Power Sector News (Archive 2009)
December 18, 2009
· Due to freezing temperatures energy consumption in Russia has hit the 2006 record this December. Gazprom recommends that large consumers, including gencos, do not increase volumes of gas consumption, representative of Mezhregiongas Maria Frolova said. This is necessary to keep up the balance in gas transmission system, she explained. Representatives of several gencos confirmed the receipt of these recommendations. They highlighted that the lack of extra volumes of gas will not affect consumers as companies have their own reserves (mazut and coal). For instance, OGK-1, OGK-5 and IES Holding use mazut along with gas, the newspaper noted. (Vedomosti “Gas Freezes”)
· The Russian Federal Tariffs Service board Friday cleared the branches of inter-district power grid companies (IDGCs) from seven Russian regions to switch to Regulated Asset Base (RAB) tariffs from January 1, 2010. The FTS told Interfax that IDGCs from the Vladimir, Kaluga, Kursk, Yaroslavl, Novgorod and Omsk regions and the Udmurt Republic would make the switch. (Interfax “Grid operators from seven regions cleared to switch to RAB tariffs from Jan 1”)
December 17, 2009
· Prepayment for electricity on the retail market can be introduced for the household consumers. Enterprises, that can use assets as collateral for future payments, will be able to make post-payments, a high-ranking official told Kommersant. However, electrical meters should be modernized to implement the system of control for people’s energy consumption. Electrical meters’ replacement will cost more than €3 billion, the newspaper notes. (Kommersant “People Will Pay for Electricity in Advance”)
· Mosenergo, Gazprom unit that supplies heat and power to Moscow, said it repaid a 5.6 billion-ruble loan from the European Bank for Reconstruction and Development ahead of schedule. The repayment cuts Mosenergo’s total debt to 19.7 billion rubles. (Vedomosti, Kommersant “Mosenergo Utility Repays $185 Million EBRD Loan Early”)
· Belarus and Russia will soon sign an intergovernmental agreement on the construction of a Belarusian nuclear power plant, head of the Belarusian Energy Ministry's nuclear energy department Nikolai Grusha told a Thursday press conference in Minsk. Belarus plans to build two units of a nuclear power plant, each with the capacity of 1,200 megawatts. The plant will be built by NPP 2006 blueprints of the St. Petersburg Atomenergoproyekt. The first unit will be ready in 2016, and the second in 2018. Most probably, the power plant will be located in the Grodno region. (Interfax “Belarus, Russia Readying To Sign Nuclear Power Plant Deal – Ministry”)
December 16, 2009
· Parliamentary commission, which investigates the Sayano-Shushenskaya accident, accused station’s workers, who had not stopped hydro unit in time. Head of the commission Vladimir Pekhtin stated that August tragedy could have been prevented. The report will be presented on December 21. (Vedomosti “Unknown Worker is Guilty”)
· Mosenergo is postponing but will not cancel half of the orders on Siemens energy equipment, Dietrich Meller, president of the Russian office said. (Vedomosti “Mosenergo Corrections”)
· Electricity trader Inter RAO expects to name the placement price for a supplementary share issue at the end of January, the company told Interfax. The company is issuing shares in favor of Vnesheconombank (VEB), the state nuclear corporation Rosatom and property agency Rosimuschestvo. (Interfax “Inter RAO To Name Supplementary Share Price At End Jan”)
December 15, 2009
· Interfax reports today that in November 2009 energy consumption grew in Russia’s both energy zones: in European zone by 5.3% in comparison with October 2009 and by 2.3% in comparison with November 2008, in Siberia by 8.5% and 1.7% accordingly. The media notes that since November 2008 energy consumption in Russia has been only decreasing because of the crisis. That is why optimistic November 2009 results give enable experts to talk about stabilization in power sector. For example, Fitch agency thinks that the worst phase of the economic and financial crisis in Russia is behind and the companies demonstrate the first signs of recovery. And grew of energy demand and consumption prove it. (Interfax “Ground for Optimism – Energy Consumption is Growing”)
· The Energy Ministry plans to resume the stock exchange's trading in gas, which was suspended due to "irrelevancy" during the crisis. Online spot stock exchange trading can start in January 2010. The launch of gas futures trading will take at least half a year. This stock exchange itself, the first contracts of which will be of a delivery nature, will begin functioning before the end of 2010. (Kommersant “Energy Source Prices Return Their Relevancy”)
· Mosenergo is planning to auction off real estate in southwestern Moscow on Dec. 22 to 23, the company said. The company, controlled by Gazprom, will hold auctions December 22 to sell off 3,718-square-meters of its nonhousing facilities located on Michurinsky Prospekt. In another action December 23, Mosenergo will sell part of a 1,213-square-meter office complex on Ulitsa Nametkina. The opening price will be 87.6 million rubles ($2.9 million). Both buildings will be sold as part of a program to get rid of noncore assets. (The Moscow Times, Vedomosti, Kommersant “Mosenergo to Auction Property Assets”)
· Inter RAO subsidiary company Inter RAO UES Baltic, has boosted its stake in the TGK-11 from 1.09% to 29.89%. TGK-11 said in a statement that this happened on November 11 and the company was informed on December 14. This was a closed deal involving an asset-swap with the owners of Siberian Coal and Energy Company (SUEK), the Inter RAO press service said. Inter RAO had announced its consolidation of the TGK-11 stake in late November, without indicating by how much. The swap with SUEK main shareholder Donalink has Inter RAO getting a 31% stake in TGK-11 and the SUEK owners a 18.9% stake in TGK-12. Inter RAO had gotten the TGK-12 stake from Federal Grid Company UES. The price-tag has not been announced, but sources close to the companies have said that it was a little more than 2 billion rubles. The swap with SUEK involved no cash. (Vedomosti “Inter RAO stake in TGK-11 almost 30% post-swap with SUEK”)
· TGK-2 minority shareholders, who are unsuccessfully trying to sell their shares by offer, may get other financial claims from controlling shareholder Sintez. Sintez accuses TGK-2 minority shareholders of breakdown of genco’s investment program. Sintez representative Alexandr Levin told RBC Daily that the company’s losses total 1.7 billion rubles. (RBC Daily “1.7 Bln Rubles for Three”)
December 14, 2009
· RusHydro decided to examine the dam at Sayano-Shushenskaya GES, the newspaper writes. The decision has been driven by considerable public attention to the issue and the intention to estimate the necessity in additional measures to provide dam’s reliability. (Vedomosti “Sayano-Shushenskaya Dam Will be Examined”)
· Nornikel subsidiary OGK-3 will sell 1.05% of its shares to broker CiG. Genco’s board approved the deal on December 1, the sum totals at 725 bln rubles or 1.45 rubles per share. OGK-3 sells its share to fulfill direction of the Audit Chamber, which found out that the company had inappropriately spent 29 billion rubles. (Vedomosti “Three Times Cheaper”)
· Moscow is prepared to fund most of the construction of a 4 billion euro NPP at Belene in Bulgaria, Energy Minister Sergei Shmatko said Friday, as Russia tries to sweeten a deal that Sofia has put under review. Shmatko was speaking after a two-day session of the Bulgarian-Russian economic cooperation commission, which discussed joint energy projects including the Burgas-Alexandroupolis oil pipe and the South Stream gas link. RWE, Germany’s second-largest utility, withdrew from the 2,000-megawatt nuclear power-plant project on the Danube River after the country declined to provide state funding. Atomstroiexport was chosen in 2005 to build the plant, with Areva and Siemens as subcontractors. Construction was delayed as the global financial crisis hindered financing. Bulgaria said it can sell half of its 51 percent stake in the project. (The Moscow Times “Moscow Will Fund Bulgarian Power Plant”)
Russia Headline News
December 18, 2009
· On Friday the Federal Tariff Service (FTS) is due to consider the indexation of Gazprom prices and tariffs for 2010. The gas prices are expected to increase by 15% for the industry from January 1, by 5% for individual consumers early 2010, and by 15% from April 1, two FTS officials said. Tariffs on gas transportation through main pipelines will increase by just 12.3%, the officials said (Gazprom planned a 15% increase). FTS and Gazprom officials declined to comment on the figures and forecasts. (Vedomosti, "Growing as planned")
· ChTPZ Group has decided to quit the oil service business, which it began to develop in 2007. It is looking for a buyer of the assets of Rimera led by Vladimir Khristenko, the son of Industry and Trade Minister Viktor Khristenko. Talks are underway with TAIF Group, CNPC and Schlumberger, according to unofficial reports. ChTPZ hopes to receive around $500 million for Rimera to be able to fund its core projects. (Kommersant, page 10, "CHEP saying goodbye to service")
· Maxim Barsky says having billionaires on the management team at TNK-BP may affect the value of the venture but getting rid of them would be a bad move. The 35-year-old picked to run TNK-BP from 2011 has set his sights on overtaking privately owned peer LUKoil on key performance indicators but said new management could only achieve that with the billionaires’ lobbying power.“They have colossal connections and it would be suicide for the company not to use them,” Barsky said. He also said BP and its billionaire partners would sacrifice dividends to find the cash needed to tap new deposits in the Arctic, a departure from previous strategy. (Reuters)
· The Hong Kong stock exchange re-examined RusAl's application for listing. The company is due to receive a reply on Friday. Its latest argument for the stock exchange was a promise to refinance VEB's $4.5 billion with Sberbank. VEB is the only creditor who extended RusAl's loan for just one year, whereas all others agreed to extend loans until the end of 2013 with the option to extend for three more years. RusAl may not be able to sell IPO shares to retail investors even if it wins approval for its placement, the Moscow Times writes. Interfax says, Hong Kong exchange’s listing committee approved RUSAL’s application for IPO. (Vedomosti, "Sberbank instead of VEB", The Moscow Times, Interfax)
· On Monday the board of directors at Uralkaliy is to consider the company's draft 2010 budget and a plan until 2012, by which time the company's potassium sales are expected to rise up to 5.5 million tonnes per year and net profit to $533 million. The liquidity crisis and slow market recovery are named as the main external risks for the Uralkaliy budget and capitalization. The company's budget is conservative, experts said. (Kommersant, page 11, "Uralkaliy waiting for the better")
· Labels on beer, wine and liquor will soon warn potential buyers in large print about the dangers of imbibing in a further blow to the industry’s sales as part of President Dmitry Medvedev’s drive for healthier lifestyles, the government said Thursday. Officials will also weigh the pros and cons of creating a state-run monopoly on the $52 billion market in a report that will be submitted to the president in the first quarter of next year, according to a set of measures released Thursday. The measures also require more sophisticated excise stamps on bottles and ban retail sales in certain locations. (The Moscow Times)
December 17, 2009
· Yegor Gaidar, the mastermind of Russia’s transition to a free economy that began with painful price shocks in the early 1990s, died Wednesday at the age of 53. Gaidar died of a blood clot at 3 a.m. as he was working on a new book at his home outside Moscow, said Yelena Lopatina, a spokeswoman for the Institute of Economy in Transition, a think tank that Gaidar established and headed. (The Moscow Times, Vedomosti, Kommersant)
· The Economic Development Ministry submitted an adjusted forecast of Russia's socioeconomic development for 2010-2012 on Wednesday. Now the ministry expects inflation to be lower and the prices for oil and GDP growth significantly higher than was previously expected. The forecast of the ruble exchange rate in 2010 has also been significantly adjusted to 28.3 rubles/$1 from nearly 34 rubles/$1. The government will be able to start revising the 2010 federal budget based on the previously expected macroeconomic indicators no earlier than in April 2010, when it is clear whether the forecast announced on Wednesday comes true (Kommersant, page 2, 'Economy Becomes Better Than Earlier'; Vedomosti, 'Three-Year Drift').
· The Federation Council on Wednesday approved a request by President Dmitry Medvedev to grant him the right to send troops abroad without the consent of the senators, Interfax reported. “This is about solving immediate tasks connected to a threat to the lives of Russian nationals, as well as fighting piracy and securing the safety of shipping traffic,” Medvedev’s envoy to the Federation Council, Alexander Kotenkov, told the senators before the vote. (The Moscow Times)
· Russian President Dmitry Medvedev will give a TV interview to Russia's main channels on Dec 24, in which he is going to sum up the results of 2009. (Kommersant)
· A consortium led by Gazprom Neft will invest $2 billion in developing the Iraqi oil field that it won at a weekend auction and expects to pump the first crude from Badrah within three years. Gazprom Neft plans to book some of the reserves at Badrah and to reach full production of 170,000 barrels per day within six to seven years of signing the contract, a company executive said. (Reuters)
· Less than two weeks are left before the launching of the first phase of the Eastern Siberia-Pacific Ocean (ESPO) oil pipeline, but oil might not reach its destination by the expected date because of traffic jams on Far Eastern railroads. Over 200 abandoned trains have accumulated on the railroads running towards all seaports in the region, Russian Railways reported on Wednesday (Vedomosti, 'Jam for Oil').
