Books on Russia
Update No: 304- (28/04/06)
Massive renovation of infrastructure and the environment
President Putin has said that his priority over the last two years of his
presidency is to use some of the Government's billions of petro-dollars to
rebuild roads, ports, the energy system and other infrastructure.
Much of the existing infrastructure is near collapse after decades of
under-investment during the Soviet Union. The Government wants to use Public
Private Partnership (PPP) to do this. It passed a special PPP law last year, and
Alexander Misharin, Deputy Minister of Transport, said: "One of our main
objectives is to promote PPP."
With only a short time left as Russian President, Vladimir Putin wants a legacy
to be remembered by, just like any other re-elected leader, such as Bush and
Blair, also soon to depart the scene. Putin wants his monument to be rebuilding
Russia's infrastructure on the back of its newly inflated oil and gas income. He
knows that only private companies taking responsibility for Public Private
Partnerships can hope to succeed in this in the time that Russia and his own
Fulfilling this dream could potentially provide a bonanza for foreign, and
especially British, project management groups, which have more experience than
anyone in this type of contract. Unfortunately, Mr Putin has already left a
legacy that will colour Russia's economy for years to come: the Yukos affair.
There is a real risk that the rise and fall of the oligarchs, who played a
comparable role in Boris Yeltsin's reforms, will be repeated in the rise and
fall of private partners. In short, financial exposure from the international
market place will be heavily influenced by estimates of the progress of the rule
of hand in Russia.
Anyone taking on a project in which the Russian Government and its agencies are
customer, partner and regulator will wonder what might happen if it upset or
fell out of favour with its partner. Yukos bosses are not the only ones to have
faced arbitrary "tax" demands, physical harassment, seizure of assets
or being charged with new crimes. The role of corruption is also a big
imponderable in acquiring contracts.
"The smart way to answer Russia's need," says Robert Cole of The
Times, "is to go for the up-front consultancy, project management and
financial structuring work, but to avoid putting up capital for long-term
investment. Bonds to finance the UK Ministry of Defence's new PPP at Aldershot
are being marketed with an AAA rating. Bonds to fund a Russian PPP would be
The British angle
The UK is a key player here. It has been attracting a lot of Russian money,
notably into the London and South England property markets. Well-heeled Russians
now speak English the way that their aristocratic forbears used to speak French.
They like to educate their children at British public schools, which are of
course in fact very private and exclusive.
British banks, financial advisers and construction companies are now set to make
hundreds of millions of pounds from the multi-billion pound PPP programme to
rebuild Russia's dilapidated infrastructure. Balfour Beatty and Jarvis, the
building groups, have already been approached by the Kremlin over whether they
would be prepared to lodge bids with Ernst & Young, the accountancy giant
chosen to run the first PPP auction, for an £8 billion contract to build a new
high-speed motorway between Moscow and St Petersburg.
As many as 20 similar deals are being considered for this year alone, with a
possible total contract value of more than £50 billion - the biggest PPP
programme in the world. British companies are favourite to win many of the
contracts, as they have the most experience of PPP, first developed by John
Major's government in the early 1990s. Evgeni Sidorenko, a partner at Ernst
& Young, said: "It's the biggest deal of its kind in the world."
Other transport projects for the next year include a ring road around Moscow;
port terminals at St Petersburg, Novorossiysk and Murmansk; and a toll road
outside St Petersburg. The Transport Ministry has 12 projects outlined for the
next year, and wants to hold tenders for all of them in the next three months.
The Government also wants to use PPP to expand its oil and gas export network,
which is at full capacity now. The new Novorossiysk and Murmansk terminals will
help to improve oil exports, as will a project to upgrade the country's rolling
stock. The Government also plans to use PPP to help to finance a £4 billion oil
pipeline from Siberia to the Pacific coast, and to build a hydro-electric dam in
Siberia. There is now of course a wealth of international experience in this
kind of financial proposition.
At a recent conference in Moscow, foreign investors expressed cautious support
for the ambitious programme, but warned against being too hasty or optimistic.
