Russia 100304 Basic Political Developments


Business, Energy or Environmental regulations or discussions



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Business, Energy or Environmental regulations or discussions

Bloomberg: Lukoil, Polyus Gold, Raspadskaya: Russian Stock-Market Preview


http://www.businessweek.com/news/2010-03-04/lukoil-polyus-gold-raspadskaya-russian-stock-market-preview.html
March 04, 2010, 12:52 AM EST

By Anastasia Ustinova

March 4 (Bloomberg) -- The following companies may be active in Russian trading. Stock symbols are in parentheses and share prices are from the previous close of trading in Moscow.

The 30-stock Micex Index rose 0.8 percent to 1,379.32 at the close in Moscow. The dollar-denominated RTS Index advanced 1 percent to 1,460.20.

OAO Lukoil (LKOH RX): Oil rose to a seven-week high after a U.S. government report showed that refinery operating rates climbed to the highest level since October, bolstering demand. Shares in Russia’s largest non-state oil producer rose 0.3 percent to 1,626.55 rubles.

OAO Polyus Gold (PLZL RX): Gold climbed to a six-week high in New York on speculation that escalating sovereign-debt concerns will boost demand for the metal as an alternative to currencies. Shares in the country’s biggest producer of the metal rose 0.4 percent to 1,458.55 rubles.

OAO Raspadskaya (RASP RX): Russia’s largest producer of coking coal said its share price is “too low” to carry out a secondary offering in London, Uralsib Financial Corp. said, citing the Kemerovo, Siberia-based company’s management. The company’s shares rose 2.7 percent to 174.59 rubles.

OAO Tatneft (TATN3 RX): The oil company based in Russia’s Tatarstan region is working with three banks to raise as much as $2 billion of loans to refinance existing debt. Company shares were little changed at 141.96 rubles.

--Editor: Glenn J. Kalinoski

-0- Mar/04/2010 03:00 GMT

To contact the reporter on this story: Anastasia Ustinova in St. Petersburg at austinova@bloomberg.net.

To contact the editor responsible for this story: Hellmuth Tromm in Berlin at htromm@bloomberg.net



Bloomberg: Rusal Shares Rise After Credit Suisse Rates Stock ‘Outperform’

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=arOcKYGjYBqU

By Marco Lui

March 4 (Bloomberg) -- United Co. Rusal, the world’s largest aluminum producer, rose in Hong Kong trading to the highest in two weeks after Credit Suisse Group AG initiated coverage with an “outperform” rating.

The shares gained as much as 5.6 percent to HK$8.48, and were up 5.1 percent to HK$8.44 at 12:26 p.m. local time. The Moscow-based company sold shares in January for HK$10.80 each.

Rusal sold stock to pay down $14.9 billion of debt and started trading amid a decline in the benchmark Hang Seng Index and aluminum prices. Prices of the metal may average $1 a pound in 2010, up from 86 cents a pound in the second half of 2009, Credit Suisse said in a note today.

Rusal is a play “to the aluminum price recovery,” analysts Trina Chen, Kevin You and Ada Dai wrote in the report. The analysts have a target price of HK$11.40 for the stock.

Rusal may post a profit of $2.2 billion in 2010, compared to an estimated $451 million in 2009, the report said. Excluding one-time items, Rusal may post a loss of $769 million for 2009, Credit Suisse estimated.

To contact the reporter on this story: Marco Lui in Hong Kong at mlui7@bloomberg.net



Last Updated: March 4, 2010 01:01 EST

Reuters: Bank of Moscow clears Eurobond guidance –source


http://www.reuters.com/article/idUSLDE6230DF20100304
2:53am EST

MOSCOW, March 4 (Reuters) - Bank of Moscow , ranked among Russia's top 10 banks, set price guidance for its forthcoming five-year benchmark Eurobond at mid-swaps plus around 425 basis points, a trading source told Reuters on Thursday.

Bank of Moscow, controlled by the Moscow government, signalled on Wednesday the price guidance could be at mid-swaps plus around 400 basis points.

The bank is following in the footsteps of Russia's second-largest bank, VTB , which sold $1.25 billion worth of five-year loan participation notes at a rate of mid-swap plus 385 basis points.

Bank of Moscow has chosen Credit Suisse , Goldman Sachs and JP Morgan to arrange the transaction. (Reporting by Dmitry Sergeyev; Editing by Lidia Kelly)

RBC: Mechel to float bonds in March

http://www.rbcnews.com/free/20100304105706.shtml

      RBC, 04.03.2010, Moscow 10:57:06.Mechel is set to launch the flotation of series B-02 bonds worth RUB 5bn (approx. USD 167m) on March 16, 2010. According to the mining and metals company, the bid book opened at 10 a.m. today and will closed at 2 p.m. on March 12. As reported earlier, Mechel placed series B-01 bonds also worth RUB 5bn (approx. USD 167m) at the end of 2009, and the first coupon rate stood at 12.5 percent per annum.