· The Economic Development Ministry has issued a new and a more optimistic forecast of gas production in Russia in 2010: 643 billion cubic meters. If this figure is compared with Gazprom's forecast, it turns out that neither the gas monopoly nor government officials believe that independent producers may increase production (Vedomosti, 'Stake on Monopoly').
· Moscow has started preparations for purchasing more shares in Sibir Energy to increase its stake in the company to a blocking one. The city budget for 2010 allots 4.5 billion rubles for this purpose, which is more than the sum at which the stake was valued in summer. However, Gazprom Neft, the second largest shareholder in Sibir Energy, has not yet made a final decision on the deal (Kommersant, page 11, 'Moscow Reserves Money for Sibir Energy').
· Russia's Gazprombank intends to sell a 25.1 percent stake in its gas firm Yamalsky SPG (Yamal SPG). (Vedomosti)
· Sibur Holding's board has endorsed a 2010 draft business plan for the company. The document envisions significant growth of the key indicators, among which EBITDA should grow most of all - by 53% to 52 billion rubles. Sibur plans to attain these goals by cutting its expenditures and hoping for the market's recovery. Experts view the company's plans as "aggressive" but realistic, pointing to the risk of the ruble's strengthening (Kommersant, page 11, 'Sibur Evaluates Future Revenues').
December 16, 2009
· NATO Secretary-General Anders Fogh Rasmussen will hold talks with President Dmitry Medvedev and Prime Minister Vladimir Putin on Wednesday in what is seen as a key step toward rebuilding the alliance’s ties with Moscow after the chill that followed last year’s war in Georgia. A potentially thorny issue will be Medvedev’s initiative for a broader European-Atlantic security treaty, which is seen by many Western governments as an attempt to restore Moscow’s influence by undermining NATO. (The Moscow Times)
· The fledging forum of gas exporting countries will seek to expand membership and gain international clout before it makes decisions on investment and pipelines, newly elected chief executive Leonid Bokhanovsky said Tuesday. Russia, Qatar, Iran and eight other gas-rich countries across the globe took another step in consolidating their Gas Exporting Countries Forum by electing Bokhanovsky as its secretary general last week. Consumer countries are waiting to see whether the group will try to fix prices like OPEC. (The Moscow Times)
· Kommersant has learned that Gazprombank has arranged the sale of a blocking stake in OAO Yamal SPG developing the Yuzhno-Tambeiskoye gas condensate field, which is among the biggest ones in Russia. The buyer is Pyotr Kolbin, a co-owner of Surgutex and a longstanding partner of Gennady Timchenko. If the value of the deal reported to the government is true, the businessman will get the stock at slightly more than one-sixth of the price offered to OAO Yamal SPG's controlling owner, Novatek (Kommersant, page 9, 'Gennady Timchenko Will Share Gas With Partner').
· The Hong Kong Stock Exchange may approve United Co. Rusal’s initial public offering application tomorrow, the Vedomosti newspaper reported today, citing unidentified bankers involved in the share sale. If approved, Russian billionaire Oleg Deripaska’s aluminum maker will start marketing the offering Jan. 4, followed a week later by management meetings with investors, Vedomosti said. (Vedomosti, 'New Year's IPO').
· Kazakhstan’s Eurasian Bank said Tuesday that it was buying Troika Dialog Bank — a subsidiary of the investment house of the same name — for an undisclosed amount in a move to expand its business abroad. “It is an important deal for Eurasian Bank, as it allows us to expand our regional presence and platform in accordance with our strategy,” Eurasian chairman Michael Eggleton said in a statement. “This acquisition will allow the bank to gain profits from trade operations, as well as investment flows between Russia and Kazakhstan.” A spokesperson for Troika Dialog confirmed the deal but would not immediately comment on the details. (The Moscow Times)
· Alfa Bank expects its revenues to be close to zero because of the building of reserves this year, Alfa Bank Board Chairman Rushan Khvesyuk said. The bank is seeking to reach the pre-crisis profitability level in 2010, Khvesyuk said during an online conference on the bank's website. Sberbank's top managers earlier announced similar plans (Vedomosti, 'Alfa Collecting Revenues').
· VTB's shares have once again drawn the financial regulator's attention, as happened earlier following the bank's IPO. VTB's shares placed in an extra offering in September this year have grown in price nearly fivefold on MICEX, which has prompted the Federal Financial Markets Service to start investigating possible manipulations, and MICEX has resorted to direct limitation of the bank's quotations, which has never happened before (Kommersant, page 10, 'VTB Reaches Bifurcation Price').
· The Industry and Trade Ministry is prepared to qualify Russian automobile plants as strategic assets. Despite the Russian automakers' deplorable condition, the ministry is proposing that foreigners could not hold more than 50% in them, a provision that is contained in proposals by a working group of experts from the Industry and Trade Ministry and the Economic Development Ministry drawing up a Russian automotive industry development program for the period up to 2020 (Vedomosti, 'Sovereign Automotive Industry').
· Beer production increased in November from a year earlier, according to figures released Tuesday by the State Statistics Service. Production rose 3.7 percent compared with November 2008, after a 6.5 percent increase in October, the service said. Output rose 4.2 percent from October. In the first 11 months of the year, Russian beer output fell 6.1 percent from the year-earlier period to 990 million decaliters, according to the report. (Bloomberg)
· Russia’s government will regulate vodka prices starting in January in a bid to curb alcoholism. Stores will be prohibited from charging less than 89 rubles ($2.95) for a half-liter bottle of vodka from Jan. 1, according to an order published today in the official Rossiyskaya Gazeta newspaper. (Bloomberg)
December 15, 2009
· President Dmitry Medvedev called on the U.S., Brazil, India and China to coordinate efforts to combat climate change, while pledging to boost energy efficiency and nuclear power at home in a blog post on Monday. “These must be simultaneous commitments and commitments that we all abide by,” Medvedev said in his video blog. “Trying to do this on our own will be fruitless and pointless.” (Bloomberg)
· Former Soviet dissidents criticized the condition of human rights in Russia under Prime Minister Vladimir Putin, saying their work is more dangerous than in the final decades of the communist regime. “We live in the Soviet Union, only a modernized, improved one,” Sergei Kovalyov, 79, said at a conference in Moscow marking the 20th anniversary of the death of dissident and Nobel Peace Prize winner Andrei Sakharov. Human rights activists gathered to pay tribute to Sakharov’s legacy in a year when government critics have increasingly become targets of attack. (Bloomberg)
· The volume of industrial output was larger than this amount last year in November 2009, for the first time since the onset of the crisis, Russian Economic Development Minister Elvira Nabiullina said. If this pace of growth is maintained, the industrial sector will be able to reach the pre-crisis level in four years' time. (Vedomosti, "Gone Into Stagnation"; Kommersant, page 2 "Neither Good Nor Bad for Industry")
· The Russian government has published its forecast for hydrocarbon production in 2009. Gas output is expected to decline 13.5% to 575 billion cubic meters, while oil production is expected to go up 1% to 493 million tonnes. However, the current severe cold spell could make the government's forecast conservative and help companies finish the year with record high results (Kommersant, page 11, "Gas Companies Let Budget Down")
· Exillon Energy, a Russia-focused oil producer, is to raise just more than $100 million in what will be the first London stock market flotation by a Russian firm since the financial crisis broke in 2008. The vast majority of the deal was bought by oil and gas sector specialist investors, while Russia or emerging markets focused funds bought a relatively small share, a source familiar with the deal said Monday. According to the source, Mirabaud Securities, which acted as joint bookrunner on the initial public offering, played a key role in selling the deal. Exillon said Monday that it would place 40.5 million shares at 153 pence each and will use the cash to repay debt and develop future projects. (Reuters)
· The Kremlin faced new pressure to rethink its priorities in Central Asia and to speed up Russian gas supplies to China as Turkmenistan inaugurated a gas pipeline to China on Monday. President Dmitry Medvedev, who formerly chaired gas giant Gazprom, is scheduled to make a trip to Ashgabat within the next two weeks for talks likely to focus on improving relations soured by Gazprom’s decision to reduce Turkmen supplies in the spring. (The Moscow Times)
· Gazprom rejected all requests from its European customers to be more flexible about gas contracts, even as the economic downturn reduced demand, analysts said Monday, after a meeting with Alexander Medvedev, the company’s deputy chief executive. Take-or-pay clauses in Gazprom’s long-term export contracts require European utility companies such as Ruhrgas and GDF Suez to pay for a set amount of gas every year even if they don’t need that much. Medvedev, who oversees exports, indicated at the Sunday meeting that the world’s biggest gas company didn’t relent on the terms as the year is ending. (The Moscow Times)
· LUKoil rose the most in a week in Moscow trading after winning a contract in Iraq and buying a stake in a Kazakh venture from BP. LUKoil rose 1.5 percent to 1,624 rubles, its first advance in six sessions, extending its gain this year to 68 percent. (Bloomberg)
· Future head of TNK-BP Maxim Barsky is to take up the post of the company's deputy general director on January 1. The company is currently headed by Mikhail Fridman. The main task Barsky will have to tackle in his new capacity is to turn TNK-BP into Russia's highest value private oil company. The bonus Barsky will receive for the effort will depend on the company's value growth. (Vedomosti, "Six Months for Promotion")
· The Energy Ministry plans to resume the stock exchange's trading in gas, which was suspended due to "irrelevancy" during the crisis. Online spot stock exchange trading can start in January 2010. The launch of gas futures trading will take at least half a year. This stock exchange itself, the first contracts of which will be of a delivery nature, will begin functioning before the end of 2010. (Kommersant, page 2, "Energy Source Prices Return Their Relevancy")
December 14, 2009
· Russia will deliver information on its customs union with Belarus and Kazakhstan to the World Trade Organization next month, in a sign that Moscow may be doubling down on its proposal to enter the organization as part of the confederation. WTO members requested the information, and Russia will prepare the necessary documents and deliver them after the New Year’s holiday, said Maxim Medvedkov, director of the Economic Development Ministry’s department for WTO accession. (The Moscow Times)
· A consortium led by LUKoil won a tender to develop the supergiant West Qurna-2 oil field in Iraq on Saturday, in a strategic victory for the firm that has been over a decade in the making. “Today we scored a deserved victory, and along with our Norwegian partners we intend to comply with all the obligations we took on to develop West Qurna-2 oil field in the interests of the Iraqi people and our shareholders,” LUKoil president Vagit Alekperov said in a statement Saturday. “This project is strategically important to our company.” (The Moscow Times)
· Belarus will get Russian gas at a discount for a few more years, Belarussian First Deputy Prime Minister Vladimir Semashko said Friday, as the countries negotiated terms for creating a common economic space. President Dmitry Medvedev and Prime Minister Vladimir Putin — at a five-hour meeting with their Belarussian counterparts the previous day — agreed to push back to at least 2014 the deadline for Belarus to begin paying prices that would give Gazprom the same profit margins that it receives on its European Union exports, Semashko said. (The Moscow Times, Kommersant)
· The government said Friday that it would welcome joint oil and gas works with Norway on the Barents Sea and a deal was possible next year to close a decades-long dispute between the two major energy producers. The Natural Resources and Environment Ministry said in a statement that Norway had proposed to sign a memorandum in the first half of next year after Russia proposed to jointly explore and produce energy in the disputed areas of the Barents Sea and the Arctic. (Reuters)
· Lukoil has closed the deal of buying back its 46% stake in Lukarco B.V. from its long-standing partner - BP. Now it owns 100% in Lukarco. The sum of the deal is $1.6 billion payable in three installments in 2010-2011, Lukoil and BP report. Lukarco must pay back a $43 million loan to BP, the British company adds. The key assets of Lukarco are 12.5% in the Caspian Pipeline Consortium (CPC), the owner and operator of the oil pipeline from Kazakhstan to Novorossiisk with annual throughput capacity of 28.2 million tonnes, and 5% in Tegizchevroil. (Vedomosti, "BP pulling out of CPC")
· Maxi Group belonging to the Novolipetsk Steel (NLMK) group has faced problems with the construction of a new steel plant in Kaluga region worth 32 billion rubles. The project is opposed by Yermolino military airfield subordinate to the Interior Ministry in the vicinity of which the plant is supposed to be built. Analysts say that the delay in the project may result in the loss of a market share for Novolipetsk Steel at the time of its revival. (Kommersant, p. 9 "NLMK didn't fit in Military Airdrome")
December 4, 2009
· All plans to develop electricity facilities must be fulfilled, Vladimir Putin said on Thursday. "We cannot afford ourselves to be late on the energy sector development," he said. In 2010-2011 Russia must build 10 gigawatts, the prime minister said. This plan includes all energy blocks, private and public, thermal, HPPs and NPPs, an energy official said. Over the past decade Russia has built 13 gigawatts, the prime minister recalled. Therefore, energy companies will have to almost quadruple the pace of commissioning. (Vedomosti, "To build everything!")
