Page 101 - TURKRptMay19

9.2 Major corporate news 9.2.1 Oil & gas corporate news
● Tupras
Turkey attempting to persuade US to allow its largest refiner to buy Iranian oil sanctions free. Turkey is trying to persuade the US to allow refiner Tupras, its biggest refinery and oil importer, to continue buying crude oil from Iran with no threat of sanctions, Turkish Foreign Ministry spokesman Hami Aksoy said on April 26. Under its unprecedented sanctions regime imposed on Iran, Washington has demanded all buyers of Iranian oil stop their purchases by May 1. For the past six months, Turkey and seven other countries including China and India, have enjoyed temporary sanctions waivers on acquired shipments of Iranian oil but on April 22 the Trump administration said that the waivers would not be renewed. The decision was far tougher than anticipated. It caught some key importers off-guard. The US claims Saudi Arabia and United Arab Emirates are working to ensure that Iranian oil removed from the market is smoothly replaced with their oil, but Turkey says Saudi and UAE oil is more expensive and anyway disagrees with the US sanctions approach to its neighbour Iran. Another difficulty is the fraught relations between Ankara and Riyadh and Abu Dhabi.
Fitch confirms Tupras at BB+ with negative outlook. Fitch Ratings has confirmed the rating of Tupras, Turkey’s biggest refiner, at BB+ with a negative outlook. “The rating affirmation reflects Fitch's view that Tupras will maintain a sound credit profile as a result of the high complexity of its refining asset base, its advantageous geographic position, which allows access to cheaper, heavier and sour crudes, and the company's leadership in the Turkish market,” the rating agency said in a statement. According to Fitch, Tupras will generate positive free cash flow despite ongoing Turkish lira volatility in the short term and a generous dividend policy. Tupras's debt and costs are predominantly in US dollars, while 86% of its sales are denominated in Turkish lira. “The resulting FX risks are mitigated by the natural hedge presented by the group's US dollar-linked inventories for crude oil and oil products and by its hedging programme with several major domestic and international banks for its commodity prices and crack spreads.” Tupras's operations benefit from its leadership position in an undersupplied, growing Turkish refined product market, combined with the company's ability to access and process cheaper, heavier and sour crudes from a number of suppliers, the rating agency added. “These advantages translated into a 2018 reported net refining margin of $9.3/bbl, double the Mediterranean complex margin, despite sharply higher oil price and lira volatility. The company generated TRY5.6 billion of Fitch-adjusted funds from operations (FFO), up 7% y/y”. Fitch said any negative effects of Tupras's leverage ratios should be temporary and were most likely to occur if there was significant lira weakening around the year-end. The lira weakened substantially during April as concerns about the central bank’s reserves weighed on investors’ confidence. Fitch forecasts that the USD/TRY rate will be 5.9 in 2019, 6 in 2020 and 6.3 thereafter while its estimate for crude prices are $65/bbl in 2019, $62.5/bbl in 2020, $60/bbl in 2021 and $57.5/bbl thereafter.
Earlier in the month, Tupras announced that it had won a tender held by IGA, the operator of Istanbul’s newly launched mega airport, to sell 1.8mn tonnes of jet fuel each year at the airport. In a filing with the Borsa Istanbul, Tupras said that it is to sell 1.8mn tonnes of jet fuel each year at Istanbul Airport. Some fuel sales had already been processed, it added. The refiner did not provide financial details of the agreement, but the deal may prove a major and growing boon to its revenues, considering the fact that officials are intent on gradually making the airport the busiest in the world, with
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