Reuters: Russia's Belon to up coal supply to MMK, stop export


http://in.reuters.com/article/oilRpt/idINLDE62306V20100304
Thu Mar 4, 2010 1:26pm IST

YEKATERINBURG, Russia, March 4 (Reuters) - Russian coal miner Belon Group (BELO.MM) said on Thursday it will stop exporting production so that it can increase supplies to its parent company, Magnitogorsk Iron and Steel Works (MAGN.MM).

Belon has sufficient capacity to meet about 70 percent of Magnitogorsk's annual coking coal requirements.

In 2010, Belon expects to mine 5.11 million tonnes of coking coal and 3.10 million tonnes of steam coal.

Magnitogorsk Iron and Steel Works, or MMK, doubled its stake in Belon to 82.6 percent last year to secure stable supplies of coking coal for its steel mill near the Ural mountains. [ID:nLG715546] (Reporting by Natalya Shurmina, writing by Alfred Kueppers, editing by Anthony Barker)

Mining Weekly: Rio Tinto in talks with Norilsk after Russian miner ends JV

http://www.miningweekly.com/article/rio-tinto-in-talks-with-norilsk-after-russian-miner-ends-jv-2010-03-04
By: Esmarie Swanepoel

Published: 4th March 2010


PERTH (miningweekly.com) – Russian nickel producer Norilsk Nickel on Thursday confirmed that it was withdrawing from its joint-venture (JV) with diversified miner Rio Tinto, in order to “concentrate its efforts on current projects”.

However, a spokesperson for Rio Tinto told Mining Weekly Online that the two parties were in “discussions” and that the JV remained in place for the time being.

The JV, known as RioNor exploration, was formed in 2006, with the aim of jointly exploring and developing deposits in Russia.



RioNor Exploration is 51% owned by Norilsk Nickel and 49% by Rio Tinto.

Initial efforts of the company concentrated on exploration opportunities in the southern regions of the Siberian and Far-Eastern Federal Districts of Russia.

At this stage, it was unknown how much either company had spent on the JV.


Bloomberg; RenCap’s Sacks Aims to Complete South Africa Hires in 6 Months

http://www.bloomberg.com/apps/news?pid=20601087&sid=agwQI1Z4M8hM&pos=6

By Vernon Wessels and Janice Kew

March 4 (Bloomberg) -- Clifford Sacks, hired by Renaissance Capital from Bank of America Merrill Lynch to build its African equity business, plans to complete the hires he needs for the Johannesburg-based operation over the next six months.

“We want a business that covers equities from Cape to Cairo,” Sacks, 47, said in an interview in Johannesburg. “We’ll be the first serious pan-African shop and, in some regions, will look at having joint ventures. We want to make sure we have people on the ground.”

Sacks, who spent 13 years at Merrill Lynch and helped turn the brokerage’s South African unit into the top-ranked equities trader in a survey of fund managers by the Financial Mail, will hire at least 25 people for the office. The business, which will span research, sales and trading, capital markets, derivative products and mergers and acquisitions, will focus mainly on the metals and mining, oil and gas, financial services and telecommunications industries, he said.

Opening a Johannesburg office gives RenCap, which already operates in five African countries including Nigeria, Kenya and Zimbabwe, a presence in the continent’s biggest economy. Sacks joins less than a month after Stephen Jennings, the New Zealander who co-founded RenCap in 1995, returned as chief executive officer of the Moscow-based investment bank to guide its expansion into Asia and sub-Saharan Africa.

Sacks was flown to Jennings’ second home in Oxford in mid- January and spent the day with him. The meeting helped convince Sacks of RenCap’s strategy on the continent and left him with “a good idea” of how to build the business.

‘Building Block’

“The first and most important building block is research,” said Sacks, who was born in Polokwane, about 330 kilometers (205 miles) north of Johannesburg, and first joined Merrill in New York from UBS AG. “We will be looking for people who have a good track record and have been doing what they do for five or 10 years and are now looking for something new.”

The South African business will link into research to that RenCap already produces on stocks such as First Bank of Nigeria Plc, Kenya’s Safaricom Ltd., Zimbabwe’s Delta Corp. and Zambia Sugar Plc. Toby Mannock recently relocated from RenCap’s Moscow office to Johannesburg as a South African metals and mining investment banker, RenCap said in an e-mailed response to questions.