· In November 2008 state corporation Rosatom received from the government 42.5% of shares in Inter as a material contribution. Under the joint-stock companies law, Rosatom was supposed to offer to other shareholders to buy out their share. Among them was Gazprom, which owns 8.97% in the energy company. But Rosatom will avoid having to make an offer, if the Duma passes the bill prepared by deputy chairman of the Duma energy committee Konstantin Zaitsev. He is proposing amendments to the joint-stock companies law, allowing the companies, which received assets in the form of a material contribution from the government after October 1, 2008, not to make an offer to minority shareholders. (Vedomosti, "Rosatom will be helped")
· Interregional Distribution Grid Companies Holding intends to develop production of electric grid equipment for domestic capacities but needs find billions of rubles to do it. The company may ask the government to include these expenses in the tariff, but for now Federal Tariff Service has ignored these expenses in its calculations. (Kommersant “IDGC Holding Dreams of Production”)
December 3, 2009
· Standard & Poor's said a survey of the transparency and disclosure amongst Russia's largest public electricity utilities revealed a low level of corporate transparency in the sector compared to both international peers and many of the largest Russian enterprises from other sectors. The Electricity Companies Transparency Index for the 40 largest public electricity companies amounted to 44.9% in 2009, the agency said in a special comment. At the same time, the average transparency level for the 90 largest Russian companies across all sectors was 55.8% in 2009 - 10.9% higher than in electricity businesses. The weaknesses in disclosure by Russian electricity utilities relates to low financial transparency, drawbacks in ownership disclosure, and opaque information about top managers' and directors' remuneration. (Interfax “Transparency Low Amongst Russian Electricity Companies – S&P”)
· The restoration of the Sayano-Shushenskaya GES following an accident in August will cost about 40 billion rubles, and its owner, RusHydro hoped for the state's assistance in financing the restoration. However, the company's performance in the first half of 2009 according to international financial reporting standards shows that it could cope with the problem itself, VTB Capital analyst Mikhail Rasstrigin says. As of June 20, RusHydro had 39.3 billion rubles, which is 58% more than at the beginning of 2009, the report says. The money has been deposited at Sberbank, VTB, and Gazprombank. The company's overall debt is 83.07 billion rubles and its net debt is 43.77 billion rubles, which is less than the company's EBITDA in yearly terms (28.11 billion rubles in the first half of the year). This means that RusHydro can easily borrow more, Rasstrigin says. (Vedomosti “Enough for GES”)
· McKinsey&Co published yesterday a survey, devoted to profitability and efficiency of measures which could be realized in Russia by 2030 and which are to increase energy efficiency of the economy and to lower carbon dioxide burst in the atmosphere. From 150 analysed measures 60 are considered to be high profitable, their realization allows getting €195 billion by 2030. The most efficiency sector for cutting emissions is agriculture and forestry. (Kommersant, Vedomosti “Fight with Weather Might Be Business”)
December 2, 2009
· Electricity sales companies in the South Caucasus may lose status of the member of the wholesale electricity market player due to 12 billion ruble debt, the newspaper writes. The Market Council may deprive six major electricity sales companies in the region of the guaranteeing supplier status. However, the regulator has not yet managed to remove any guaranteeing supplier from the wholesale market because the Ministry of Energy blocks such initiatives. (Kommersant “North Caucasus Did Not Listen to The Market Council”)
· Market Council worked out a mechanism to deprive debtor energy sales companies guaranteeing supplier status. The Partnership suggests choosing a company from the list of certified companies and transferring the status of guaranteeing supplier to it. This procedure is to substitute the existing mechanism of special tenders. Head of Energy Development Fund Sergey Pikin thinks that in this case deprivation of guaranteeing supplier status is a struggle not with the causes for debts but with consequences. It means than change of the supplier won’t regulare debts on wholesale energy market and new supplier will be in the same situation as the previous one, Pikin adds. Pikin thinks its better to transfer the management of such sales companies either to grids or to gencos. But deprivation of guaranteeing status is an extreme measure while fighting with debtors and it might be launched in July 2010. Non-payments on wholesale market may complicate lives of consumers, which will have to provide either financial guarantees or form the system of non-acceptance payments. Sales companies will try to divide responsibilities with retail consumers, analysts say. The Market Council admits it and suggests toughening punishments for final defaulters and implementing system of advance payments. (Interfax, RBC Daily “The Market Council Worked Out Mechanism To Deprive Energy Sales Company Status of Guaranteeing Supplier”)
· Inter RAO surged more than 20 percent in its first day of trading on the MICEX Stock Exchange after MSCI Inc. added the stock to its index. The shares jumped as much as 22 percent, the biggest intraday gain since Oct. 16, and closed up 18 percent at 3.53 kopeks Tuesday. (The Moscow Times “Inter RAO Up on First Day of MICEX Trading”)
December 1, 2009
· Rushydro has signed a contract with Power Machines to supply equipment for Sayano-Shushenskaya hydro power station. The contract is worth 13.7 bln rubles for 2011-2012. (Vedomosti, RBC Daily “Turbines with the Discount”)
· Rosatom may save 21 bln rubles if amendments to the law on state corporations are adopted. The amendments envision the introduction of a right for state corporations to skip the obligation to make a buyout offer to minority shareholders if joint stock companies account for more than 30% of the state corporations’ capital. Thus Rosatom may obtain the right not to buy out shares from Inter RAO minority shareholders. (RBC Daily “How to Earn Billions in Two Months”)
· Vladimir Putin has signed a resolution that confirms an energy saving plan which was presented by Deputy Prime Minister Sergei Ivanov on Tuesday. Presenting the energy saving policy plan to Putin on Tuesday, Ivanov said that one of the document's sections lay outs measures to provide consumers with domestic electricity meters, which according to the deputy prime minister, should encourage energy saving. Other parts of the plan deal with steps to increase the energy efficiency of commodities, services and housing construction. According to the document, each ministry will have to draw up its own energy saving plan in this area. (Interfax “Putin confirms energy saving plan – press secretary”)
November 30, 2009
· Russian energy enterprises are on the whole prepared for the coming winter, “despite the tragic events at the Sayano-Shushenskaya plant,” Energy Minister Sergey Shmatko said at an all-Russia conference on energy supply in the 2009-2010 winter season. But the terms and methods of preparedness for winter do not satisfy the Ministry of Energy, Kommersant writes. Minister Sergey Shmatko has therefore promised to control fulfillment of investment programs and to institute criminal proceedings against gencos which try to avoid mass scale repairs at power plants. Enel-owned Enel OGK-5 was the only company mentioned by Shmatko as fully implementing its investment obligations on time. (Kommersant “Gencos Are Being Prepared for Cold Weather”)
· The Russian Energy Ministry has for now rejected a request by the Federal Grid Company (FGC) to allow it to hold onto generating assets for a period of three years. "The preliminary response has been to reject this, Deputy Energy Minister Vyacheslav Sinyugin told a briefing. The Energy Ministry has said the FGC wanted the law changed to enable it to combine grid operating functions with power generating and to keep hold of the assets that it inherited from RAO UES of Russia for a period of three years. "A decision will be reached once the Energy Ministry has analyzed all the possible implications [of the proposed changes]," the ministry said at the beginning of November. "The [grid] company wants to hold shares in generating companies and wait until the equity markets pick up before selling them to raise funds for its investment program," a grid company representative told Interfax earlier. At the same time, "generating is not a core business for the FGC," he said. (Vedomosti “Without Generation”)
· Russian energy companies need additional credits for modernization and Ministry of Energy takes part in negotiations with foreign banks, which are ready to give discount debts, Sergey Shmatko said. (Vedomosti “To Held Gencos”)
· The market council agreed the method of costs justification on construction of new capacities, RBC Daily writes. Finally gencos got clear financial orients for construction of generation objects. The market council defined the method of costs justification. Financial figures are acceptable for the majority of the companies, analysts say. Despite a number of disputable issues, gencos will be able to correspond their expenses with the expected payments for capacities. (RBC Daily “Capacities Got Clarity”)
· The media outlets discuss “Energy Strategy 2030”. State control over the gas and oil industries may begin declining in 2013, the government said in this energy policy paper published Thursday. Under the plan “Energy Strategy 2030,” the economy and budget will steadily move away from the reliance on energy exports, spurring the changes. “In these conditions, direct government involvement in the development of the energy sector will gradually weaken,” the paper said. Authorities will increasingly seek private partners, especially for construction and the upgrade of energy facilities, it said. (The Moscow, Vedomosti “Times Government Expects Energy Sway to Decline”)
Russia Headline News
December 4, 2009
· Vladimir Putin defended his record after a decade in power as Russian president and prime minister and hinted he may upstage his successor, Dmitry Medvedev, by running for the presidency again in 2012. “Don’t hold your breath,” Putin, 57, said during his annual call-in show yesterday when asked if he planned to retire from politics. There’s still “enough time” to think about the elections, said Putin, who favored Medvedev’s presidency last year because the constitution bans three consecutive terms. Medvedev, who is seeking a political voice distinct from his mentor’s, only hours later told reporters in Rome that he also doesn’t rule out running in the next elections. The 44-year old lawyer outlined his vision for a modern, democratic Russia in an address to the nation three weeks ago. (Bloomberg)
· The U.S. is “hindering” Russia’s 17-year effort to join the World Trade Organization, Prime Minister Vladimir Putin said. “Russia’s accession to the WTO remains our strategic goal, but we have the impression that for reasons unknown to us certain countries including the United States are hindering that process,” Putin said in a live call-in television show with the nation. (Bloomberg)
· President Dmitry Medvedev told Pope Benedict on Thursday that he had decided to upgrade diplomatic relations between the Vatican and Moscow to the highest level. “President Medvedev told Pope Benedict at today’s meeting that he signed a decree concerning the establishment of full diplomatic relations with the Vatican,” Medvedev’s spokeswoman Natalya Timakova told reporters. (The Moscow Times, Reuters)
· Prime Minister Vladimir Putin on Thursday accused Mikhail Khodorkovsky of ordering murders while running Yukos, in a stinging attack that the jailed businessman’s lawyer dismissed as a frame-up. Putin, who as president oversaw Khodorkovsky’s arrest in 2003 and subsequent sentencing to 8 1/2 years in prison on tax and fraud charges, mentioned the issue during his annual televised call-in show. Khodorkovsky’s case was raised when the call-in show’s host read out the question, “When will Khodorkovsky be released?” It wasn’t clear who had sent the question. Putin did not give a definite answer but recalled that Yukos’ former security chief, Alexei Pichugin, had been convicted on murder charges and suggested that he had been acting on the orders of Yukos owners. (The Moscow Times)
· Italian energy giant ENI, Gazprom's partner in South Stream, a project for supplying Russian gas to Europe across the bottom of the Black Sea, has approved the entrance by a new participant, France's EdF. The latter will receive at least 10% in the project. In a similar project, Nord Stream, Gazprom owns the control stake, the rest is divided between foreign partners. In South Stream ENI and Gazprom so far remain on a par basis, and Italians insist this should continue, that is each partner should allocate 5% for EdF. (Kommersant, page 1, "Pouring some of South Stream for the French")
· Transneft’s oil pipeline project across eastern Siberia to China and Asian markets will cost about 770 billion rubles ($26.3 billion), chief executive Nikolai Tokarev said Thursday. Transneft will spend about 350 billion rubles on the second phase of the East Siberian-Pacific Ocean project, to extend the link from Skovorodino near the Chinese border to Kozmino on the Pacific coast and expand capacity to 80 million tons, Tokarev told Kommersant in an interview. (Bloomberg)
December 3, 2009
· Two Constitutional Court judges are stepping down from senior positions after giving interviews that denounced mounting pressure on the country’s judicial system. Judge Anatoly Kononov will resign from the Constitutional Court at the end of this month, while judge Vladimir Yaroslavtsev has handed in his resignation as a member of the country’s Council of Judges, court spokeswoman Yekaterina Sidorenko said Wednesday. She stressed that Yaroslavtsev would remain at his job in the Constitutional Court. (The Moscow Times)
· Gazprom could exchange its gas for electricity produced by France's EDF and sell it on the open market, the paper reports citing a spokesman for the Russian gas export monopoly. (Vedomosti)
· Russia expects tough talks with Bulgaria next week over the proposed Burgas–Alexandroupolis oil pipeline, as Sofia is reviewing its energy deals with Moscow, Energy Minister Sergei Shmatko said Wednesday. (The Moscow Times)
· President Dmitry Medvedev will oversee the signing of an agreement between OAO Gazprom, Eni SpA and Electricite de France SA on the South Stream natural-gas pipeline and meet Pope Benedict XVI in Rome today. Gazprom Chief Executive Officer Alexei Miller said last week that EDF would take a 10 percent stake in the offshore section of the 900-kilometer (560-mile) pipeline, due to open at the end of 2015 and designed to link Russia to the Balkans, where it will split into northern and southern routes. Sergei Prikhodko, an aide to Medvedev, said Russia “expects” Gazprom and Eni to sign an agreement on South Stream in Rome. The agreement will also involve EDF, Gazprom spokesman Sergei Kupriyanov said. (Bloomberg)
