Page 48 - bne IntelliNews Ukraine Country Report May 2017

Ukraine's leading poultry producer MHP received offers of $245.2mn during the initial stage of accepting applications for the buyback of its Eurobonds worth $750mn with maturity in 2020, the company said on April 27. On April 18, the company initiated a tender offer to purchase about $350mn in its 2020 notes of a total of $750mn outstanding. Six days later, the company announced that it will increase its early tender offer price for the Eurobond to 103.75% of par (from 102.75%). The initial stage of accepting applications for the redemption of Eurobonds ended on 3.00 am New York time on April 27.
9.0 Industry & Sectors 9.1 Sector news
9.1.1 Oil & gas sector news
Russia’s natural gas pipeline exports monopolist Gazprom will cut the transit of gas through Ukraine almost six-fold after the second strand of the Nord Stream pipeline is completed, Gazprom CEO Alexei Miller told Reuters on April 25. The remarks came as Gazprom announced a major boost to the North Stream-2 project through securing 50% of its estimated cost from five European energy utility majors. Nord Stream 2, along with the extended Turkish Stream pipeline, aims to deliver Russian gas to Europe bypassing Ukraine. The gas transit system of Ukraine has the capacity of 120bcm annually, but the transit of Russian gas was cut significantly to 50-80bcm since 2014 as relations between the countries plummeted, yielding about $2bn revenues for Ukrainian economy. With the commissioning of Nord Stream 2 and the expiration of current transit agreements in 2019, the transit could be cut even further, Miller said.
Russian oil companies might bear the burden of Belarus subsidy from a deal cut between president Vladimir Putin and his counterpart Alexander Lukashenko of Belarus at the start of April that analysts think is worth $1.6-2.0bn in 2017-19F or 1.0-1.2% of sector’s total estimated EBITDA for the period. Apart from the gas discount, which has not been disclosed, Belarus will be allowed to keep the crude oil export duty on 6mmt, which the country estimates at $2bn, and which is considered as a sort of subsidy provided by Russia to Belarus, according to Kommersant. The paper also states that this subsidy is to be provided at the expense of Russian oil companies, rather than the budget. Under VTBC crude oil price forecast, with an average $48/bbl for the period (based on the futures curve) Belarus could potentially benefit to the tune of $1.6bn, or 1% of the oil companies’ combined EBITDA for 2017-19F. Although the number itself is not that substantial, analysts say this development is generally not supportive for the sector. To recap, Russian oil companies currently deliver some 20mmt of crude to Belarus without paying export duty.
9.1.2 Transport sector news
Azerbaijan, Georgia, Kazakhstan and Ukraine have discussed introducing a single-window system for processing cargoes traveling along the Trans-Caspian International Transport Route (TITR), AzerNews
48 RUSSIA Country Report April 2017 www.intellinews.com