Alexander Yerofeyev, senior manager at KPMG, said: "PPP deals can fail
spectacularly, even in developed and transparent markets like the UK. The
Government needs to be careful to get it right if it doesn't want several
situations like the Channel Tunnel or Wembley Stadium."
UK bids to rebuild Russia's infrastructure
Russia's Private Public Partnership deals due in the next 12 months
· New ten-lane high-speed motorway between Moscow and St Petersburg. Ministry
of transport holding tender. Value US$15bn
· Moscow ring-road. Ministry of transport holding tender. Value US$2bn
· New terminal at St Petersburg port. Ministry of transport holding tender.
· Motorway link to St Petersburg port. Ministry of transport holding tender.
· New Terminal at Novorosslysk port. Ministry of transport holding tender.
· New terminal at Murmansk port. Ministry of transport holding tender. Value
· New oil pipeline to Pacific coast. Ministry of Industry and energy holding
tender. Value US$6bn
· Hydroelectric plant in Krasnoyarsk. Ministry of culture considering tender.
Russia's creaky infrastructure signals more deals to come
· Russia's energy system is overloaded, leading to city-wide blackouts. UES,
the state energy company, wants to attract £20bn in private investment over the
next few years.
· Electrical wiring throughout Russia is old and some believe dangerous. One of
the most spectacular wiring-related fires was at the 540-metre-high Ostankino TV
tower in 2000.
· Hot water is switched off for two weeks in every home each summer to prevent
heating systems breaking down.
· Russia's far east also hit by water shortage, and eastern port of Vladivostok
has frequently without tap water last year.
· Much of Russia's military and navy technology needs overhaul. Recent
disasters include the 2000 sinking of the Kursk submarine and the sinking of
another submarine last year.
· Many Russian planes are in need of servicing, particularly regional airlines,
and emergency landings are not uncommon.
UK mulls halting foreign takeover of gas
Russian gas giant Gazprom was believed to be considering a takeover of
Centrica in February, the newspaper said. Britain is reportedly closely watching
Gazprom, which aims to supply 20 per cent of British gas by 2015.
The nervousness over supplies may, in part, be a reaction to Gazprom cutting off
- temporarily - gas supplies to Ukraine earlier this year because of a pricing
However, the Government's free market policy - that already has seen most of
Britain's utilities sold to overseas buyers - cannot easily be reversed.
Shareholders, who have seen Centrica's share price rise gently on the back of
persistent takeover speculation, should be heartened by this.
A more pressing question, however, is how the shares will fare if the takeover
speculation evaporates entirely. Since February's results, Centrica's shares
have fallen back as the market has digested the nature of the group's problems.
While wholesale gas and electricity prices have been high, Centrica has suffered
because its downstream margins have been squeezed - British Gas's residential
supply business actually lost money in the second half of last year.
The energy group has also lost more than a million customers and has been unable
to make the upstream acquisitions on which its strategy depends because of high
prices for such assets.
Gazprom is more and more being used by the Russian government that controls it,
as an agent of expanding Russian influence in the world of energy production and
supply - already considerable. (See our report on Belarus). Not only does
Gazprom already control the world's largest gas reserves, but there is every
probability, given the sheer size of the worlds largest nation, that there is
far more yet to be discovered.
This Gazprom story looks like the equivalent for the UK of the recent debacle in
the USA over the acquisition of some US docks by a Dubai based investor. So free
markets in the west are 'free' only up to a point.
Rosselkhozbank plans to lower loan rates for farmers
The Russian Agriculture Bank (Rosselkhozbank) is planning to lower the rates of
loans issued to farmers, Rosselkhozbank CEO, Yury Trushin, said, Interfax News
Agency reported recently.
"A session of the bank's executive committee was held at which the decision
was made to lower rates on loans (to farmers). We're carrying out the
president's instructions," he said. Russian President, Vladimir Putin,
called on Rosselkhozbank to lower the rates on loans to agricultural producers
at a session of the legislative council. The rate currently amounts to 16 per
cent. The parameters of the lowered rate are currently being determined,
"but the rate will be acceptable and will not differ too much from the
Central Bank's refinancing rate," Trushin said. "It will be one
percentage point higher than (the Central Bank's rate) or two at the most,"
he said. "Loans are in great demand right now and the flow of recipients is
enormous. People are truly standing in line starting at five in the morning as
the president said," Trushin said, adding that "this means the
programme hit the nail on the head and the bank will cope with it."