· A leak on Russia’s Druzhba pipeline spilled 54 tons of oil in Russia’s Lipetsk region yesterday, said Igor Dyomin, a spokesman for OAO Transneft, the country’s pipeline operator. Deliveries through the system toward Europe weren’t interrupted, Dyomin said by telephone from Moscow today. Transneft expects the pipeline to resume working at full volume tomorrow, he said. The spill, which occurred on one of the system’s two main pipelines, is being cleaned up, Dyomin said. The cause hasn’t been determined, he said. (Bloomberg)
· Belarus is asking Gazprom not to raise gas prices in 2010, the paper says, citing officials. (Kommersant)
· Hong Kong’s stock exchange will hold a special meeting on Dec. 7 to consider United Co. Rusal’s initial public offering of as much as $3 billion, said three people familiar with the matter. Rusal and its bankers had sought to have the application reviewed today at a weekly meeting of the exchange’s listing committee, said the people who declined to be identified as the information is private. The Rusal application was delayed to Dec. 7 after some committee members indicated they couldn’t attend the hearing, said two of the people. (Bloomberg)
· OAO Sberbank may participate as an investor in a share sale by United Co. Rusal, Interfax reported, citing German Gref, chief executive officer of Russia’s biggest lender. “We are currently an underwriter in Rusal’s IPO and are considering participation as an investor as the shares look promising,” Gref said. (Interfax)
December 2, 2009
· The government unveiled its branding for the 2014 Sochi Olympics on Tuesday, becoming the first country to use a web site in the logo and putting a local Internet portal out of business in the process. The logo — which combines Sochi.ru 2014 with the Olympic rings — reflects the goals of the Olympic Games for Russia and was decided upon after vast amounts of research in large cities in Russia and abroad, Dmitry Chernyshenko, head of the Sochi Organizing Committee, said at a news conference. The logo was approved by top political leaders in September, he said. (The Moscow Times)
· A London court on Tuesday decided to postpone extradition hearings for businessman Yevgeny Chichvarkin until Aug. 2 to give legal experts time to translate Russian documentation. The Westminster Magistrates Court said the eight months were needed to translate 29 volumes of documents from Russian into English and the August hearing would set a timetable for a full hearing. (The Moscow Times)
· Higher oil prices have prompted the Economic Development Ministry to upgrade its forecasts for economic growth while moderating its planned eurobond issue, the ministry said Tuesday. The economy will likely grow by at least 2.5 percent next year, more than previously expected, Deputy Economic Development Minister Andrei Klepach said. It could grow as much as 3.1 percent at best, he said, bringing the figure in line with the latest estimate by the World Bank. The ministry’s current forecast is for the economy to expand by 1.6 percent. The World Bank said last month that the growth would reach 3.2 percent. (The Moscow Times)
· The Permanent Court of Arbitration in The Hague, which has been hearing a motion against Russia from Yukos shareholders since 2006, ruled on Monday evening that the EU Energy Charter Treaty is applicable to the dispute, GML, the claimant in the dispute, said in a statement. GML accused the Russian government of confiscating the Yukos assets, most of which ultimately went to the hands of the state-run oil company Rosneft, and is claiming $50 billion in compensation. "We understand that the litigation will take years, but it is a matter of principle for us to have the lawyers bring the proceedings to an end," said Mikhail Brudno, a GML co-owner (Vedomosti, 'Acting Against Charter'; Kommersant, page 1, 'Investments in Yukos Grow to $100 Billion').
· Europe’s two biggest suppliers of natural gas, Norway’s Statoil and Gazprom signed initial deals to import liquefied natural gas, or LNG, to the United States and trade energy there. In a joint statement Tuesday, the companies said the deals include Gazprom gaining regasification capacity at the Cove Point, Maryland, LNG receiving terminal. Statoil will also sell natural gas to Gazprom at various U.S. locations, while purchasing LNG from the Russian company at Cove Point. (Reuters)
· Gazprom Neft's net debt grew by $1.2 billion to $5.46 billion in the first nine months of 2009, and its monetary resources and their equivalents dropped by half, the company said in its report according to US GAAP. Gazprom Neft's capital investments also declined by 28.4% to $1.8 billion, but it spent $2.2 billion on acquisitions (stakes in Serbia's NIS and Sibir Energy), which is 30% more than in the same period in 2008. Gazprom Neft is about to conclude a new deal: it signed a binding protocol with Sweden's Malka Oil on buying its only production subsidiary, STS-Service, for about $118 million (Vedomosti, 'Buying Everything'; Kommersant, page 11, 'Gazprom Neft Expanding Extraction').
· Sberbank has reduced the rates of foreign currency loans by 1.5-5.5 percentage points to a pre-crisis level of 9.5%-15%. Other banks consider this strategy to be too risky and are not prepared to encourage demand for foreign currency loans (Kommersant, page 9, 'Sberbank Fabricates Foreign Currency Risks').
· Boris Alyoshin, a former president of Avtovaz, has been appointed to head the Central Aero-Hydrodynamic Institute (TsAGI). The Industry and Trade Ministry is no longer concealing that the institute will serve as the base for "consolidating all the industry's resources", that is, all research institutes having to do with the development of aircraft (Kommersant, page 9, 'Boris Alyoshin to Take Care of Aerodynamics').
· Globaltrans Investment, Russia’s largest private rail freight operator, is to buy a controlling stake in rival BaltTransServis for $250 million to boost its presence in the oil transport market. Globaltrans said Tuesday that it would partially fund the deal by raising $175 million in a placement of Global Depositary Receipts, with $75 million going toward the acquisition. Its shares rose 6.9 percent to close at $9.10 a share Tuesday. Chief executive Sergei Maltsev said the remaining $100 million would go toward expanding the company, particularly through the acquisition of new rolling stock. (Reuters)
December 1, 2009
· Investigators probing Friday's train bombing are also questioning suspects in another criminal case - the train bombing on the same railway back in 2007. A verdict is to be announced in the 2007 Nevsky Express bombing soon and investigators suspect that Friday's bombing could have been timed to coincide with the pronouncement of the verdict. Meanwhile, facial composites have been made of a man and woman, who reportedly stayed near the scene of the disaster for several days and then disappeared. (Kommersant)
· Prime Minister Vladimir Putin will hold his annual televised call-in show with Russians on Thursday, where he will likely take questions on pensions, corruption and the Nevsky Express. “A Conversation With Vladimir Putin — the Sequel” will be broadcast live on state television and radio at noon. Putin instituted the broadcast while president and has continued it in his role as prime minister. (Reuters)
· The positive economic that made themselves felt in Russia in early autumn were short-lived by all accounts, and October saw a decline in the processing industry, while GDP shrank further by 8.1% against 7.8%. These tendencies were largely due to problems in industrial lending and to extremely low demand. The government is not in the defeatist mood, however. It looks like Putin has decided to test the Western anti-crisis model, taking Russian specifics into account. The crisis configuration has changed. It was a crisis of liquidity last autumn. In other words, the world economy lacked money. Therefore, priority was given to pumping liquidity into banks. The world economy now has a lot more money, experts say. (Nezavisimaya Gazeta)
· Russia and Poland may not agree on a gas contract by the end of this year, Poland’s Deputy Prime Minister Waldemar Pawlak said Monday, contradicting earlier comments by Warsaw and Kremlin officials. (Reuters)
· Croatia has intensified talks with Russia to join the South Stream gas pipeline project, a new transport link for Russian gas to Europe, the economy ministry said Monday.“ Croatia is interested to join the South Stream pipeline and is now holding intensive talks with the Russian side. At the moment, the talks are in a stage where we cannot provide any detailed information,” the ministry said in a statement. (Reuters)
· Transneft plans to move exports of Urals blend to a joint terminal with the Caspian Pipeline Consortium on the Black Sea to reduce delays from weather and customs clearing. Transneft may start shifting oil shipments of 37 million metric tons of oil a year to the terminal from the Sheskharis terminal at the port of Novorossiisk in 12 to 18 months, Igor Dyomin, a spokesman for the pipeline operator, said in an interview on Monday. (Bloomberg)
· Russian companies will receive priority in Iran’s future power-generation projects, Ali Akbar Salehi, head of Iran’s Atomic Energy Organization, said Monday. Salehi, speaking after a briefing with Russian Energy Minister Sergei Shmatko, who was on a visit to the Bushehr nuclear power plant, said Russia would get priority as Iran sought to build 20,000 megawatts of new generation capacity. (Reuters, Bloomberg, The Moscow Times)
November 30, 2009
· The attack on the Nevsky Express high-speed train on Friday caused a traffic collapse and made people realise railways were unprotected from terrorist attacks. The bomb blast killed dozens and injuries 100 others. (Kommersant, The Moscow Times)
· Russia, Belarus and Kazakhstan on Friday gave the go-ahead for the creation of a united customs union, whose tariff regime will be based largely on the one that Russia currently has in place. President Dmitry Medvedev met with his counterparts Alexander Lukashenko and Nursultan Nazarbayev in Minsk on Friday, where they agreed to the creation of a unified customs tariff, which will start Jan. 1, as well as a unified customs code, which will go into effect July 1. (The Moscow Times)
· Russia has unveiled the text of its draft European Security Treaty aimed at creating a mechanism to avert military conflicts. (Vedomosti)
· Energy Minister Sergei Shmatko arrived Sunday in Tehran for two days of talks, including on possible exports of refined oil products to Iran and greater participation for Russian refiners there. The prospect of Russian oil product supplies to Iran came as the International Atomic Energy Agency rebuked the country Friday for secretly building a uranium-enrichment plant — a project that fueled fears that it was seeking a nuclear bomb. Russia and China, traditional allies of Iran, gave rare support to the international censure. (The Moscow Times)
· Ukraine has asked Gazprom to amend the formula by which it calculates the price of gas, Ukrainian state energy firm Naftogaz said Friday. Naftogaz announced the proposal just days after Gazprom relaxed contract obligations for Ukraine, allowing it to buy far less gas next year as its crippled economy needs less energy. Feuds between Kiev and Moscow over gas volumes, prices and debts have led to supply cuts to Europe, which gets a fifth of its gas from Russia via Ukraine. (Reuters, The Moscow Times)
· Electricite de France, Europe’s largest utility, and GDF Suez agreed on Friday to join Russian gas pipeline projects as European nations seek to boost security of supply following disruptions in the past three years. EDF will take a 10 percent stake in Gazprom’s South Stream pipe, which will run under the Black Sea, bypassing Ukraine, Gazprom CEO Alexei Miller said. “The realization of South Stream will allow reliability and stability of deliveries to Europe for many decades,” he said. (Bloomberg, The Moscow Times)
· Gazprom is seeking to reach a $3 billion agreement with Japan to supply almost one-fifth of the steel pipes for a gas link in the Far East, partially replacing domestic producers, a person familiar with the plans said. (Bloomberg)
· Vedomosti has learned the formula of calculating wholesale oil product prices developed by the Federal Antimonopoly Service (FAS). Its application is expected to reduce fuel prices by approximately 15%. The wholesale fuel price in any spot in Russia will be determined by deducting the export duty and the cost of transportation from the quotation of the international trade center closest to a specific oil refinery. The resulting price will be converted into rubles at the current exchange rate and the cost of fuel transportation from the oil refinery, the excise tax and VAT will be added. A FAS spokesman said the formula will be agreed with oil companies in the nearest future. (Vedomosti, "The Gasoline Formula")
· The High Court of London has brought two new judgments on the Sibir Energy lawsuit against its former co-owner Shalva Chigirinsky and his affiliates; the sum of claims has grown to $354 million. The latest judgment was brought on November 24. The court increased by $111.3 million the sum which Chigirinsky and his companies must return on two instances: the advance payment made by Sibir to Chigirinsky's affiliates for development projects (the deal was not approved by Sibir shareholders) and the payment for simulated oil contracts. The defendants have 28 days to file an appeal. (Vedomosti, "New Victory for Sibir")
November 20, 2009
· Investigating agencies of the Novosibirsk region brought a criminal action against Nikolay Krasnikov, the head of “scientific town” Koltsovo. He is suspected in forgery and abuse of power amid construction of the power station. Krasnikov considers the case to be an “unpleasant misunderstanding”, but does not rule out the possibility that the action is connected with the coming elections of Koltsovo. (Kommersant “In Energy Grids Under Inquest”)
- Sistema has submitted an application to consolidate 100% of the shares in Sistema-Invest, the Federal Antimonopoly Service said in a statement. The application was for acquiring 80.002% of the voting shares in Sistema-Invest, which would boost the holding's stake to 100%. The FAS approved the company's application. It was earlier reported that Sistema's stake in Sistema-Invest had been lowered from 65% to 19.9%. The company said that sale of its stake in Sistema-Invest was part of internal restructuring and included an option for buyback. (Interfax “Sistema applies to consolidate 100% in Sistema-Invest, FAS approves deal”)
