Page 93 - bne IntelliNews Russia Country report May 2017

financial institutions accounting for about $500mn of Essar’s debt reportedly blocking the deal that Rosneft had initially hoped to close by the end of 2016. “Tensions between Rosneft and Essar are high,” a source close to the deal told the news agency in May. The institutions include IDBI Bank, Punjab National Bank, Syndicate Bank, Indian Overseas Bank, insurer Life Insurance Corp of India, and non-banking credit organisation IFCI. Rosneft was reportedly warning that it will revise the price of the asset downwards, should negotiations over Essar debt delay the deal. “We are hoping to close the deal in a matter of weeks,” Essar representative told Reuters without elaborating. Essar Oil owns about $5.5bn to 30 Indian creditors and most of those have approved the change of ownership, including the country’s largest bank, the State Bank of India.
Lukoil reported a strong set of results in May, with revenues up 10% Q/q
to $24.3bn in 1Q17. EBITDA and net income grew 21% Q/q and 43% Q/q to $3.5bn and $1.1bn, respectively. The stock also outperformed peers by some 3%. Revenues came 0.6% higher than forecasts, with the major reason being that Lukoil purchased and resold some 1mmt more oil products in 1Q17 than anticipated. However, low realised sales prices for oil products (on average 4-6% lower than we expected in 1Q17) and low gas and power business revenues partially offset the strong operating dynamics. As a result, revenues came only $150mn higher than our forecast. On the costs side, we note the quite low opex in the power and gas business in 1Q17 (likely caused by low reported revenues in those segments) and quite low SGA costs, which Lukoil was able to decrease 23% Q/q.
Gazprom Neft is to receive OMV’s assets in Norway from Gazprom,
Vedomosti reports. Gazprom Neft did not specify under which conditions, and which assets exactly it will receive. Gazprom Neft did not disclose the conditions of the deal with Gazprom, but bankers note that a transfer would be in line with Gazprom’s long-term policy, approved back in 2009, which envisages the gradual transfer of crude oil field licences to Gazprom Neft. In April, Gazprom Neft received licences to develop the Severo-Samburgrksoye and Tazovskoye oil fields. These Norwegian assets are located offshore, where production is more complicated and expensive. Given the relatively low oil prices at the moment, bankers do not think that Gazprom Neft would allocate any sizable investments into developing those assets in the near future.
Russia's state pipeline operator Transneft increased its IFRS net profit by 5% year-on-year to RUB79.5bn (€1.25bn) in the first quarter of 2017, the company said on June 2. Notably, the company's board recommended paying RUB30.6bn in dividends for 2016, much below the RUB60bn (€0.94bn) that Energy Minister Alexander Novak on May 22 said the company would pay . Transneft's IFRS net profit was RUB233bn in 2016, making the RUB30.6bn only a 13% payout, well below the 50% required by the finance ministry. The previous month was negative for the state-controlled company's stock on news of the reduction of the weight of its preferred shares in the MSCI Russia Index. In another possible negative development, Transneft is one of the Russian oil majors reportedly requesting limitations on information legally available for minority shareholders.
9.2.2 Automotive corporate news
Avtovaz plans to deliver several hundred cars to China in 2017, the company’s CEO Nicolas Maure says. According to him, Avtovaz is currently negotiating with Chinese suppliers, but negotiations are also being conducted
93 RUSSIA Country Report May 2017 www.intellinews.com