"The bank is currently working on mechanisms to ease the procedure of
receiving loans since demand for borrowed funds will grow as the snow
melts," he said. As part of the national priority project on the
development of the agro-industrial complex, Trushin said Rosselkhozbank has
already issued about 2,700 loans, mainly for farmers and people with private
plots, who use them to purchase young livestock. About 500-700 loans will be
issued annually as part of the project, he said. "This is a minimal figure
that will grow in the future," he said.
S&P raises Rosbank rating to B with stable outlook
International rating agency, Standard & Poor's said recently it had raised
its long-term counterparty credit and certificate of deposit ratings on
Russia-based Rosbank from B- to B and its Russia national scale rating from
ruBBB- to ruA- with a stable outlook, New Europe reported.
"The rating upgrade reflects Rosbank's improved capitalisation following
the recent Tier 1 capital increase; completed legal and organisational
integration of the OVK banking group; and expectations of higher sustained core
profitability in the medium term," S&P credit analyst, Irina Penkina,
"The ratings remain constrained by Rosbank's sizable concentration in loans
and funding, low operating efficiency, challenges in managing an extensive
distribution network, untested quality of the fast-growing retail portfolio, and
Russia's high operating risks," the agency said.
"The stable outlook reflects Standard & Poor's expectations that, in
the beneficial macroeconomic environment, Rosbank will be able to reach a
sustainable improvement in its core profitability due to a double effect of
higher margin from retail lending, and cost-cutting initiatives," S&P
"If the bank demonstrates its ability to withstand the competitive pressure
on recurrent profitability better and maintains good asset quality, this could
lead to an upgrade," Penkina said.
"The ratings could be lowered if the bank is unable to control the quality
of its lending, which is growing quickly in the current favourable economic
environment; to reap satisfactory financial benefits from its enlarged
distribution base ad infrastructure following the OVK integration; and if there
is a discontinuation of financial support from the Interros group to support the
bank's rapid growth in a financial or economic stress scenario."
Rosbank's is one of Russia's 30 largest private banks owned and controlled by
Interros, Russia's largest non-energy Financial Industrial Group. "In 2005,
Rosbank completed the consolidation of its sister banking group, OVK thereby
adding retail operations to its traditional large corporate focus," S&P
HydroGenCo, RusAl project may cost US$6 billion
The cost of the HydroGenCo and Russian Aluminium project to complete Boguchansk
hydro power plant and construct an aluminium plant in Krasnoyarsk that will
require electricity from Boguchansk could reach US$6 billion, New Europe
This amount includes investment in creating infrastructure, RusAl Director
General, Alexander Bulygin, said recently. "This is a top priority project
for RusAl. We beat many records with this project," he said. Over 500 hours
were spent in negotiations to prepare the project, he said. "I consider it
to be objectively exclusive," he added. "We are now concluding the
negotiation stage for the deal structure. The project will be the biggest
private-government sector partnership to build a hydro power plant in the
world," HydroGenCo Chairman Vyacheslav Sinyugin told the press.
Wintershall moving forward on Russian, Turkmen projects
The board of directors at Achimgaz, a joint venture of Gazprom subsidiary
Urengoigazprom and Germany's Wintershall AG, is pleased with construction
progress at its production facilities, an Urengoigazprom source said, Interfax
News Agency reported.
Achimgaz was set up in July 2003 to develop Achimov deposits at Urengoi gas and
oil condensate field found at 3.15 - 3.8 kilometres.