- Russia's Federal Financial Markets Service (FFMS) has registered RusHydro's additional share issue worth 19 billion shares, the service said in a statement. The company will receive 4.3 billion rubles from the state through the placement, which will go to fund the construction of a shore spillway near Sayano-Shushenskaya GES. The placement is slated to start in the fourth quarter of 2009 and the first quarter of 2010, RusHydro earlier said. (Interfax “FFMS registers RusHydro’s additional share issue”)
November 19, 2009
· Shares in gencos have wide popularity among swindlers, RBC Daily writes. According to the Moscow Central Depositary, around 80% of attempts to acquire shares illegally are connected with large power companies. The most attractive shares for swindlers are in RusHydro and Federal Grid Company. Such interest in genco shares increased after the reorganization of RAO UES in 2008, when information about share lists became publically available. (RBC Daily “Hunting for Energy Shares”)
· Ministry of Energy has developed out and distributed a bill which suggests that the rights to key energy assets should be restricted to one year if the owners don’t meet their obligations. In accordance with the document, management will be transferred to a temporary designee, if the owner has not prepared the asset for winter or has technical regulations. The project refers to all electricity, water and gas assets except state monopolies. (Kommersant “Winter Asks as Ministry of Energy”)
· RusHydro will have to finish building its Boguchansk dam without the help of RusAl, but the firm will be able to raise up to $660 million selling shares to the private sector next year, Energy Minister Sergei Shmatko said in the Federation Council on Wednesday. Shmatko said RusAl would be pulling out the management of its joint project with RusHydro — building the Boguchansk plant — leaving the power company to finish the construction on its own. After the Sayano-Shushenskaya accident, the government urged RusHydro and RusAl to speed up the construction of the Boguchansk plant, which the companies started in 2006. The project has caused frequent feuding between the two firms, however, with RusHydro claiming that RusAl has delayed paying its share on several occasions. RusAl has since paid up on most of its Boguchansk obligations. “RusAl paid almost all of its debt on the Boguchanskaya project by now, except for a small portion from 2008,” Elena Vishnyakova, a spokeswoman for RusHydro said. She did not specify the exact amount. Speaking about the power company’s future partnership with RusAl, Vishnyakova said “we will maintain 50-50 parity financing, but RusHydro will be the sole manager of the project.” (The Moscow Times, RBC Daily, Kommersant “RusHydro to Finish Dam Alone”)
November 18, 2009
- To make KAP more efficient, the parties agreed upon a new contract on supplying electric power to the plant in the period up to 2012, and the price for it will be pegged to the aluminum prices on LME. (Kommersant, Vedomosti “Oleg Deripaska Shares Combine with Montenegro”)
- OGK-4, controlled by E.ON, has cleared the terms for breaking the agreement with the general contractor for Berezovskaya GRES’s third unit building, KATEKenergoremont, part of GK Kvarts. The sides are separating peacefully, Kvarts has no financial claims on OGK-4 and will be able to participate in another tender. However, the reason for breaking the contract, besides the revision of OGK-4 investment program, could be the the genco’s dissatisfaction with the contractor. (RBC Daily “Civilized Divorce”)
November 17, 2009
- Inter RAO UES is ready to assume a 1.6 billion euro debt burden. The company plans to use this sum, which far exceeds the value of the restoration of the Sayano-Shushenskaya electric power plant, to acquire new assets. Sberbank is ready to provide this money to Inter RAO against the pledge of contracts to ship energy and stakes in subsidiaries, as well as the right to the acceptance-free write-off of resources from the energy company's accounts. (Kommersant “Inter RAO Plunges into Debt”)
- Russia reduced power generation 6.4% to 800 billion kilowatt-hours in January-October 2009 compared to the same period in 2008, the Federal State Statistics Service (Rosstat) said. Electricity production fell 3.6% in October 2009 compared with the same month last year but was 15.1% higher than in September 2009. Nuclear power plants reduced output 2.1% to 132 billion kWh in the 10 months, and output from coal and gas-fired power stations fell 10.9% to 518 billion kWh. Hydroelectric plants increased generation 8.4% to 149 billion kWh. Heat production decreased 3.5% to 1.004 billion Gcal in the 10 months. (Interfax “Russian electricity production down 6.4% in Jan-Oct – Rosstat”)
- OGK-2 revenue fell 7.74% in January-September year-on-year to 29.145 billion rubles, the company said in its earnings statement. Revenue declined due to falling volumes of electricity and capacity sold under regulated agreements. The average price of electricity on the futures market was down 12.77% compared with the same period last year. (Interfax “OGK-2 revenue falls 7.74% in 9 mths”)
- LLC Gazprom Energy Holding has increased its stake in the TGK-1 territorial generating company to 30.013% from 29.501% ordinary shares, the genco said in a statement. The company is now obliged to offer to buy out the genco's minority shareholders. (Interfax “Gazprom increases TGK-1 stake to above 30%”)
November 16, 2009
- Inter RAO shows interest in buying Ukrainian grid companies. The Russian company may take part in privatization of the Ukrainian regional power distributors when the country’s authorities sell controlling stakes in 14 regional structures. The analysts noted that Inter RAO wants to do what Gazprom did not mange to do – to reach final consumers. (RBC Daily “Inter RAO Gets into Nets”)
- Russia has threatened to stop the Sangtuda HPP-1 in Tajikistan which it controls. Rahmetull Alzhanov, the plant's general director, sent a letter on Friday to Tajik Prime Minister Akil Akilov giving warning that the facility may be stopped as of December 1. He described this as an extreme measure and the debts of the sole consumer - the state-owned Barki Tochik company - as the reason. The company's electricity bills for August 1 through November 12 total $6.5 million ($3.9 million of that is overdue). By the end of the month the debts may exceed $10 million (given debts of previous years), Alzhanov fears. Debts for two years may reach $25 million. (Vedomosti “Lights may be turned off”)
- Almost two thousand citizens in Krasnoyarsk region and Khakassia addressed President Dmitry Medvedev and Prime Minister Vladimir Putin asking that Sayano-Shushenskaya HPP be demolished. They are sure its operation in an “active seismic zone” puts hundreds of thousands people at risk. RusHydro, which owns the HPP, says this demand is “insane”. (Kommersant “Sayano-Shushenskaya HPP to Be Stopped”)
Russia Headline News
November 20, 2009
· President Dmitry Medvedev called on the international community Thursday to rally around the problem of road safety and treat it with the same urgency as they have the global financial crisis. “It is no less dramatic for our planet than the consequences of the world’s recession or food supply security,” Medvedev said while opening the First Global Ministerial Conference on Road Safety. (The Moscow Times)
· The Constitutional Court ruled Thursday that capital punishment could not resume in January, when the last of Russia’s regions begins jury trials, effectively extending a moratorium on the death penalty indefinitely. “The introduction of jury trials Jan. 1, 2010, does not open the way for the possible use of the death penalty,” the court said in statement. Chairman Valery Zorkin told RIA-Novosti after the ruling that the “decision was final and cannot be appealed.” The Constitutional Court’s decisions must be followed by all Russian courts. (The Moscow Times)
· Companies in Russia experienced more economic crime this year than anywhere else in the world, according to a report released Thursday, which underscores the difficulties facing an ambitious Kremlin plan to curb corruption and lawlessness. Of 86 companies surveyed in Russia, 71 percent said they had been subjected to at least one major economic crime in the past 12 months, according to a report released by PricewaterhouseCoopers. (The Moscow Times)
· Prime Minister Vladimir Putin and his Ukrainian counterpart, Yulia Tymoshenko, began talks Thursday that the European Union hopes will avert a possible new conflict disrupting supplies of Russian gas to EU consumers. Even before they met, the Kremlin snubbed Ukrainian President Viktor Yushchenko, who had called for a revision of a gas agreement brokered by the two leaders early this year and it accused Kiev of trying to blackmail Russia and Europe over energy supplies. (Reuters, The Moscow Times)
· Lukoil has decided to redirect its growth strategy from increasing production output to free monetary flow growth. On Thursday the company's board of directors approved the new 2010-2019 plan, the company said in a press release. Until now Lukoil has used a strategy approved in 2007 (until 201), but the crisis, the decreasing oil demand and new macroforecasts forced some adjustments. Lukoil did not disclose any figures, only listed eight tasks that still include production growth. (Vedomosti, "Money matters")
· On Friday Itera will sign a deal on selling 51% in the project for exploitation of the block N21 in Zarubezhneft's Turkmen shelf on the Caspian Sea. The state is thus assuming control over the first project for hydrocarbon production by Russian companies, agreed with Turkmen President Gurbanguly Berdimuhammedow. A day earlier Itera was able to increase the pipe access, and experts see these both events as not an accidental coincidence. (Kommersant, page 11, "Itera will settle down on Turkmen shelf")
· Total SA said the first output from OAO Gazprom’s Shtokman natural-gas project in the Arctic is targeted for the end of 2015, provided a final investment decision is taken by the end of next year. The start of liquefied-natural gas production is scheduled for early 2016, said Paris-based company spokesman Paul Floren, who cited comments by Chief Executive Officer Christophe de Margerie in Argentina last month. Statoil’s spokeswoman Mari Dotterud declined to comment on a report in the Wall Street Journal saying production at the Shtokman project will be delayed by two years. “It is Shtokman Development who should comment on any time frame, being the operator,” Dotterud said on the phone. “We will have a new board meeting before the end of the year. Until then, our focus is to develop the project.” (Bloomberg)
· BP said the candidate proposed by its oligarch partners to lead their Russian joint venture, TNK-BP, had won out over BP’s candidate and that oligarch Mikhail Fridman would stay at the helm until 2011. BP and AAR, a consortium representing the billionaire co-owners, said Thursday that Maxim Barsky, currently TNK-BP’s executive vice president for strategy and development, would become CEO, effective Jan. 1, 2011. Analysts said Barsky’s appointment, which has been expected for weeks, highlighted how the Russian partners, previously largely sleeping partners in TNK-BP, had wrested operational control of the company from BP. (Reuters)
· Russia and Ukraine may swap minority stakes in their aircraft design companies to jointly produce new planes. “Should we move our aviation industries closer, to design and produce airplanes, I think we can reach very serious results,” Ukrainian Prime Minister Yulia Timoshenko said late yesterday after meeting with her Russian counterpart Vladimir Putin in Yalta, Ukraine. (Bloomberg)
November 19, 2009
· Prime Minister Vladimir Putin’s passion for geography was on full display Wednesday as he became head of the Russian Geographical Society’s board of trustees, a day after Emergency Situations Minister Sergei Shoigu unexpectedly became the group’s president. The shakeup at the St. Petersburg-based society, which bills itself as Russia’s oldest organization, has ruffled feathers in the group. Some members suggested Wednesday that the government’s sudden interest could be linked to the society’s extensive property holdings or a desire to use its prestigious name to lend credibility to state-backed projects. (The Moscow Times)
· United Russia’s majority in the State Duma suffered a major blow to its image Wednesday, when the Federation Council voted down controversial tax hikes on car owners that were broadly criticized by auto owners, opposition parties and eventually the Kremlin. The about-face was one of the very few instances where the authorities have backed down on plans because of a public outcry, and it was the latest victory for well-organized drivers’ groups. The changes, intended to help plug a budget deficit next year, would have doubled the base rate of a transportation tax that is key to funding some regional budgets. It is also a major embarrassment for United Russia, which has a large enough legislative majority to change the Constitution unilaterally, and feeds perceptions that the party is following orders rather than generating ideas. (The Moscow Times)
· The State Duma on Wednesday approved the 2010 budget in a key second reading after plowing through hundreds of minor amendments and brushing aside proposals from the opposition. The approved amendments, overwhelmingly sponsored by the Cabinet, largely shuffled around amounts earmarked for various budget items — without changing the overall spending of 9.89 trillion rubles ($345 billion). (The Moscow Times)
· Russia wants to join the World Trade Organization quickly but has not decided whether it will do so as a separate state or in a customs union with Belarus and Kazakhstan, President Dmitry Medvedev said Wednesday. His remarks at a summit with the European Union contradicted comments by Russia’s EU envoy, who said Moscow would join on its own but coordinate entry with its two neighbors, ensuring that confusion remains over Russia’s entry bid. “One thing which is still outstanding and which will be resolved in the near future is … whether [Russian entry] will be part of a process of our customs union joining the WTO or we will do it separately but agreeing on a position with our partners,” Medvedev told a news conference in Stockholm. (Reuters)
· Vedomosti has learned the terms and conditions of ethane's supplies to Kazanorgsintez, on which the company agreed upon with Gazprom only after Prime Minister Vladimir Putin's intervention. The price for ethane will be pegged to the price of polyethylene produced by Kazanorgsintez. With polyethylene costing 30,000 rubles per tonne, which is an average quarterly price, the delivery price of one tonne of ethane will be 6,750 rubles without VAT, Vedomosti's sources said. The agreement has been concluded for five years. Gazprom, however, expects ethane's supplies to amount to 270,000 tonnes of ethane a year, while Kazanorgsintez 390,000 tonnes (Vedomosti, 'Putin's Formula').
