Page 6 - FSUOGM Week 28 2019

FSUOGM PIPELINES & TRANSPORT FSUOGM
Gazprom lowers prices to keep European buyers
RUSSIA
The price cut follows a sharp decline in exports.
RUSSIAN gas giant Gazprom has increased sales through its Electronic Trading Platform (ETP), at which the gas trades on spot prices that are generally lower than the long-term contract prices, Vedomosti daily reported on July 11 cit- ing analysis from the Oxford Institute for Energy Studies.
Reportedly, Gazprom’s daily ETP sales reached 0.4bn cubic metres (bcm) at the begin- ning of July, totalling 1.69bcm in the rst eight trading days of July. is accounted for 30% of all ETP sales this year.
“More sales via ETP reflects an attempt to maintain sales volumes as customers gradually shift to the spot market,” BCS Global Markets commented on July 12. The prices on ETP are
20-25% below the current contract price, so aver- age prices will decline further in 3Q19, the analysts warned, seeing the news as negative for Gazprom.
Sales were mainly targeted at Northern Europe, where the share of spot-linked contract pricing is traditionally high, Vedomosti said. In the meantime, in a separate report the Central Bank of Russia (CBR) reported gas exports from Russia fell 38% quarter-on-quarter to $11bn in 2Q19.
Despite declining exports, this month capi- talisation of Gazprom on the Moscow Exchange topped RUB6 trillion ($95bn) on July 4, reaching its highest since August 2008 and extending its lead as Russia’s most valuable company over rival state-owned Sberbank. ™
INVESTMENT
Naftogaz launches $1bn bond issue
UKRAINE
Market conditions are more favourable now than they were last year.
UKRAINE’S Naftogaz has placed more than $1bn of Eurobonds, raising funds to pay for gas storage this coming winter.
The national gas producer announced on July 12 that it had successfully completed two bond placements worth €600mn ($677mn) and $355mn respectively. The euro-denominated bonds have a ve-year duration and provide a yield to maturity (YTM) of 7.125%, while the US dollar-based bonds will mature in three years and o er a 7.375% yield.
Naftogaz had planned a Eurobonds issue in November last year, but cancelled the o er- ing a er investors demanded too high a return on the notes. Market conditions have since improved, with Ukraine launching a success- ful sovereign issue of seven-year bonds in June, raising €1bn ($1.1bn) at a yield of 6.75%. is was followed by a $500mn placement on July 2 by Ukrzaliznytsia, Ukraine’s national railway operator, which had an 8.25% yield.
According to Na ogaz, the two placements were made without state guarantees. However, they were still oversubscribed by 2.5 times, with more than 120 investors from the UK, other EU countries, Asia and South America purchasing the bonds, the company said.
“ e level of interest generated by the issue shows investor con dence in Ukraine and is a recognition of our e orts to make Na ogaz a transparent and reliable company,” Naftogaz CEO Andrei Kobolev said.
Na ogaz noted that the raised funds, which it expects to receive on July 19, have put it in a better position to store up gas in underground gas storage (UGS) facilities ahead of the coming winter. Ukraine relies on this reserve to cover spikes in demand and safeguard against supply outages during the colder months of the year. Naftogaz’s gas infrastructure arm, Ukrtrans- gaz, recently announced plans to have 20bcm of gas in storage by the start of the heating sea- son, which typically starts in either October or November, up from just above 14bcm at present.
Citibank and Deutsche Bank served as lead managers for the issues, while Fresh elds Bruck- haus Deringer, AEQUO, White & Case, Avel- lum, Linklaters and Cli ord Chance provided legal advice. In a research note, Kyiv-based Con- corde Capital said Na ogaz’s decision to place bonds in two currencies was likely aimed at diversifying risks.™
P6
w w w . N E W S B A S E . c o m
Week 28 17•July•2019