The brokerage will target South African institutional investors, such as money managers and pension funds, that want to invest in stocks outside the country, Sacks said.

RenCap, which started its African business in 2007, last year participated in 18 transactions across 10 countries, including the $955 million sale of Central African Mining and Exploration Co. to Eurasian Natural Resources Corp., the Moscow- based brokerage said in a statement.

Jennings in the past month has also hired four senior managers, including Nick Andrews from JPMorgan Chase & Co. as global head of equities, and Ali Khalpey as managing director and head of African sales.

To contact the reporters on this story: Vernon Wessels in Johannesburg at vwessels@bloomberg.net; Janice Kew in Johannesburg at jkew1@bloomberg.net



Last Updated: March 3, 2010 17:00 EST
Bloomberg: Norilsk to End Rio Tinto Venture, Review BHP Accord (Update2)

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aywIwpQ_7mIM
By Yuriy Humber and Maria Kolesnikova

March 3 (Bloomberg) -- OAO GMK Norilsk Nickel, Russia’s biggest mining company, will end a four-year exploration joint venture with Rio Tinto Group and review a similar accord with BHP Billiton Ltd. as it focuses on existing projects.

“We’re exiting the venture with Rio,” Deputy Chief Executive Officer Oleg Pivovarchuk said in an interview yesterday in Moscow. “We have enough of our local concerns.”

The venture with London-based Rio was established in 2006 to explore for iron-ore and copper in Siberia. Since then, the government has curbed foreign companies’ access to the country’s natural resources, Moscow-based Norilsk’s management was replaced following a shareholder dispute, and the company’s earnings shrank as commodity prices plunged.

“Norilsk has significantly cut its investments with the crisis and new projects are not on the agenda,” said Denis Nushtaev, an analyst at Metropol, a brokerage in Moscow. “They want to focus on modernizing their home facilities, which are not in the most up-to-date shape.”

Rio and Norilsk are in discussions about the future of their venture, said Nick Cobban, a spokesman for Rio in London.

Norilsk, the world’s biggest producer of nickel, is focusing on the development of mines close to its main Arctic operations, which are located on the Kola peninsula and in the Taimyr region, Pivovarchuk said.

The Syradasaiskoye coal deposit in the Arctic, which is being explored in a venture with Melbourne-based BHP, is under review because the project “lacks prospects in the short- term,” he said.

Diamond Search

Norilsk had planned to explore with BHP for nickel in the Krasnoyarsk region in Russia’s north, for diamonds in the Murmansk and Arkhangelsk regions, and to examine Syradasaiskoye. A lack of infrastructure and the “massive” investment needed to develop the coal field have delayed work indefinitely on the projects, Pivovarchuk said.

Illtud Harri, a spokesman for BHP in London, declined to comment.

Separately, Norilsk has no current plans to reactivate its Australian assets, mothballed last year after an earlier plunge in nickel prices, Pivovarchuk said. The assets have a breakeven point of between $20,000 and $24,000 per metric ton, he said. Nickel has averaged $19,036 per ton this year in London.

“We’ll be looking at some new ways” to operate the assets in Australia, Pivovarchuk said. “The issue needs serious study.”

Instead, Norilsk plans to start exploration near its Botswana operations, where its deposits have as few as five years of mining life left, Pivovarchuk said. It expects results from exploration in Cuba by the end of the year, he said.

Norilsk is also making an “extra effort” to promote the use of palladium, where it accounts for half of the world’s supply, Pivovarchuk said. The company is also starting to offer more high-value products such as nickel salts and nickel powder for use in nanotechnology industries, he said.

To contact the reporters on this story: Yuriy Humber in Moscow at yhumber@bloomberg.net; Maria Kolesnikova in Moscow at mkolesnikova@bloomberg.net.



Last Updated: March 3, 2010 10:21 EST
04.03.2010 - Fitch Ratings

Cbonds: Fitch Rates Insurance Group MSK at IFS ‘BB’; Withdraws Moscow Insurance Co Ratings on Merger


http://www.cbonds.info/all/eng/news/index.phtml/params/id/456200

Fitch Ratings-Moscow/London-03 March 2010: Fitch Ratings has today assigned OJSC Insurance Group MSK (IG MSK) an Insurer Financial Strength (IFS) rating of ‘BB’ and a National IFS rating of ‘AA-(rus)’. The Outlooks on both ratings are Negative. The assignment of the ratings follows the completion of the OJSC Moscow Insurance Company’s (MSK) merger with IJSC MSK-Standard and IG MSK.