· The government will encourage consolidation in the petrochemicals industry because it is too fragmented to become globally competitive, Prime Minister Vladimir Putin said late Tuesday. “Consolidation of this industry stands high on the agenda. The state should help this process and will definitely do it,” Putin told government officials and oil industry executives in Nizhnekamsk, Tatarstan. He added that consolidation in the petrochemical industry was a global trend, but Russia had not participated thus far. “We’re selling raw materials and buying finished products, most likely made from our raw materials,” Putin said, stressing that Russia, which extracts 13 percent of the world’s oil, manufactures only 2 percent of its plastic. The meeting, held at the site where Tatneft is building an oil processing and petrochemical complex, is among several industry forums being held to discuss the development of nonextractive sectors of economy. Putin said access to oil-product pipelines was a crucial problem for the sector and he warned that pipeline owners should not abuse their monopoly. “Access to product pipelines should not be discriminatory,” he said. Energy Minister Sergei Shmatko said the pipeline network needed to be developed since most oil and gas is extracted in Siberia, while most of the country’s petrochemicals plants are in the European part of Russia. (Reuters, The Moscow Times)
· TNK-BP is looking at acquisitions or joint ventures as a means of growing in the oil refining sector, a senior company executive said Wednesday. In recent years, Russian oil firms have shown interest in acquisitions of refineries in Eastern Europe and Western Europe to expand their businesses selling refined oil products and promote their crude oil exports. (Reuters, Bloomberg)
November 18, 2009
· President Dmitry Medvedev’s 18-month campaign against corruption caused Transparency International on Tuesday to bump Russia up by one spot on its annual corruption index. The anti-corruption watchdog said the decision to move Russia up a notch from 147th to 146th place — tying with Ukraine and squeezed between the African nations Kenya and Sierra Leone — was based more on Medvedev’s words than his actions. A State Duma deputy and a small business owner agreed that corruption remained untamed. (The Moscow Times)
· Former Russian Prime Minister Mikhail Kasyanov said President Dmitry Medvedev will fail to modernize the commodity-dependent country’s economy without overhauling its political system. “We cannot have any modernization of our country without modernizing the political system,” Kasyanov, who is now an opposition politician, said in an interview with Bloomberg Television today in London. “Without people’s participation in real political life that is impossible.” Medvedev renewed his calls last week for Russia to free itself from a “humiliating” dependence on commodities in his state-of-the-union address, even as rising oil prices help ease the steepest contraction on record. The economy of the world’s biggest energy exporter shrank 8.9 percent in the third quarter after a 10.9 percent contraction in the previous three month period. Medvedev’s take on the economy and society in his address was “absolutely correct,” though without “global changes,” he’ll fail to meet his goals, Kasyanov said. (Bloomberg)
· The European Union and Russia hope to lay the foundations of a new economic and political partnership at a summit Wednesday despite differences over energy, trade, human rights and climate change. President Dmitry Medvedev and the EU’s Swedish presidency will seek to rebuild trust shattered during Russia’s war with Georgia last year but boosted by a deal this week on an “early warning” mechanism to shield Europe from supply cuts. They are setting their sights low for now, especially as the EU fears gas supplies from Russia are threatened by a dispute between Moscow and Ukraine, but hope at least to avoid new quarrels and start a gradual improvement in ties. (Reuters, The Moscow Times)
· A 37-year-old lawyer jailed amid a heated tax dispute between Hermitage Capital, once the largest investment fund in Russia, and the Interior Ministry died abruptly in Moscow’s Matrosskaya Tishina detention center. Sergei Magnitsky, a father of two, died at 9:50 p.m. Monday of apparent toxic shock and heart failure, said Irina Dudukina, a spokeswoman for the investigative committee of the Interior Ministry. Interior Ministry investigators had accused Magnitsky, a partner with the Firestone Duncan law firm, of being directly involved in developing and executing a scheme in which Hermitage head William Browder purportedly evaded more than 100 million rubles ($3.25 million) in taxes in 2002. (The Moscow Times)
· Russian government officials and Gazprom managers have never concealed it that they view the South Stream gas pipeline as a future alternative to gas transit across an unpredictable Ukraine and a way to make Russian gas supplies to the European Union more stable. However, the price for this alternative is quite high and may reach 25 billion euro in current prices. This is a record for Russia, and the price for gas transportation through this pipeline will also be record high. Germany's RWE and East European Gas Analysis have calculated that the delivery of gas through South Stream will cost three times as much as that through Ukraine (Vedomosti, 'A Costly Alternative').
· "We have managed to settle a long-standing dispute and the parties have signed a deal on the prices, timeframes, and volumes of supplies," Prime Minister Vladimir Putin said in opening a conference in Nizhnekamsk, referring to a dispute between Kazanorgsintez and Sibur, a Gazprom agent. Putin did not give details but instructed his deputy Igor Sechin to make sure, along with the Federal Antimonopoly Service, that the deal is completed and the companies sign it, Putin's press secretary Dmitry Peskov said (Vedomosti, 'Putin Settles Dispute'; Kommersant, page 3, 'Arbitration Oilman).
· Gazprom on Tuesday challenged a recent forecast that the world gas market would be flooded with cheap supplies through 2015, claiming that the glut in Europe would end by 2012. Deputy chief executive Alexander Medvedev made the optimistic statement at a gas conference in Moscow, adding that the company’s prices would become competitive again by that time. (The Moscow Times)
· Gazprom and Srbijagas, Serbia’s state-run gas utility, formed a venture to oversee construction of the South Stream natural gas pipeline across Serbian territory, Gazprom said Tuesday. South Stream Serbia will be registered in Switzerland “soon,” Gazprom said. Gazprom will hold 51 percent of the venture while Srbijagas will have 49 percent. (Bloomberg)
· The U.S. is advising the European Union to get prepared for a new gas crisis: U.S. experts believe Russia will again leave European gas pipelines empty in the upcoming winter. Hungary is looping its gas transportation system so that the country should not experience gas shortage in case supplies from Russia are halted, and the Czech Republic is placing the emphasis on developing its nuclear power industry (Kommersant, page 1, 'Europe Starting Farewell Ceremony for Gas').
· The Federal Antimonopoly Service (FAS) supports an Economic Development Ministry proposal that the vertically integrated oil companies (VIOC) be obliged to separate wholesale and retail operations within independent holding companies by a certain deadline. This would enable FAS to control internal transactions within VIOCs. The idea is so far being discussed at very early stages: the Economic Development Ministry's 'Competition Development Program', in which it is mentioned, has not yet been agreed upon with the Energy Ministry and therefore has not yet been submitted to the government (Kommersant, page 2, 'Separate and Fill').
· Nord Stream AG plans to agree on 3.9 billion euros ($5.8 billion) of loans by the end of the year, , the OAO Gazprom-led venture’s first financing package to build a gas pipeline directly from Russia to Europe. A total of 29 banks confirmed participation in the financing, Managing Director Matthias Warnig said in Moscow today, without naming the lenders. Nord Stream will seek an additional 2.6 billion euros in early 2010, he said, in a speech translated into Russian on Gazprom’s Web site. (Bloomberg)
· En+ Group will give up majority control of Montenegro’s only aluminum plant by transferring half its stake to the government in a deal that will slash the work force at the smelter and a nearby mine. En+ Group said Tuesday that the government of Montenegro would issue guarantees on up to 135 million euros ($201.1 million) in debt to cover loan repayments and redundancies at Kombinat Aluminijuma Podgorica. The agreement ends a dispute between the Russian group and the government of Montenegro. Both sides have agreed to withdraw claims against each other in international courts and each will own 29.365 percent of the smelter after the deal is completed. (Reuters, Vedomosti)
· To make KAP more efficient, the parties agreed upon a new contract on supplying electric power to the plant in the period up to 2012, and the price for it will be pegged to the aluminum prices on LME (Vedomosti, 'World Under the Sun'; Kommersant, page 11, 'Oleg Deripaska Shares Combine with Montenegro').
November 17, 2009
· Moscow will find it harder to exploit divisions within the European Union after the Lisbon Treaty makes the 27-member bloc’s foreign policy more efficient from Dec. 1, diplomats and analysts said Monday. President Dmitry Medvedev will meet senior EU officials under the bloc’s old makeup for the last time at a EU-Russia summit in Stockholm on Wednesday. On Thursday, EU leaders will gather in Brussels to appoint a new permanent president of the European Council and a foreign policy chief with enhanced powers. But it is unclear whether Moscow will abandon its traditional preoccupation with the perceived Western military threat of NATO in favor of new worries over the EU’s growing dominance. European diplomats said the EU reforms would help to improve ties by making the organization more efficient and capable in its role as a global economic player. (The Moscow Times)
· Russia's Finance Ministry is cutting the budget for fighting regional unemployment by 34 billion roubles ($1.19 billion). (Kommersant)
· President Dmitry Medvedev on Monday hailed Singapore’s high-tech sector as an “impressive example” for Russia as it seeks to wean itself off its dependence on commodity exports. Medvedev spoke as he oversaw a flurry of negotiations in Singapore with companies interested in investing in Russia’s Far East and a possible deal that would allow Gazprom to exclusively supply gas to the island nation. Medvedev told a meeting with business leaders that Russia could take a lesson from how Singapore had spurred its technology-driven economy with close but not excessive state intervention. (The Moscow Times)
· Slovak Prime Minister Robert Fico asked for stable gas supplies from Russia and pushed for Gazprom to help build a gas storage facility in his country during talks with Prime Minister Vladimir Putin on Monday. Fico said Putin reiterated that last winter’s painful disruption in supplies to Europe could recur if Ukraine, a main transit route for the gas, defaults on any of its monthly payments for its own imports. (The Moscow Times)
· Surgutneftegaz, which has never before disclosed the names of traders buying its export oil and petroleum products, has finally named its partners. Sunimex Handels and Surgutex were Surgutneftegaz's two major debtors as of the end of the third quarter, the company said in a report by Russian accounting standards. The first trader owes it nearly 12.1 billion rubles ($402 million at the Central Bank's exchange rate by that moment) and the second trader 9.8 billion rubles ($324 million), the report says. But these debts are not overdue. The standard term of installment is about 30 days, InfoTEK General Director Natalya Shulyar told Vedomosti. (Vedomosti, Surgut Discloses Debtors' Names).
