Page 102 - RUSRptSept18

able to raise funds domestically with RUB40bn ruble bonds planed ($0.63bn). Reportedly the company planned to borrow RUB417bn ($657bn) externally, but now will have to tap into its cash cushion, which is seen as sufficient, yet more expensive than foreign borrowings. Prior to June Gazprom was able to raise CHF750mn 5-year Eurobond in, which UBS was the only Western bank to participate, with another €750mn in 8-year Eurobond arranged by Deutsche Bank, JPMorgan, and along with three Russian banks.
Russia's largest gas producer and pipeline exports monopolist Gazprom has opened an e-platform for direct sales of gas to European clients , Vedomosti d aily said on August 19 citing the announcement of Gazprom Eksport subsidiary. The additional sales platform would incentivise Gazprom to keep the Ukraine transit channels in order to increase on-demand supplies to Europe even given the construction of Nord Stream 2 pipeline . This would make a compromise under the trilateral talks on maintaining Ukraine's gas transit role possible. "This instrument [e-platform] would allow to optimise operations with our buyers in Europe and make the mechanisms of gas sales more efficient," the head of the Gazprom Eksport Elena Burmistrova is quoted as saying. Reportedly the platform is now ready to register the participants, while the launch timeline for new operations is unclear. Vedomosti s uggests that the new sales mechanism could become operational in September and would function on a "blind auction" bidding basis for volumes of gas proposed by Gazprom. The price guidance was not disclosed by Gazprom, but the price 5-10% lower than existing spot prices could be interesting for potential buyers, Dmitry Marichenko of Fitch Ratings told the daily. He estimated that possible additional supply capacity for the platform could amount to 10bn-15bn cubic meters of gas (bcm). Reportedly Gazprom expects European demand for gas to increase from 312bcm in 2017 by 19% or 60bcm by 2025, and 25% or 78bcn by 2030, according to Vedomosti c iting internal company's documents. Gazprom has been keeping its exports to Europe at record-high , with 37% of the company's revenues generated on this market.
Russia's largest oil company Rosneft reported record second-quarter revenues of RUB2.1 trillion , supported by 21% quarter-on-quarter Urals oil price growth in ruble terms and higher output that was under the Opec+ deal. The revenues beat the consensus by 1%. Rosneft's Ebitda for the quarter was RUB565bn, beating the expectations by 8%, both due to higher revenues and lower costs and taxes. "Net income brought the biggest positive surprise, surging to RUB228bn (+31% vs our forecast. +15% to consensus)," Aton Equity commented on August 7, noting that the quarterly bottom line approximated RUB222bn that the company reported for the entire 2017. "The numbers are very strong, beating our and consensus estimates," Aton writes, reminding that Rosneft pays dividends from its IFRS net income with no adjustments for one-offs, therefore having the results point to healthy dividends on 2018 earnings. The analysts believe that Rosneft could be now comparable with key dividend payers in Russian oil and gas universe (Lukoil, Tatneft) Previously in the first quarter Rosneft already reported strong earnings and started to deliver on its recent pledge to investors to cut massive capex programme and reduce debt , seeking to support capitalisation seen as undervalued by Rosneft's management. In the second quarter the course for deleveraging continued, with net debt cut by RUB101bn to RUB3.29 trillion or 1.8x net debt /Ebitda, although the calculations omit prepayments for crude oil supplies which some analysts regard as debt. Rosneft also said it reduced its short-term financial debt by a notable 20% q/q. The increase in capital expenditure was modest in the second quarter, adding 3% q/q to RUB229bn, due to which Free Cash Flow posted RUB221bn (up by 56% q/q). The "extremely strong" cash flow along with recently confirmed $2bn share buy back plans will support Rosneft shares, Aton believes, seeing the results as positive overall and reiterating a Buy call on the name. VTB Capital on August 7 estimated that Rosneft might be capable of generating enough cash in 2018 to cover both the $2bn buyback, cut the capex by 20% to RUB800bn, repay some RUB500bn ($7.9bn) of prepayments and pay at least 50% of net profit
102 RUSSIA Country Report September 2018 www.intellinews.com