The deposits have a more complex geological structure than the Senomanian and
Valanzhin deposits currently in development. Wintershall has the modern
technology, equipment, and experience drilling sub horizontal wells at great
depths in complex geological conditions, which is important in developing the
The directors visited the Achimgaz construction site. A commission headed by
production director at Gazprom Vasily Podyuk and Wintershall executive,
Bernhardt Shmidt, visited the gas and condensate treatment plant at the first
block of Achimov deposits, as well as gas condensate wells and a condensate
The Achimgaz directors were pleased with the work at the sites and said that in
the two months remaining before the thaw all construction of pipelines and
delivery of heavy equipment must be completed.
"In summarising the work by the commission Shmidt said there was complete
certainty the facilities would be launched on time and production of Achimov gas
and condensate at Urengoi field would begin at the end of this year," he
Achimgaz began drilling work at Achimov deposits in March. German specialists
are building several wells for Achimgaz. They have delivered housing facilities
and drilling equipment. Tyumenburgaz has installed one drilling derrick and
launch work has begun. US specialists are helping install the upper drilling
structures, making drilling work more efficient, faster, and safer.
Urengoigazprom and Wintershall have conducted only exploration work at the
deposits up to this point. In the summer of 2005, Achimgaz started the third
phase of a project to develop Achimov deposits at the Urengoi gas field, the
Urengoigazprom press service told Interfax.
Kuzbass coal producer gets syndicated US$100m loan
Yuzhkuzbassugol, a coal producer from Russia's coal-rich Kuznetsk basin or
Kuzbass, has arranged a US$100m loan with a syndicate of banks led by Societe
Generale and Paribas to build a new deep mine at the Yerunakovsky-VIII coal
field, Vladimir Lavrik, the company's general director, said, Interfax News
"The company has already received the syndicated credit from the banks
Societe Generale and Paribas has started to use it to build the mine,"
Lavrik said. He said this was a five-year loan repayable at 6.5 per cent
annually with a one-year grace period.
The funds "should suffice" to build the mine and a rail track to
transport the coal, he said. Yuzhkuzbassugol won the rights to the section,
which is part of the Yerunakovsky coal filed in the Novokuznetsk district, at a
February 2005 auction.
The five million tpy mine should be commissioned in the second half of 2007. Its
initial capacity will be three million tonnes of coal per year, rising
eventually to five million tonnes.
Yerunakovsky-VIII contains around 57.5 million tonnes of coking coal.
Yuzhkuzbassugol estimates that it accounts for 24.5 per cent of the coal
produced at deep mines in the Kuzbass and 17.5 per cent of Russia's entire coal
produced that way.
It has 25 enterprises, including 11 deep mines, and supplies most of its coal to
steel mills from the Evraz Group, the Mechel Group's Chelyabinsk Iron &
Steel Works, Magnitogorsk Iron & Steel Works and Severstal.
Yuzhkuzbassugol reduced coal production 5.5 per cent to 17.1 million tonnes in
2005. The company exported 30 per cent of its coal and sold 70 per cent in
Russia, as in 2004.
TNK-BP offers Gazprom 51% of Kovykta
Russian-British oil company TNK-BP has offered Gazprom a controlling stake in a
holding company that will develop the Kovykta gas condensate field, TNK-BP
Executive Director for Gas Projects, Victor Vekselberg, said at a briefing in
Moscow, New Europe reported.
He said that TNK-BP proposes to set up a holding company that will contain four
companies. Participation in these four companies is to be distributed in various
proportions. Vekselberg said that TNK-BP proposes to give its subsidiary Russia
Petroleum a controlling stake in the company that will develop the field, and it
is ready to give Gazprom 100 per cent of a transport company that will operate
both regional and export pipelines. He said that for the gas sales company TNK-NP
is proposing "the same distribution as for the holding company, but gas
should be exported via an agent agreement with Gazexport." The fourth
company in the holding company will process gas and, according to Vekselberg,
third parties may participate in this company. He said that as part of this
sub-division "we propose to set up two gas processing companies: one of
them based at Sayanskkhimplast, and a second -producing helium - at Geliimash."
