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company reported in its 2017 filings. The loans to Donetsksteel group that Pokrovske Coal guarantees are in default, and some of the creditors went to court in order to recover portions of these loans, according to Pokrovske Coal. In 2017, Pokrovske Coal’s revenue amounted to $346mn and the company’s EBITDA was $120mn, according to Concorde Capital’s analysis of Pokrovske Coal’s filings. It mines K-grade coking coal. The company’s production volume amounted to 2.16 mmt of run-of-mine coal in the first half of 2018 (+10% y/y) and 4.35 mmt in 2017 (+1% y/y). “This development carries both positive and negative risks to Metinvest. The positive risks are the financial benefits if Pokrovske Coal is eventually consolidated and coking coal supplies are secured, although Metinvest is the dominant coking coal buyer on Ukraine’s market in any case. The negative risks are the possibility of Donetsksteel group continuing to exercise de facto control over Pokrovske Coal and the guarantees on Donetsksteel group loans,” Dmytro Khoroshun of Concorde Capital said in a note.
A 40.8% stake in Ukraine’s largest coking coal miner Pokrovske Coal has changed hands for a total consideration of UAH7.9bn ($300mnat that date), according to a report published by the company via Ukraine’s stock market regulator. Last week, Ukraine’s largest producer Metinvest alongside companies likely affiliated with its owners, acquired 100% ownership in Ukraine’s producer of coking coal concentrate Donetsksteel and a 40.8% stake in Ukraine’s largest coking coal miner Pokrovske Coal. This values the total equity of Pokrovske Coal at $734mn. The company also reported on August 10 that its board is convening an EGM on September 12. The EGM has a broad agenda, including replacing supervisory board members and changing the company’s statute and by-laws. Meanwhile, a 100% stake in Donetsksteel, a Ukrainian producer of coking coal concentrate, changed hands on July 19 for a total consideration of UAH5.5bn ($200mn). Dmytro Khoroshun at Kyiv-based brokerage Concorde Capital believes that if the $300mn that was paid for the 40.8% stake is real money (as opposed to just a leg of a complex payments scheme), that would mean that Metinvest’s effective stake in Pokrovske Coal, 14.3%, is worth $105mn. However, Metinvest might also be financing the entire 57.3% stake that ICH owns, which is worth $421mn. If Metinvest acquires and consolidates both the 57.3% and the 40.8% stakes in Pokrovske Coal at the valuation reported above for $721mn (assuming $1bn in debt and $100mn of Ebitda for the assets acquired), its Net Debt / Ebitda will grow to 1.7-fold from 1.0-fold at the end of the first quarter of 2018, the expert added in a note on August 13.
9.2.11 Other sector corporate news
Major Russian fertilizer producer EuroChem says it lost $25mn on the sale of its distribution assets in Ukraine on August 8. Russian industrial companies have mostly exited the country after relations fell to a post-Soviet low in the last few years. Kyiv has passed explicit laws forcing Russia’s state-owned banks to sell up but the majority of metal producers and other businesses have left of their own accord. Eurochem has got caught in the crossfire following an import ban on specific products at the beginning of the year in Ukraine that includes fertilisers, leading EuroChem to sell 100% of its distribution assets in the country (two Ukrainian companies) in May to an unrelated party for a reported $53mn in May, the company said. Ukraine imposed sanctions at the end of 2017 against a number of EuroChem Group companies, as well as other Russian fertilizer suppliers. The authorities said
65 UKRAINE Country Report September 2018 www.intellinews.com