· Russia and the European Union have signed a memorandum on early warning of energy supply faults and it covers gas, oil and electricity shipments, as well the prevention of emergencies. The mechanism is expected to prevent cuts or termination of energy shipments to the European Union, EU Energy Commissioner Andris Piebalgs said. The memorandum is the European Union's first written response to the termination of Russian gas shipments to Europe over a conflict with Ukraine last winter. Only verbal statements were made earlier. (Vedomosti, Non-Termination Pact; Rossiiskaya Gazeta, Gas Without Complications, Page 5).
· Singapore has asked Gazprom to become its exclusive supplier of liquefied natural gas. Gazprom is interested, but the proposal is far from an implementation. Singapore has already signed a 20-year contract with British Gas, while a new one can only be obtained in an open tender. Singapore can thus far ask Gazprom to run small operations on its market. (Kommersant, Page 11, Twenty Years of Waiting for Russian Gas).
· Russia's gas monopoly Gazprom has increased gas exports to Europe by 9 percent in the third quarter of 2009. (Vedomosti)
· United Co. Rusal’s Billionaire owner Oleg Deripaska, who is seeking to lure investors for an initial public offering in Hong Kong, dismissed a claim for a stake in the aluminum producer by a former business associate. The claim by Michael Cherney is “nonsense” and “resembles a blackmail,” Deripaska said in an interview in Singapore. (Bloomberg)
· The Central Bank will withdraw one of the main anti-crisis measures - unsecured lending for banks. The regulator has raised the minimal levels of lending ratings by Russian agencies, which qualify banks for unsecured lending in a step back to traditional instruments of monetary-credit policy, the Central Bank said in a press release. The Central Bank expects the level of liquidity to rise in the banking system, and the interest rates and systemic risks to go down. As stabilization continues, the need in emergency measures will disappear. (Vedomosti, Returning to Traditions).
November 16, 2009
· President Dmitry Medvedev addressed the world community Saturday with a call for cooperation and coordination in handling the pullout from economic stimulus measures, but he took a wait-and-see approach on specifics. The speech was noteworthy for its lack of criticism of the United States, which has been a constant subtext of his economic addresses since last year. Dmitry Medvedev said Russia can benefit from Singapore’s innovative development and asked the country’s businesses, including Temasek Holdings Ltd., to help with technology and investment. “If we do not change the paradigm of our thinking we will remain a resource appendix of many other countries which is unacceptable in the 21st century,” Medvedev said. “We very much count on investment and help with technology from our colleagues in Singapore.” (The Moscow Times)
· President Barack Obama said Sunday that the United States and Russia would have a replacement treaty on reducing nuclear arms ready for approval by year’s end. Obama and President Dmitry Medvedev met on the sidelines of a summit of the Asia-Pacific Economic Cooperation to announce good progress in negotiations on an updated pact to replace the 1991 Strategic Arms Reduction Treaty, or START I, which expires Dec. 5. “I’m confident that if we work hard and with a sense of urgency, we’ll be able to get that done,” Obama said, adding that technical issues remain. (The Moscow Times)
· The European Union will be a tougher but more predictable negotiating partner after the bloc’s Lisbon Treaty enters into force because it will be better able to speak with one voice, a senior Kremlin aide said. The treaty, which comes into force on Dec. 1, will make the 27-member bloc more cohesive, President Dmitry Medvedev’s foreign policy adviser Sergei Prikhodko told reporters. “In many events, discussions with the European Union will become more difficult because now they will be speaking with one voice,” Prikhodko said in comments released Friday. (The Moscow Times)
· Russia raised its target for revenue from state asset sales next year to 100 billion rubles ($3.5 billion) as it seeks to overhaul decrepit infrastructure and finance the budget deficit, said First Deputy Prime Minister Igor Shuvalov. The list of so-called strategic state-owned assets will be shortened in the process, Shuvalov said on television yesterday. The state will keep a so-called golden share in companies it considers important, Shuvalov said yesterday. (Bloomberg)
· President Dmitry Medvedev ordered Prime Minister Vladimir Putin to deliver a plan by March 1 for reorganizing state corporations. “The absence of the necessary control over their activities leads to the inefficient use of the state property transferred to them in many cases,” the Kremlin, Medvedev’s seat of power, said today in an e-mailed statement. The authorities must decide where the state is needed and pull out of companies where it is not, reaching an “optimal” level by 2012, Medvedev said in his state-of-the-nation address yesterday. Independent audits should be conducted at state corporations, Medvedev said.(Bloomberg)
· RusAl may offer stakes in smelters and mines to Chinese companies to ensure the success of its initial public offering in Hong Kong and Paris, analysts said. RusAl is seeking a primary listing in Hong Kong and a secondary listing in Paris, with investors’ meetings starting as early as Nov. 30. RusAl may seek to win Chinese state-owned companies as investors by offering production joint ventures and access to raw materials, said Chris Weafer, chief strategist at UralSib, and Eric Kraus at Otkritie. (Bloomberg)
· Slovenia has permitted the construction of the South Stream gas pipeline in its territory. A corresponding agreement as signed in Moscow last Saturday following the talks between Russian Prime Minister Vladimir Putin and his Slovenian counterpart Borut Pahor. The agreement allows for bringing the pipeline to the border of Italy - the key target market of the project, a government official said. "The construction requires the consent of Turkey. So far it has agreed only to geological prospecting for the construction of the sea section," RusEnergy partner Mikhail Krutikhin noted. Bulgaria where the Cabinet has changed may reconsider its agreement. (Vedomosti "Slovenia for it", also Kommersant p. 1 "Russia and Slovenia tie the Match")
· Gazprom increased estimates for gas condensate reserves at Shtokman by 71 percent after receiving new exploration data. Shtokman’s gas condensate reserves are now estimated at 53.3 million tons, Gazprom said in an e-mailed statement today. Natural gas reserves remained unchanged at 3.8 trillion cubic meters, it said. (Bloomberg)
November 13, 2009
· The accident at the Sayano-Shushenskaya hydropower plant and unpaid consumer fees could lead to the reduction of the investment program of RusHydro this year, RusHydro's acting CEO Rustem Khamitov said in his letter to deputy energy minister Vyacheslav Sinyugin. RusHydro has suggested that it decreases its investment in 2009 by 4.8 billion to 60.1 billion rubles. The main cuts - 5.96 billion rubles - will affect the Boguchansky project (the hydropower plant and aluminum plant, BEMO), reconstruction (3.5 billion rubles) and construction (2.5 billion) of the Zagorskaya-2 power plant. (Vedomosti - Delayed projects)
· Sberbank is set to begin bankruptcy proceedings for Energomash Group, of the country's biggest manufacturers of energy equipment, whose debt has come close to 30 billion rubles. The bank wants to sell Energomash assets via competitive bidding by offering half of them to Rosatom, the group's customer. The idea makes sense only if Rosatom agrees to provide Energomash with guaranteed orders. (Kommersant – Sberbank and Rosatom will share Energomash)
· OGK-4 has announced that the register of OGK-4 was removed from Central Moscow Depositor to R.O.S.T. Registrator. CMD hasn’t paid for the transfer. The court session will take place on November 25. (RBC Daily – How much is the transfer)
· After 10 years of RAO UES reform it was decided to return to the beginning. Anatoly Chubais said in his interview that there were 3 points that wouldn’t support this return. The first is the “energy” law and governmental resolution to liberalize the power market. The second is investors’ obligations to create new facilities. The third one is the government’s reputation. (Kommersant – It took one year to widen RAO UES reform lasting 10 years)
November 12, 2009
· In his address to the Federal Assembly Russian President Dmitry Medvedev said that the development of a rational model for energy use is a national economic priority. Programs will soon be launched to install meters. Russia has already started to switch to the use of energy-saving light bulbs. Public utility networks will start to be modernized next year. Medvedev pointed out that a lot of energy is lost during transmission through Russia. "In the future, superconductor technologies will radically change the process of production, transmission and use of electrical power," he said. (Interfax - Rational energy use a national priority – Medvedev)
· Inter RAO UES Baltic, a 100% subsidiary of Inter RAO, has closed a deal on buying 18.9% in Kuzbassenergo, or TGK-12, from the Federal Grid Company, a source close to Inter RAO told Vedomosti, adding that the company paid for the stake in cash. A Federal Grid Company spokesperson confirmed the fact of the deal but refused to disclose its value. The Federal Grid Company board of directors had decided to sell the asset in early October, a source close to the grid monopoly said. (Vedomosti – Energy Exchange)
· TVEL, which is part of Rosatom, will get the control of a significant number of enterprised involved in aspects of uranium processing. Their combined earnings together with TVEL itself reached 97.6 billion rubles in 2008. Atomenergoprom, the subsidiary of Rosatom responsible for Russia’s civil nuclear industry, announced yesterday that Toplivnaya Kompaniya will be established at the TVEL base. (Kommersant, RBC Daily – TVEL to Enrich Uranium)
November 11, 2009
· On Tuesday the 16th Arbitration Court of Appeals in Yessentuki granted an appeal filed by two Gazprom's affiliates, Mezhregiongaz and Centerenergyholding, which own 45.02% in OGK-2, on recovering 446.5 million rubles from OGK-2 former General Director Mikhail Kuzichev, Mezhregiongaz reported. The claimants are seeking the return of the golden parachutes the company paid to 13 sacked top managers in May 2008. (Vedomosti, Kommersant, RBC Daily – Court Closing Golden Parachutes)
· Andrei Shishkin, a first vice president at Viktor Vekselberg's IES Holding, is leaving the company. His replacement should be announced in the next few days. Experts believe that Shishkin remains the head of Tyumenenergosbyt, the second largest retail power company in Russia after Mosenergosbyt. (Kommersant – IES Holding Losing Managers)
· There will be not a division between old and new capacity on the long term capacity market. Prices in 2011 will be capped at 200,000 rubles for 1 mega watt a month. The gencos stated that at such prices they are not prepared to finance construction above existing their agreements. RBC Daily quotes Dmitry Ponomarev, Market Council Chairman, stating that the Ministry of Energy has presented its proposals for the long-term capacity market to the relevant departments. The concept currently has three aspects - competitive power takeoff, free contracts between gencos and consumers and contracts on capacity delivery. (RBC Daily – Indivisible Capacity)
· OGK TGK-14's investment program until 2015 will come to 19.2 billion rubles, the company's CEO, Sergei Vasilchuk, told journalists. The installed capacity at the genco's stations will be increased by 50% (300-350 megawatts) to one gigawatt. He said that until 2015, TGK-14 plans to introduce two power blocks each with a capacity of 120 megawatts at Ulan-Udensky CHP-2. In addition, the genco's investment program includes projects to boost heat capacity at its current stations and reconstruct heating mains and points. TGK-14 also plans to replace its outmoded equipment. (Interfax – TGK-14’s investment program until 2015 to reach 19.2 bn rubles)
November 10, 2009
· The Russian Federal Tariffs Service (FTS) plans to approve the 2010 energy balance on November 20 and generation tariffs between November 20-24, Maxim Yegorov, head of the FTS profile department, said at an energy conference. The deadline for decisions regarding gencos is November 24. Decisions on tariffs for grid companies will be reached by December 15. The Federal Grid Company's tariffs could rise 52.4% in 2010, the FTS has said. Yegorov told reporters that the FTS was not yet prepared to disclose planned tariff increases for RusHydro or Energoatom, which runs Russia's nuclear plants, because the government had not yet approved their investment programs, which will depend on tariffs for funding. The FTS hopes the government will approve aspects of the investment programs dependent on tariffs next week. Yegorov said that tariff increases for the OGKs and TGKs would be up to 5.4% for the first price zone, up to 3.7% for the second and up to 7.7% for the Far East. Tariffs for the power industry as a whole will rise 8% next year, including 7.6% for industry and 10% for households. The FTS forecasts that, ultimately, electricity prices in Russia will rise 12%-14% due to the liberalization of the electricity market. (Interfax - Russian Tariffs Service Could Adopt 2010 Energy Balance, Generation Tariffs Nov 20-24)
· RusHydro, together with Rusal, plans to adjust the costs of construction at Boguchansk by the end of the year, Vasily Zubakin, RusHydro's acting chief, said. The construction costs set out initially might fall as the companies look to optimize expenses. New Rostekhnadzor requirements set out after the accident at Sayano-Shushenskaya GRES also may influence the cost of the project. (Interfax – RusHydro Plans to Adjust Boguchansk GRES Construction Costs)
