Page 114 - RusRPTFeb19

the technological launch of the third train in November. Bankers welcomed the company’s ability to launch a project of such complexity ahead of schedule. However, during the 3Q18 conference call, the company guided for the third LNG line to be launched in December, one year ahead of the initial schedule. Were strong LNG prices in Asia of USD 11/mmbtu to continue, that would support Novatek’s LNG projects in the Arctic. According to Thomson Reuters, Asian prices currently stand at USD 8.8/mmbtu, down 20% from the summer highs and 5% below the five-year average, with European prices at USD 7.8/mmbtu (+7% since June). Overall, bankers see LNG prices in Asia stabilising from the summer highs, which would be neutral for the company.
France has decided to extend the state guarantees for Yamal LNG project
of Russia's LNG runner-up Novatek, Kommersant daily reported citing the French Minister of Economy and Finance Bruno Le Maire. Reportedly, this deal for Yamal LNG might reduce the credit burden for Novatek and accelerate the launch of Arctic LNG-2, the next LNG project of the company.
On November 22 Novatek announced the completion of the third line of its Yamal LNG project one year ahead of schedule and reaching the full capacity of 16.5mn tonnes annually. In January-September 2018 Yamal already produced 5mn tonnes of LNG on short- and long-term deals and 0.47mn tonnes of gas condensate.
With the help of French energy major Total and a consortium of other international energy majors Novatek launched its first major LNG project Yamal in 2017 despite Western sanctions against its shareholder stoligarch Gennady Timchenko. Total also said it will acquire a 10% stake in Arctic-2 and recently upped its stake in Novatek overall to 19.4%.
"As of 1H18, Yamal LNG had accumulated RUB1.6bn ($25.9bn) of long-term debt on its balance sheet," VTB Capital commented on December 18, reminding that in December 2016, the French export credit agency COFACE approved a guarantee of €350mn for Yamal LNG under the €750mn loan agreement with Intesa Sanpaolo.
"Given that the approved prolongation of the period for returning the loan relates to 3% of Yamal LNG’s total debt position, the effect on the project’s financials is likely to be rather limited," VTB believes, seeing the prolongation as more of a symbolic step and seeing the news as not market moving for Novatek.
• Other
Lukoil bought back $154mn worth of GDRs and local shares in December. This put its total purchases under the ongoing buyback program at $888mn, or 1.6% of the value of shares outstanding. The volume of purchases last week was in line with our expectations, and the total amount of repurchased shares is on track to reach our forecast of $1bn for this year. The current pace of purchases, at more than triple the three-month average, once again highlights the company's commitment to the program. If this pace persists, the $3bn program will be completed in 1H19, providing solid support for shares in the short term. The regulatory limit for share buybacks is 25% of the ADT over the 20 days preceding the buyback. The management recently indicated that the program would be accelerated and that it planned to complete it next year.
114 RUSSIA Country Report February 2019 www.intellinews.com