGM today, 45%+ votes will be from VTB and VEB, may bring surprise BoD decisions 4. VimpelCom- Altimo announces it has halted talks with Telenor RBL NEWS 5. Market Overview- Crude, but effective 6. Gazprom to gain priority access to Shakh Deniz gas field 7. Russian unemployment still falling 8. Vimpelcom- Might see value boost via merger with Kyivstar RBL On the website today 9. Mastering business in emerging Europe 10. Russia's real world MBAs 11. Striving for standards RBL OTHER NEWS 12. FSK CEO resigns - expected - still unclear who will take the post - 13. Kudrin considers higher gas export duty a possibility 14. Reiman elected chairman of Svyazinvest 15. Slavneft- AGM and management meeting- go-go greenfields RBL DEBT 16. AvtoVAZ restructures USD 480mn of debt in June 17. Domestic debt strategy- Rouble/basket rate and bond prices under pressure 18. Fixed Income Trader's Comment 19. MTS raises EUR413mn for network development 20. Polymetal- To place ruble bonds 21. Polymetal BoD approves rights issue and bond placement 22. RBC- Dispute indicates low chances for debt restructuring RBL SECTOR SNAPSHOTS 23. Moscow elite residential property prices stabilize in May 24. Steel prices set to catch up 25. Untangling the Chinese copper puzzle RBL MACRO RESULTS 26. Economics- Official forecast gloomier as 2010 budget planning starts 27. Average oil price may reach $55 per barrel says Putin RBL REFORM & REG'S 28. Gas Tariffs and Taxes- 29. Mobile sector- MNP poses a minor threat to margins long-term 30. Three companies can be transferred to RAB from 2010 RBL CO. RESULTS, UPGRADES ETC 31. Rosinter releases FY08 IFRS results and 1Q09 trading update 32. Toghliattiazit FY08 results businessneweurope.eu 33. Togliattiazot- 2008 RAS financial results - Strong financial performance RBL BELARUS 34. Russia softens on Belarus gas, gives discounts RBL TOP STORY 1. Gazprom to begin purchasing gas from Azerbaijan Renaissance Capital, Russia Tuesday, June 30, 2009 Event: Yesterday (29 June) Gazprom and the State Oil Company of Azerbaijan Republic (SOCAR) signed a gas purchase agreement, according to which Gazprom will begin purchasing gas from Azerbaijan from 1 Jan 2010. The initial volumes are tiny (500mmcm pa), but they may be substantially increased along with growing Azeri gas production. The purchase price will be formula-based, and according to Kommersant, Gazprom is ready to pay SOCAR up to $350/mcm, which is comparable with Gazprom's 1Q09 purchase price from Turkmenistan ($340/mcm, as stated by Russian Prime Minister Vladimir Putin). According to Gazprom CEO Alexei Miller, as quoted by RBC Daily, Azeri gas will be used for internal consumption in Russia's southern regions. Action: We retain our BUY rating for Gazprom, but we do not regard this agreement as value-accretive for Gazprom's current shareholders. Rationale: Azerbaijan has gas reserves of 1.5tcm, including the giant Shakh-Deniz field on the Caspian shelf with 1.3tcm of gas reserves. The field is regarded by the EU as a source of gas for the Nabucco pipeline, but now Gazprom has received the priority right for this source. Given Gazprom's excessive domestic production capacities, we see more politics than economics in this agreement. Irina Elinevskaya 2. Government takes measures to encourage bank lending Troika, Russia Tuesday, June 30, 2009 Prime Minister Vladimir Putin yesterday announced recommendations to state banks on lending expansion, following the approval of revised legislation on state guarantees to banks at a government meeting on the economy. Putin suggested a plan to increase loan books at state banks by R150bn in July, R150bn in August and R200bn in September. Among the state banks, he listed Sberbank, VTB, Gazprombank, Russian Agricultural Bank and VEB. The R500bn increase in the corporate loan book would put it nearly 4% higher than the 4m09 (latest available sector data) total corporate loan book in Russia, which implies growth of about 1.2% per month. In January April, banks increased loans by an average of 1.3% m o m, but this was due largely to the devaluation effect. In absolute terms, the plan seems like rather strong guidance, as the banking sector's loan book increased just R59bn in April (the first month to see early signs of a possible recovery in corporate lending). Looking at the two state banks, Sberbank averaged a R38bn increase in its loan book during the past three months, while VTB's declined by an average R39bn per month. businessneweurope.eu Presumably, a lot of new loans under this plan should be provided with state guarantees. Additions to the legislation on guarantees that shift more responsibility