Page 9 - FSUOGM Week 24 2021

FSUOGM INVESTMENT FSUOGM

Tatnef to buy major PET

plant in Kaliningrad

RUSSIA TATARSTAN-BASED oil firm Tatneft has said downstream activities is becoming increasingly
it will acquire 100% of the Ekopet PET plant popular among Russia’s oil producers, given the
Ekopet is the in Kaliningrad region from the "bad assets" of constraints in upstream investment presented by
largest polyethylene Trust Bank for RUB6.45bn. The oil company got the OPEC+ output restrictions and tax increases
terephthalate plant in the asset in an auction with a starting price of on heavy oil implemented from January".
Russia and Europe. RUB3.75bn. The analysts at BCS GM expect that Tatneft
As reported by bne IntelliNews, in Septem- will likely earn at least its cost of capital on "the
ber 2018 the company approved a 2030 strategy, relatively modest investment".
which targeted more refining and downstream However, BCS GM's Ronald Smith argues
segment exposure, including the construction that the deal does not justify the dividend under-
of a RUB70.6bn ($1bn) gas chemical complex pay on 2020. For 2020, Tatneft paid 70% of net
by 2024. income versus the 100% of FCF the company
Ekopet is the largest polyethylene terephtha- should have paid by the dividend policy, which
late (PET) plant in Russia and Europe, with a makes an estimated RUB20bn difference.
capacity of 0.22mn tonnes per year (tpy). "Therefore, the question of Tatneft’s actual
Tatneft commented in a press release that the dividend policy remains outstanding," Smith
acquisition of Ekopet would help the company wrote.
realise the development of its petrochemical To remind, Tatneft's results in 1Q21 beat con-
business and help to lower its GHG emissions sensus expectations on revenues, but underper-
along its value chain. formed on EBITDA and net income.
Sova Capital analysts view the acquisition Tatneft posted 17% year-on-year growth
as neutral, as the purchase price of RUB6.45bn in revenues under IFRS to $3.5bn, adjusted
is just 2.5% of the estimated 2021 EBITDA of EBITDA growth of 32% y/y, and net income
Tatneft. In 1Q21, the company reported free growth of $0.6bn, up by 49% y/y.
cash flow (FCF) of RUB32bn and net cash of The company's FCF in the reporting quar-
RUB26.6bn. Sova reiterated a Buy call on Tat- ter stood at $0.4bn, slightly below an average of
neft's ordinary and preferred shares. $0.45bn per quarter the previous six periods, but
BCS Global Markets are neutral on the in line with the 4Q20, BCS Global Markets com-
acquisition itself, noting that "investing in mented on June 4. ™

Week 24 16•June•2021 www. NEWSBASE .com P9