Vekselberg also said: "We are considering spinning off production of
nitrogen fertilizer into a separate company." He said that TNK-BP would
like to have a leading position in the company producing Kovykta gas "as we
have experience connected with the analysis of geological information for the
field, and we think that we will handle this more effectively." Vekselberg
refused to say at what price TNK-BP is prepared to offer the Kovykta stake to
Gazprom. He said that Gazprom could acquire this stake for cash, or in exchange
for assets. He ruled out the possibility of 50 per cent of Slavneft being used
in this deal, and said that Slavneft is worth more.
LUKoil to launch phase-3 of Vysotks terminal in July
Russian oil company LUKoil is to launch the third phase of an oil terminal in
Vysotsk in Leningrad region in July 2006, AO RPK-Vysotsk LUKoil-II Deputy
general director, Sergei Kiselev, said in St. Petersburg on March 17th, Interfax
News Agency reported.
He said that the launch of the third phase would include the launch of an
additional reservoir park of eight reservoirs. Four of these will have capacity
of 15,000 cubic metres, two - 20,000 cubic metres, and two - 10,000 cubic metres.
Kiselev said that with the launch of the third phase the total reservoir
capacity at the terminal will amount to 460,000 cubic metres and the terminal's
capacity will increase to 12 million tonnes of products per year. He also said
that in January-February 2006 LUKoil exported about 1.4 million tonnes of oil
products through Vysotsk. In particular, in February LUKoil shipped two tankers
from the terminal, with about 50,000 tonnes of diesel for TNK-BP. "There
have not yet been any TNK-BP orders for March," he said. LUKoil launched
the first phase of the Vysotsk terminal in June 2004 with a capacity of 4.7
million tonnes of oil and oil products per year. The terminal was built to
export cargo to Europe and the US. The company launched the second phase of the
terminal in April 2005, increasing its capacity to seven million tonnes per
year. After the launch of the third phase in 2006, the complex will include two
rail loading platforms, 17 reservoirs, three service docks - including two for
tankers of 47,000 tonnes and 80,000 tonnes.
Alfa Bank places Eurobonds, plans US$250m loan
Russia's Alfa Bank has placed US$350 million in Eurobonds at LIBOR + 1.6 per
cent, secured by the bank's payment rights, a source in banking circles said,
Interfax News Agency reported.
Alfa Bank appointed Dresdner Kleiner Wasserstein and Merrill Lynch as the
organizers of a debut issue of Eurobonds secured by diversified payment rights (DPR),
a source in banking circles said. The issuer of the Eurobonds is the SPV Alfa
Diversified Payment Rights Finance Company S.A., and the guarantor is ABH
Financial Limited (the parent company of Alfa Bank). The Eurobonds are issued
under regulation 144A/RegS. Alfa Bank was in fifth place in terms of assets in
the Interfax-100 rating of Russia's largest banks in 2005. Alfa Bank is planning
to raise a US$250 million syndicated loan in May and June, said Interfax. Alfa
Bank confirmed that it plans to raise a loan for about US$250 million. The
syndication process is due to start in May. A bank representative did not reveal
the timeframe for the loan or other details of the transaction.
Russia plans repayment
Finance Ministry officials said recently that Russia could pay an additional
US$12bn of the country's outstanding US$25.2bn debt to the Paris Club of
creditor nations this summer, the International Herald Tribune reported on April
The early repayment underscores the rebound in Russia's finances since an
economic collapse in 1998, a turnaround largely due to high prices for oil and
gas, its main exports.
Sergei Storchak, the deputy finance minister, was quoted by Russian news
agencies as saying that the issue would be discussed at the May session of the
Paris Club of lender nations and that the sum could be paid by the end of
Prime Minister, Mikhail Fradkov, has ordered negotiations to be held on paying
the debt, a spokeswoman for the Finance Ministry said.
The planned payment constitutes a large chunk of Russia's outstanding debt to
the Paris Club, which also includes some 6bn Euro, or US$7bn, that the German
government has converted into bonds, the spokeswoman said. She declined to give
her name, citing the ministry's policy about speaking to the press.
The deputy head of the ministry's press service, Vitaly Krasnyuk, said the time
frame proposed by Storchak was "quite realistic."
