Page 9 - RusRPTJul19

Despite the record payments, the RTS payout ratio declined to 37%, mostly on technical factors, breaking the upward trend seen since 2011. However, the dividend payout ratio for FY19 is to recover to 42%, says BCS.
The recent rerating of the Bloomberg consensus on the MSCI Russia DY catapulted the Russia yield to a fresh record high, at 7.9%. In the EM space, Russia has the one of the highest DYs, with the fresh record high spread of 460bp to the MSCI EM DY. Meantime, the 10Y OFZ YTM dove below 8.0%, resulting in a never before seen positive spread vs. the Russia DY. The Russia DY spread to the dollar sovereign Eurobond (4.15%) printed fresh record high, at 370bp.
Top 10 yields. Double-digit next twelve month DYs are offered by Surgutneftegas, prefs (19%), Globaltrans (17%), HMS (14%), Severstal (13%), VEONX (13%), Evraz (12%), Nornickel (12%) Enel Russia (12%), Tatneft, prefs (12%) and MMK (11%).
Gazprom delivers the key dividend increase. The overall payments of Russian companies increased RUB 514bn to RUB 2.88tn. The biggest share of the increase came from Gazprom, which surprised the market with FY18 dividends at RUB 382bn (up RUB 197bn). Sberbank is the second placed payer this year, with payments of RUB 361bn (up RUB 90bn). Rosneft (BBG cons) closes out the top-payers podium, with a RUB 320bn (RUB 35bn) payment that is RUB 95bn higher.
The seven-year streak of dividend payouts rising in the Russian market ended last year. Surgutneftegas and Lukoil meaningfully decreased their payouts from last year’s earnings. Gazprom also negatively affected the benchmark payout, although this was due to the technical issue with the change of weighting and number of shares in the index. For 2019, we see a recovery of index payouts, with Surgutneftegas and Sberbank as drivers.
2.4 Russia’s Gazprom has denied Ukraine’s claims that there will be a shortage of gas in Europe this winter
Russia’s Gazprom has denied Ukraine’s claims that there will be a shortage of gas in Europe this winter if the Russian gas giant decides to stop using Ukraine to transit gas to its western customers.
In an exclusive interview with bne IntelliNews “GAS WARS: Ukraine faces a bleak winter as Russia prepares to cut it off” Ukraine’s national gas company general director Yuriy Vitrenko said that the company’s base case scenario is all deliveries of Russian gas, including the transit gas to Russia’s European customers via Ukraine, will cease on January 1, 2020.
He went on to say that even if Gazprom build up its reserves in European storage tanks, which it has been doing in recent months, there will still be a deficit of some 5-6bn cubic meters (bcm) of gas in the European market.
Gazprom supplied 200bcm of gas to Europe last year and this year is forecasting deliveries to fall by 5% to 191bcm, or almost 37% of Europe’s gas.
Both companies are anticipating a clash and both companies are now actively storing as much gas as they can during the summer ahead of the start of the heating season.
Gazprom expects two pipelines that bypass Ukraine — Nord Stream 2 under the Baltic Sea and Turkish Stream across the Black Sea — to start on schedule by the end of the year. Doubts over whether Nord Stream 2 will be
9 RUSSIA Country Report July 2019 www.intellinews.com