Page 8 - FSUOGM Week 45 2021

FSUOGM COMMENTARY FSUOGM

eurobond placement towards refinancing its proceeds.
current indebtedness, while the remainder is to The pricing of the debut UNG eurobonds,
be used for general corporate purposes (includ- according to VTB, is likely to go through the
ing capex financing). prism of yield levels currently formed by Uzbek-
In late 2020, the Uzbek government istan’s sovereign curve, which appear to be the
included UNG in its privatisation programme, most suitable benchmark, and additionally,
meaning that the company’s IPO could be on the so far sole outstanding corporate bond out
the table during the next few years. The state is of Uzbekistan: UZAMTS 26 (YTM 5.2%) of
considering selling up to 25% of UNG. VTB UzAuto Motors (another of the country’s qua-
said that it was not considering a partial pri- si-sovereign borrowers, rated a notch lower than
vatisation (with the state retaining control) as UNG).
a negative credit development for UNG. The “With the current yield curve positioning of
potentially lower government support for the Uzbekistan and the country’s QSissues, we see
company post-IPO could weaken the issuer’s UNG’s 5Y tenor bond pricing within the range
credit profile and, to a certain extent, threaten of 3.9 – 4.4% (mid swaps + ~275 – 325bp), which
its credit ratings. suggests a ~50-100bp yield premium relative to
UNG’s debut eurobonds are to be issued Uzbekistan’s sovereign curve. That is mostly in
under English Law in the RegS and 144A for- line with the spread levels to sovereign at which
mats, and rank as a senior unsecured obligation other CIS O&G majors are currently trading,”
of the company. Based on the preliminary deal the investment bank concluded.
terms, there is the possibility of a double-tranche For UNG’s 10Y tranche bond, the estimate is
transaction (five and 10 years), while the total 4.7-5.2% (mid swaps +~320-370bp).
size of the offering is likely to exceed $0.6bn According to a resolution of the government,
(VTB estimates it at up to $1bn), considering the the eurobond listing is set to take place by the
company’s declared refinancing plans for raised end of this month. ™

PIPELINES & TRANSPORT

Gazprom starts filling European

gas storage sites

EUROPE NATURAL gas prices fell on November 9 after significantly as a result of storage injections
Russia’s Gazprom announced it had begun fill- starting. The company has avoided booking
Gazprom's priority so ing up its gas storage facilities in Europe, which additional transit capacity via Ukraine for much
far has been injecting should help ease the continent’s supply crunch. of this year, and westbound gas deliveries via the
enough gas into its “Gazprom approved and began implemen- Yamal-Europe pipeline have become increas-
domestic facilities. tation of the plan for pumping gas into five ingly intermittent. The pipeline has instead
European underground storage facilities in flowed in reverse, eastbound, for a number of
November,” the company reported via its social days in the last two weeks.
media channels. "We still believe that the drop in pumping
Gazprom has four storage sites in Germany, through the Yamal-Europe pipeline might be
along with another one in Austria, one in Serbia explained by the actual gas requests of European
and one in the Czech Republic. But their utilisa- gas consumers, which could be partially driven
tion is currently unusually low, with as little as by the slightly warmer weather during the last
190,000 cubic metres stored as of October 27, two weeks and elevated gas prices," VTBC said.
according to Gazprom. Analysts at BCS Global Markets (BCS GM)
Gazprom’s priority so far has been injecting added that Gazprom’s injection rates were not
enough gas into its domestic storage facilities impressive, and predicted that gas prices would
ahead of winter – something it is required to do remain elevated until the end of winter.
under Russian law. It previously said it would While Gazprom has faced accusations of
begin supplies to European storage facilities after withholding gas supply from the European mar-
November 8, after stockpiling some 72.6bn cubic ket in order to drive up prices and put pressure
metres (bcm) of gas domestically. on the EU to allow Nord Stream 2’s launch. But it
The December gas delivery contract at the is unclear how much spare production capacity
Dutch TTF hub was down 2.9% at €76.9 ($89)/ the company has. In any case, Gazprom contin-
MWh by around 13:00 GMT on November 9, as ues to meet its contractual supply obligations,
fears of supply shortages this winter eased. while refraining from spot sales. Its export arm
However, analysts at VTB Capital (VTBC) reported on November 8 that it had not sched-
estimated in a research note that Gazprom’s uled any auction at its electronic sales platform
overall gas supplies to Europe have not grown this week. ™

P8 www. NEWSBASE .com Week 45 10•November•2021