Page 9 - FSUOGM Week 23

FSUOGM INVESTMENT FSUOGM
Gazprom could raise borrowing by US$1.5bn
RUSSIA
RUSSIA’S natural gas giant Gazprom could increase its borrowing programme by 100 bil- lion rubles (US$1.55 billion) in 2019, Interfax reported on June 10 citing unnamed sources in the company.
Reportedly, Gazprom could tap the Eurobond market in October-November, possibly with euro-denominated placement. Currently the company’s foreign borrowing programme for 2019 is set at 297.7 billion rubles.
Gazprom’s Eurobonds issues are o en timed and benchmarked by Russian sovereign place- ments. e head of the Finance Ministry’s debt department Konstantin Vyshkovsky said in an interview to Bloomberg on May 28 that Russia could sell another Eurobond this year denom- inated in euros or US dollars, a er successfully testing the investor sentiment amid sanction risks and swi ly placing US$3 billion and 0.75 billion euros worth of Eurobonds in March.
Gazprom has over US$40 billion bonds in circulation under the Euro Medium Term Note
(EMTN) programme alone, with the latest issues placed in November 2018 (1 billion euros) and the next one planned for October 2019 (US$1.25 billion). In April Gazprom redeemed a US$2.25 billion Eurobond issue placed in 2009, the issue being the biggest Eurobond placement in Gaz- prom’s history.
A sovereign placement or a placement of top borrower such as Gazprom could pave way for more Russian corporate Eurobonds this year. Favourable market conditions are leading up to 10 Russian companies to consider issuing Eurobonds by the end of this year, VTB Capi- tal investment bank’s head of debt capital mar- kets Andrey Solovyov told Reuters in a separate report.
“ e market is really good now ... ere was a rally in sovereign and corporate Eurobonds. e sanctions theme is losing strength, investors expect good yields. And Russia is the country that keeps on o ering good yields,” Solovyov argues.™
Transneft could pay 50% dividends for 2018
RUSSIA
THE management of Russia’s state oil pipeline monopoly Transne expects to pay 50% of IFRS net pro t in dividends for 2018, Interfax said on June 7 citing the CEO of the company Nikolay Tokarev.
As reported by bne IntelliNews, sharp post-sanction deleveraging of Russian blue chips released cash ows that were converted into some of the best-paying dividend stocks in the world.
is trend is now being reinforced by coun- try’s largest State Owned Enterprises (SOEs) paying up and complying with the Finance Ministry’s demand to pay 50% of IFRS net pro t, possibly marking a new contract between Krem- lin and state behemoths.
After Rosneft oil major, Gazprom natural gas giant, and VTB Bank promised to adopt the 50% payout rule, Transne remains the next big SEO to con rm its dividends, but its dividend outlook, however, is endangered by the ongoing risks surrounding the Druzhba pipeline crisis.
e Deputy Prime Minister Dmitry Kozak has said that the government, when considering dividends moving forward, would not consider the costs of Dzuzhba compensations for 2018 dividends, but could take those into account moving forward.
e Economics Minister Maxim Oreshkin, on the other hand, previously said that a reduc- tion in the dividend payout was not the only way to make up for the costs, while the Finance Min- ister Anton Siluanov openly opposed helping
Transne to deal with the Druzhba fallout on the expense of the state budget.
Commenting on the 2018 dividend payment announcement, Sberbank CIB said on June 10 that “the announcement will be taken positively by the market. A 50% payout would imply a 2018 DPS [dividend per share] of 15,746 rubles, for a 10% yield.”
“ is is the rst time the company has given clear guidance of a 50% payout; previously, the management had guided a range of 25-40%, while the company’s dividend policy stipulates a 25% payout,” Sberbank notes.
BCS Global Markets, however, estimated the DPS for 2018 at 11,294 rubles given the 50% pay- out, which would imply a dividend yield of 7%. BCS analysts see this as already priced-in by the market.
In any case, “for a 50% payout to be sustaina- ble, the company would need to reach an agree- ment with the government to raise tari s, in our view,” Sberbank warns.
Previously, Transne was looking for a way to both abide by its infrastructure obligations and improve investment attractiveness, and sug- gested including its dividends in the calculation of transportation tari charged to oil companies using its pipeline system.
“We continue to believe that any proposal by the company to include its dividend in the trans- port tari calculation will face substantial resist- ance from the oil companies,” Sberbank CIB previously commented on the issue on April 8.™
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