Russian officials have said they would use money collected in a special oil
revenue fund to pay the country's Soviet-era debt to the Paris Club.
Moscow is seeking to retire the debt early, while several creditor countries
have asked Russia to pay a premium to compensate them for lost interest
Vladimir Dmitriyev, chairman of the state-controlled, Vneshtorgbank, which deals
with foreign debt payments, expressed optimism for the planned negotiations.
"Members of the Paris Club have shown political will to meet Russia halfway
and settle the debt ahead of time," Dmitriyev was quoted as saying.
In May 2005, Russia reached a deal to pay off US$15bn of the US$43bn in
Soviet-era debts it owed to the Paris Club.
Russian-Chinese relations developing steadily
Russian-Chinese relations are probably at their strongest ever, Russian Deputy
Foreign Minister, Alexander Alexeyev, said in an article published in the
Nezavisimaya Gazeta newspaper recently.
"They have been expanding steadily in a wide variety of areas over the past
15 years. It seems to me that Russia and China now have the best relationship
they have ever had and the governments of both countries will continue to
develop them," he said. 2006, the Year of Russia in China, "will be a
truly unique period for Russian-Chinese ties," Alexeyev said. "This is
a 12-month period that will include a wide range of political, public, economic
and cultural events featuring Russian symbols on the territory of the People's
Republic of China," the deputy foreign minister said.
"The first two months of the Year of Russia in China were a great
success," he said.
Cross-border trade between Russia and China increased by more than 30 per cent
in 2005, exceeding US$5 billion, Vneshtorgbank (VTB) President and Chairman,
Andrei Kostin, said at a Russian-Chinese economic forum in Beijing recently,
Interfax News Agency reported.
VTB has concluded settlement agreements on cross-border trade with several
Chinese banks in the two countries' national currencies, Kostin said. "This
creates additional opportunities to broaden bilateral trade, and is an important
measure to enhance demand for our currencies, which will ultimately strengthen
them and make them convertible," he said. Kostin also said positive
tendencies have made themselves felt in the bank's cooperation with Chinese
lending organisations on international financial markets. In 2004-2005, China's
major banks - the Bank of China and Agricultural Bank - were among the banks
that extended the VTB a syndicated credit worth over US$1 billion. Partnership
between the VTB and Chinese lending organisations is broadening rapidly in new
MINERALS & METALS
Lebedinsky GOK buying 8.67% of Oskol steel works
Lebedinsky GOK (LGOK), a major iron ore producer from Russia's Belgorod region,
is buying 370,148 common shares or 8.67 per cent of the charter capital in Oskol
Electrometallurgical Combine (OEMK), a steel works from the Belgorod region, for
US$139 million, LGOK said in an official statement, Interfax News Agency
The statement said that the deal was signed on March 21st. Elbridge Investments
(Cyprus) Limited sold the shares. Directors at LGOK have decided to buy back
1,859,401 shares or 9.944 per cent of the company' charter capital. The company
will offer to buy the shares for US$223.1 a share between April 25 and June 5
inclusive. The whole block could cost US$414.6 million. It is thought that LGOK
is buying the shares in order to consolidate upstream assets that will be part
of a mining holding being set up by the businessman Alisher Usmanov. LGOK and
OEMK are controlled by the company Gazmetall, in which Usmanov is a major
shareholder. Novolipetsk Steel sold its 11.86 per cent of LGOK to OEMK-Invest
for US$400 million at the start of this year. Prior to that deal, Gazmetall
controlled 81.51 per cent of LGOK. Gazmetall currently controls 70 per cent of
MMK reduces RAS net profit 10.8% in 2005
Magnitogorsk Iron & Steel Works (MMK) reduced net profit to Russian
Accounting Standards (RAS) 10.8 per cent in 2005 to 29.82 billion roubles, the
company said in a financial report, to be presented to shareholders at their
annual meeting. The report said MMK had to contend with a competition war on its
sales markets and a price war with iron ore suppliers last year, New Europe
It said steel prices, which had grown in recent years, started to plummet in the
second quarter of 2005. MMK produced 49,000 tonnes less metal than planned in