onto the state were signed yesterday, but its usage by banks is still up in the air. The draft law implied that guarantees would be provided on loans from banks with general licenses (there were 293 banks with general licenses in Russia as of June 1), should cover 50% of a loan (principal only; or 70% for the defense industry), and could be provided on loans in rubles with maturity from six months to five years. A guarantee should also require another security from a borrower, and each guarantee should be for at least R150m, while the limit on guarantees per borrower is R10bn. While only time will tell how strictly this plan is adhered to and how the onus on new lending is shared between the several state banks mentioned by Putin, our impression is that setting such targets can only really have negative implications for credit risk and corporate governance perceptions for Sberbank and VTB. Andrew Keeley 3. Norilsk Nickel - AGM today, 45%+ votes will be from VTB and VEB, may bring surprise BoD decisions Citibank, Russia June 30, 2009 (GMKN.RU - 3H: Sell/High Risk, Target Price: USD89; Current Price: USD90.8) The company will elect a new BoD today and the new board will vote on a number of issues. The new board may have as many as 4 state-owned banks' representatives. The newly elected BoD will vote on: 1) changes to the information request policy; and 2) approval of annual report and financial statements. Kommersant quotes sources in the Kremlin, VTB and VEB as saying that the latter may be rejected by the BoD. The change to the information request policy, which makes it more difficult to for the BoD to receive information, may also be rejected by the BoD. Kommersant dwells again on last autumn's transactions (Plug Power, Buy Backs, Russia Petroleum) which have drawn the attention of the government. Our take: this detailed Kommersant report may bring negative newsflow and be potentially damaging for the share price of Norilsk in the near term similarly to the publication of Vedomosti's report in March which raised issues related to the government's interest in the transactions of last autumn. However, in the longer term, if VEB and VTB interests are confirmed to be aligned with those of minorities and the BoD's voting proves that, today the news may be taken positively by investors. Daniel Yakub businessneweurope.eu 4. VimpelCom: Altimo announces it has halted talks with Telenor UralSib, Russia June 30, 2009 First of all means there were talks. Russia-based Altimo group, which owns 44% of the voting shares in VimpelCom (VIP - Buy), announced it has stopped talks with Telenor (which holds 29.9% of voting shares in VimpelCom) on resolution of their conflict on development of mobile business in Russia and Ukraine, and that it does not plan to resume talks, Kommersant reported today. While the news looks negative for VimpelCom at first glance, the statement effectively confirms officially that talks did take place. In our view, the statement could be part of Altimo's negotiating tactics, and the chances of Altimo and Telenor reaching an agreement over their telecom assets in Russia and Ukraine are still fairly high. A solution could imply merging telecom assets in Russia and Ukraine. Altimo approached Telenor to merge their telecom assets in Russia and Ukraine (i.e. VimpelCom and Kyivstar) into one company. The latest proposal suggests that 44% of the new company will be owned by Altimo, 37% by Telenor, and the rest by minorities of VimpelCom. The two sides had been in disagreement over management: with Altimo pushing for the CEO to be appointed by shareholders and Telenor looking for the appointment to be made by the board of directors. Negative in the short term, but amicable resolution is the most likely outcome. The news may generate some short-term negative sentiment on VimpelCom shares and the issue in general. That said, we never expected negotiations between Telenor and Altimo to be publicly known, and we continue to believe that an amicable resolution of the conflict is the most likely outcome. Fundamentally, VimpelCom remains undervalued, trading at a 2010E EV/EBITDA of 4.1 and offering 26% upside potential to our 12-month target price of $15/ADR. We reiterate our Buy recommendation for VimpelCom. RBL NEWS 5. Market Overview: Crude, but effective UralSib, Russia June 30, 2009 Oil rose because of the Nigerian explosion. Nigeria has featured prominently in Russian affairs over the past week. The latest event was worth about $20 million extra to Russia's coffers yesterday and several percentage points to the equity market.
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