Fitch has simultaneously withdrawn MSK’s IFS rating of ‘BB-’ and its National IFS rating of ‘A+(rus)’, both of which were on Rating Watch Evolving (RWE), following the completion of its merger.

The rating actions follow MSK’s statement today confirming the merger. IG MSK is now the legal successor of all MSK and MSK-Standard’s assets and liabilities, and these two insurers will cease to exist as legal entities.

IG MSK’s ratings reflect the strength of its majority owners, the City of Moscow (‘BBB’/F3/Stable) and Bank of Moscow (‘BBB-’/F3/Stable), the strategic importance of the insurance business to its owners and their ongoing support. The ratings also take into account the insurer’s relatively strong capital position and good market position. They further reflect the high level of concentration within IG MSK’s investment portfolio, its weak underwriting performance and moderate debt leverage. The Negative Outlooks reflect the impact of the deteriorated operating environment in the Russian insurance sector on the insurer’s underwriting performance.

IG MSK is the key operating company of Stolichnaya Insurance Group (SIG), a holding vehicle. SIG has received capital and operational support from its shareholders and is expected to receive another substantial capital injection of RUB10.8bn in Q110. The agency believes that IG MSK is strategically important to its shareholders. This is partially a reflection of the fact that the City of Moscow directly owns 48% in Bank of Moscow, one of the five largest banks in Russia, and has control over the bank only together with SIG’s consolidated 15% cross-holding stake in the bank.

Fitch expects that the parents will continue to support the newly-formed insurance group and will not withdraw capital from it, at least in the medium-term.

Fitch believes that IG MSK’s capital adequacy is relatively strong for the rating level, due in part to the capital adequacy inherited from MSK and revaluation of the shares of Bank of Moscow to market value from the historical cost on the balance sheet. However Fitch is concerned that the revaluation will result in the increase of the proportion of equity instruments in the insurer’s investment portfolio and will significantly increase the exposure of IG MSK’s capital to volatility of the bank’s share price.

However, Fitch believes that IG MSK has a relatively good cushion in the capital base to withstand moderate fluctuations in the share price. At the same time, a significant decrease in the shares’ market value would not only deplete IG MSK’s capital base, but would also challenge the repayment of IG MSK’s long-term financial debt.

Fitch expects that the execution risk of the merger will be relatively low for IG MSK, as MSK and MSK-Standard have similar operational profiles and have applied uniform underwriting policies since 2009. Additionally, both companies have been overseen by the same management team and CEO since 2008. MSK and MSK-Standard’s portfolios were largely skewed towards motor lines, accounting for around 72% of total premiums on a consolidated basis, and their underwriting performance was weak with an average combined ratio of 108% in 2008 and 9M09. Although Fitch expects that the combined ratio may decrease after the merger as a result of strengthened operational control and cost synergies, Fitch sees improvement in underwriting performance as a key challenge for IG MSK, particularly due to recent negative developments in the operating environment of the Russian insurance sector.

On a consolidated basis, IG MSK is expected to report RUB13.8bn of gross written premiums and gross assets of RUB26.5bn at YE09.

Wednesday, March 3, 2010, 10:35am EST


RenCap: Sollers and Fiat offer VEB 10% in future JV

http://www.businessneweurope.eu/dispatch_text11173

Rencap
March 4, 2010

Event: According to Prime-TASS yesterday (3 Mar), citing a source at the Ministry of Industry and Trade, Sollers and Fiat offered Vnesheconombank (VEB) a 10% stake in their JV. VEB is expected to take part in financing the creation of the JV.

Action: We reiterate our BUY rating on Sollers stock.

Rationale: Soller and Fiat announced in Feb 2010 that they would create a JV to produce 500,000 cars per annum. The project investment is estimated at EUR2.4bn. Fiat will contribute its proprietary compact wide platform into the JV worth EUR150mn; Sollers will contribute capacity of its plant in Naberezhnye Chelny and capacity of its ZMZ plant, also worth around EUR150mn. The remaining EUR2.1bn will be financed via a 15-year loan from the state (VEB), likely with a five-year grace period on the principal payments and subsidised interest rate. VEB in turn gets the 10% equity stake in the JV for its substantial project financing. The initial interest payments will be through Sollers' SKD production which is expected to be EBITDA positive in 2011 and have a 4% EBITDA margin in 2012.

The structure of the deal appears to us to be very favourable for Sollers. On the one hand, it will control half of the cash flows if the project is successful, and on the other, the new JV will be legally separated from the rest of Sollers Group and the EUR2.1bn project finance package will have no recourse on other group subsidiaries.


Ivan Kim


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