Page 12 - FSUOGM Week 18

FSUOGM INVESTMENT FSUOGM
Lukoil places $1.5bn worth of eurobond
RUSSIA
Lukoil has the strongest credit metrics in Russia, according to BCS Global Markets.
PRIVATE Russian oil major Lukoil on April 28 placed $1.5bn worth of 10-year eurobonds at 3.875% annual yield. Despite the ongoing coronavirus (COVID-19) and oil market cri- sis, the demand for Lukoil’s bonds was high at $2.7bn, which allowed the company to lower the initial yield guidance of 4.25%.
BCS Global Markets ahead of the issue reminded that Lukoil has the strongest credit metrics and highest ratings in Russia, with free cash ow in 2019 showing record-high numbers despite weak oil prices, while maintaining net leverage close to zero.
is made the re nancing risks immaterial for the new issue, given substantial cash reserves, while a signi cant worsening of credit pro le in 2020 turmoil is unlikely with that margin of safety. e $1.5bn placement is seen improving the debt maturity profile of Lukoil, BCS GM argues.
However, the yield for the newly issued bonds was still higher than the 3.60-3.65% BCS GM predicted, but the analysts believe “LUKOIL 30 bonds still have room for a fur- ther decline in yield, as the fair discount to Gazprom’s GAZPRU 30 (YTM 3.89%) is 15-20bp.”
Promsvyazbank estimated the yield for the new issue at 3.8% and agrees that 10-year placement improves the eurobond pro le of the company that had 6-year bonds as the longest outstanding maturity. Lukoil could issue more bonds in 2H20 to re nance its $1bn LUKOIL 20 issue due for repayment.
As reported by bne IntelliNews, the invest- ment case of one of the most valuable Russian oil and gas blue chips in 2019 was reinforced by the launch of the second $3bn buyback programme and the pledge to pay at least 100% of cash ow in dividends. ™
POLICY
Gazprom complies with ruling on Polish gas prices
POLAND
Gazprom has said it will correct previous invoices.
RUSSIA’S Gazprom has cut the price of gas sup- plies to Poland’s PGNiG, as required under a recent arbitration ruling.
The arbitration institute of the Stockholm Chamber of Commerce ruled in late March that Gazprom was overcharging PGNiG, and ordered the Russian supplier to adjust its pric- ing formula to take into account market rates in Europe and pay $1.5bn in compensation.
Gazprom initially did not comply with the award but continued to invoice PGNiG accord- ing to the old formula. Warsaw later suggested it might seek the freezing of Gazprom’s assets in Europe.
In a statement on April 29, PGNiG said Gaz- prom had issued a declaration stating it would adopt the new pricing system, and would cor- rect invoices previously sent for supplies in March and April. It did not refer to the $1.5bn in past overpayments, but said Gazprom’s dec- laration met its “expectations as to the full and
immediate implementation of the arbitration tribunal’s ruling.”
PGNiG, which accounts for almost all Poland’s gas imports, took 9.73bn cubic metres in Russian supplies last year, down from 9.86 bcm in 2018. is represents just under two- thirds of total Polish gas consumption. Poland has been increasing purchases from LNG sup- pliers over recent years, and plans to take piped Norwegian gas via a new pipeline in 2022. Its long-term contract with Gazprom is due to expire at the end of that year.
PGNiG reported on April 28 that it had received another batch of US LNG from Texan exporter Cheniere Energy. The shipment, received at Poland’s sole LNG import terminal, is equal to 95mn cubic metres of regasi ed gas. PGNiG began taking spot cargoes of US LNG and initiated contractual supplies last year. Deliveries are expected to reach 1.95 bcm in 2023. ™
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w w w . N E W S B A S E . c o m Week 18 06•May•2020