view of the global over-production crisis. Revenue was 3.5 billion roubles less
than targeted, although operating profit was 9.6 billion roubles more than
targeted because MMK managed to reduce costs by 13.1 billion roubles. Product
profitability was 12.6 percentage points higher than planned. According to a
conservative forecast for 2006, MMK does not plan to raise metal product prices
even though raw material prices are forecast to rise. Operating profit would
fall 10.8 billion roubles to 31.4 billion roubles, revenues would be 143.9
billion roubles and costs 112.5 billion roubles. MMK plans to sell 10.6 million
tonnes of commercial metal in 2006, exporting 5.1 million tonnes to the non-CIS
and 300,000 tonnes to the CIS. Exports of long products should quadruple in
2006, flat hot-rolled products should grow eight percent and cold roll 205, and
billet sales should fall 52 per cent. MMK said in a statement that its board of
directors had approved candidates for the new board to be elected at the AGM,
which took place on April 21st. Four of them are independent candidates: Andrei
Gorodissky, who is head of the law firm Gorodissky & Partners; Kirill Levin,
deputy chairman of Gazprombank; Zumrud Rustamov, vice president of Siberian Coal
and Energy Company (SUEK); and Sir Brian Fall, who was British envoy to the
South Caucasus in 2003 and is an advisor to Rio Tinto. Other candidates are:
Nikolai Lyadov, who is MMK's security chief; Sergei Krivoschekov, the deputy
general director for strategic planning and ownership; Viktor Kutischev,
commercial director; Andrei Morozov, deputy chairman of the board of directors;
Viktor Rashnikov, chairman of the board; Gennady Senichev, general director; and
Rafkat Takhautdinov, MMK's first deputy general director. MMK has said it plans
to increase the number of independent directors, partly in connection with
requirements for companies planning to enter the stock market.
Mechel halves ADR offering to US$350m
No. 5 Russian steel maker Mechel has halved an ADR offering to US$350 million,
Interfax reported recently, citing a market source.
The source said he thought this was because the price that had emerged during
the placement was on the low side. "The price range is US$21.5-22 per ADR,
and it looks like the price will be US$22," the source said. Mechel's ADR
were trading for US$24.59 each on the NYSE. The source said the order book had
been "re-subscribed several times." USB is organising the placement.
UBS AG originally planned to sell ADR and derivatives for up to US$1 billion in
Mechel shares, including around US$700 million in shares and between US$250
million and US$300 million in three-year convertible bonds. The coupon on the
bonds could be 9.5-10.5 per cent annually. The order book for the bonds closed
recently. Analysts said they thought Vladimir Iorich, one of Mechel's core
shareholders with 42.2 per cent of the company, was probably selling a 30 per
cent stake in Mechel. Mechel has said Igor Zyuzin, chairman of the board of
directors and the company's other main beneficiary, will increase his stake in
Mechel to controlling.
Murmansk region, Hydro discuss aluminium plant
Governor of Murmansk region, Yury Yevdokimov, and representatives from Hydro of
Norway met recently to discuss the construction of an aluminium plant in the
Kola Peninsula, New Europe reported.
"We received a very interesting proposal from our Norwegian partners about
the possible construction of an aluminium plant in the region," the
governor said. The project will include two phases for the plant each with the
capacity to produce 300,000 tonnes of aluminium annually, he said. In addition,
a thermal power station will be built that will use gas from the Shtokman field.
Part of the electricity will be used in production and the rest will be used to
supply heat in Murmansk. "I think it is positive that construction of the
first phase of the project coincides with the first phase at Shtokman,"
Yevdokimov said. "There are some nuances in the Hydro proposal that we are
not completely happy with," he said. For example, Hydro proposed bringing
in raw material from Komi, while the Murmansk regional authorities consider it a
better idea to use their own raw material reserves. "We have natural raw
material reserves and man-caused reserves, namely, nepheline sand (Apatit
production waste)," he said. The regional governor and Hydro decided a
working group should be set up to develop an additional agreement to the
memorandum of cooperation signed in 2005, Yevdokimov said.