· The state may provide support to RusHydro in 2011-2012 by subsidizing interest rates or increasing its equity stake, Energy Minister Sergei Shmatko told journalists. "In discussion with the Finance Ministry we are examining the possibility of providing state support to RusHydro in 2011-2012, either by supporting it with subsidized interest rates or participating in its charter capital," he said. In 2010 the state will support RusHydro with 4.3 billion rubles to finance construction of a bypass channel. RusHydro will finance the restoration of Sayano-Shushenskaya GRES. "The balance sheet for 2010 has already been drawn up. Everything is aimed now at ensuring the stable financing of the work," he said. (Interfax - State May Support RusHydro in 2011-2012 with Subsidies, Equity Buy – Shmatko)
· E.ON has no plans to replace Sergei Tazin, head of its Russian unit, Tatjana Dreyer, a spokeswoman for the German utility, said. Dreyer denied a report by Interfax that cited unidentified industry officials as saying Tazin would leave the company by the end of this year amid changes to E.ON’s top management. E.ON controls Russian power generation company OAO OGK-4. (Interfax - Head of E.On Russia Power to Leave Company Before Year-End – sources, E.ON Denies the Information)
November 9, 2009
· Starting from 2011 all grid companies should move to an RAB system, which guarantees a profit rate from capital investments. The requirement is set out in the energy efficiency law, which might be enacted soon. The State Duma will discuss the document in its third reading on November 11. The government initiated the reform, a State Duma representative told Vedomosti, but government representative Dmitry Peskov knows nothing about it, the newspaper writes. VTB Capital analyst Dmitry Skryabin thinks that everyone will be a winner with this reform. The grid companies will increase construction volumes, and thus the number of refusals for technical connection will decrease. (Vedomosti - New Rules)
· The Energy Ministry has developed and submitted to the European Commission a memorandum on an early warning mechanism in the Russia-EU energy dialogue. The memorandum describes possible joint actions in case of disruptions in fuel supplies to Europe, specifically those caused by third parties. It contains separate mentions for the instances of the disappearance of gas from pipelines and storage facilities. Such incidents have provoked conflict between Russia and Ukraine in the past. Deputy Energy Minister Anatoly Yanovsky told Kommersant about Russia’s readiness to reach agreement on the memorandum with Europeans by November 18 in order to sign it at the Russia-EU summit in Stockholm. (Kommersant - Protecting Tap Order)
· OGK-2 appealed to the 16th Arbitrage Court against the decision of Stavropol Arbitrage Court, which refused to recognize a cancelled contract with E4 Group on the construction of two energy blocks at Stavropolskaya GRES. The genco insists that the contract should be annulled because the engineering company violated the terms of the agreement. (Vedomosti, RBC Daily - OGK-2 Went in Court)
Russia Headline News
November 13, 2009
· President Dmitry Medvedev on Saturday will address the annual Asia-Pacific Economic Cooperation summit in Singapore, where leaders will discuss ways to spur economic recovery and Medvedev will hold a series of bilateral talks with his Asian and American counterparts. Medvedev will carry out bilateral talks with Chinese leader Hu Jintao, Japanese Prime Minister Yukio Hatoyama and U.S. President Barack Obama, a Kremlin official said Thursday. Medvedev and Obama will also have one-on-one talks in which they will discuss a revision to the Strategic Arms Reduction Treaty, due to expire Dec. 5, the White House said. (The Moscow Times)
· Russian President Dmitry Medvedev stressed the need for economic reform in his state of the nation address in the Federal Assembly on Thursday, with lessened state involvement, streamlined procedures, and an increased focus on high-technologies named key to the country's future. Medvedev's speech centered on moving Russia's economy forward through development and innovation and he said that Russia's prestige on the world arena cannot remain determined by past achievements. Dmitry Medvedev laid out few specific plans to modernize the country in his state-of-the-nation address Thursday, but sometimes offered goals that stretch far beyond his current term. The longer-term goals included creating a local version of Silicon Valley, upgrading domestic industry to make affordable, high-quality goods for mass consumption and trimming Russia’s number of time zones. “It’s a claim for re-election,” said Alexei Makarkin, an analyst with the Center for Political Technologies, a think tank. “He is demonstrating readiness to continue working on these issues, apparently as president.” (The Moscow Times)
· Russian Technologies, Rusnano and Vneshekonombank will likely lose their status as state corporations as early as next year, presidential aide Arkady Dvorkovich said Thursday. The state corporations could be transformed into state-controlled joint-stock companies in 2010, Dvorkovich said at a news conference responding to President Dmitry Medvedev’s state-of-the-nation address. (The Moscow times)
· Russia may ease import duties on foreign products such as farm machinery, the Economy Ministry said today. “We are getting signals that anti-crisis duties are starting to turn into the opposite of the medicine they were meant to be,” Deputy Economy Minister Andrei Slepnyov told reporters in Moscow. The government’s commission for protective measures in foreign trade recommended to review the need for the duties, Slepnyov said. The Economy Ministry plans to submit proposals on whether to maintain or scrap the duties before year-end, he added, without specifying imports of which goods may be affected. Russia’s Economy Ministry is developing specific strategies to boost trade with 30 countries as part of President Dmitry Medvedev’s push for greater innovation. The ministry will submit the 30 “country plans” for the government to consider by the end of the year, Slepnyov said. (The Moscow Times)
· Prime Minister Vladimir Putin is the world’s third-most powerful person, far ahead of President Dmitry Medvedev and outranked only by the U.S. and Chinese presidents, according to a list released by Forbes magazine Thursday. (The Moscow Times)
· In the third quarter the Russian economy contracted by 8.9% compared to the same period last year, according to the first estimate by Rosstat. In the first and second quarter the slump year-on-year was 9.8% and 10.9%, respectively. The GDP reduction in the third quarter was estimated by the ministry of economic development at 9.4%, whereas Rosstat had better data. Deputy Minister of Economic Development Andrei Klepach forecasts that in the fourth quarter the economy will grow by 3-4% compared to the third one. (Vedomosti - Not in a hurry to grow)
· The rising price of oil is helping the treasury: oil and gas revenues have already topped the annual plan by 11%, the tax service, administering the mining tax, has almost reached its annual standard level. In January - October the budget received 5.79 trillion rubles, with just 924 billion rubles remaining to be collected, and, considering the growth in revenues in September-October, the collected tax could be one-third bigger. At the end of the 10-month period the federal budget deficit is half the projected figure. The spending in November - December will correct it, the Finance Ministry said, as the treasury will spend a quarter of its annual spending over two months. (Vedomosti - Treasury recovering)
· Russia’s economic decline eased last quarter from a record slump in the previous three months as oil, gas and metals prices rebounded and stimulus measures helped offset the impact of the global recession, the State Statistics Service said Thursday. The country’s output shrank 8.9 percent in the third quarter from a year earlier, after contracting a record 10.9 percent in the previous period, the service said in a preliminary estimate on its web site. From the second quarter, output grew a nonseasonally adjusted 13.9 percent. (The Moscow Times)
November 12, 2009
· The State Duma first passed a bill on changing the transportation tax basic rates at three readings and then retracted its decision on Wednesday. The Duma plans on Friday to readdress the transportation tax, which, according to the Finance Ministry's plans, regions may either increase five-fold or halve in 2010. Meanwhile, some regions may not have enough time to change the tax rates before December 1 because of these hesitations. St. Petersburg has already announced that it will not change the transportation tax rates in 2010, and Moscow is not going to increase the tax, either (Kommersant - Parliamentarians Cannot Lift Hand Against Cars).
· President Dmitry Medvedev’s decision to fire Sverdlovsk Governor Eduard Rossel won praise Wednesday from opposition politicians, who called for the removal of more regional leaders. Political analysts have often placed Rossel among the Yeltsin-era governors who pose a threat to the federal government because of their high popularity at home and said they might be replaced by younger and less independent figures. (The Moscow Times)
· Top scientists will be watching President Dmitry Medvedev’s state-of-the-nation address Thursday to hear how he intends to rescue the country’s scientific community as part of his ambitious plan to modernize the economy. Russian science is at the brink of collapse, but it represents Medvedev’s only hope of ending the economy’s dependence on energy resources through modernization, scientists said. With many scientists aged over 50, the Kremlin has only a window of a few years to revive what’s left of a community that won acclaim for its huge scientific advances in Soviet times, the scientists said. (The Moscow Times)
November 11, 2009
· Prosecutor General Yury Chaika presented the results of his inspection of state corporations Tuesday and revealed that 22 criminal cases had been opened in connection with the activities of state corporations. (The Moscow Times)
· Former Soviet President Mikhail Gorbachev, drawing on his experience of military failure in Afghanistan in the 1980s, said the U.S. can’t win the conflict there and should begin pulling out its soldiers. Afghanistan, where U.S. and NATO forces are battling a Taliban-led insurgency, is too fragmented between clans to be controlled militarily, Gorbachev, 78, said in an interview today in Berlin. While he said President Barack Obama would be unlikely to take his advice, Gorbachev said he saw no chance of success even with more U.S. troops. (Bloomberg)
· Deputy Prime Minister Sergei Ivanov on Tuesday called for harsher penalties to be imposed on excessive drinking among pilots and passengers on commercial flights. (The Moscow Times)
· President Dmitry Medvedev has stressed that the Soviet Union’s role in bringing down the Berlin Wall and suggested more must be done to clear “our common Europe” of dividing lines, alluding to the differences and distrust that still set Russia apart from the West. “This wall divided not only a single country but, as we realize today, all of Europe,” Medvedev said, taking his turn in a series of speeches by leaders gathered at Berlin’s Brandenburg Gate for 20th-anniversary ceremonies late Monday. Medvedev said the wall was “destined to fall” amid reforms that were gaining momentum in the Soviet Union and other countries in Eastern Europe, which was dominated by Moscow. “The role of the Soviet Union in that period was truly decisive.” “These events brought Europe freedom and progress and became a turning point for the fate of the world,” he said. (The Associated Press)
· Oil companies will face heavy fines for missing targets to reduce gas flaring by 2012, Prime Minister Vladimir Putin said at a meeting Tuesday, reinforcing government plans to reduce the wasteful practice. Russia flares more gas than most other countries, sending the greenhouse gas carbon dioxide into the atmosphere after burning gas from oilfields that is deemed too difficult or expensive to move to market. Oil firms, including Rosneft, LUKoil and TNK-BP, are investing hundreds of millions of dollars to meet the government’s target of increasing associated gas utilization to 95 percent by 2012. (Reuters)
· The International Energy Agency said in a report Tuesday that global energy demand would rise by about 1.5 percent a year between now and 2030, providing huge investment opportunities in upgrades and exploration in Russia. The energy watchdog said in a report that half of the world’s existing production capacity will need to be replaced over the next 20 years. By that time, only one-third of existing facilities will remain in operation. Global energy demand will be driven largely by India and China, the IEA report says. Analysts expect Russian capacity to easily keep pace with domestic and external demand in the short to medium term. (The Moscow Times)
· The government needs a reasonable budget policy and a new plan to diversify its economy and attract investment if it hopes to return to booming precrisis growth, the World Bank said Tuesday. “The vulnerability of Russia’s economy will increase if the government doesn’t change the structure of the economy,” World Bank economist Sergei Ulatov told a news conference. According to a World Bank report on Russia released Tuesday, the economy will reach its precrisis level only in 2012. Ulatov said the government should choose a new economic model for the country within the next three years. (The Moscow Times)
· Sberbank may take General Motors to court to “defend our position” after the U.S. automaker canceled the sale of its Opel division, Sberbank head German Gref said Tuesday. “We really hope it’s not going to come to that,” he said. (Bloomberg)
· The Russian government has chosen suppliers of medicines and means of individual protection in 2009 to create federal medical reserves and carry out humanitarian missions, according to a document posted on the government’s Web site on Tuesday. Pharmstandard will supply the government with Arbidol antiviral medicine for influenza, Nearmedic Plus will supply Kagocel antiviral medicine, Biocad will supply Genferon light antiviral medicine, and Gexa Nonwoven Materials will supply masks. (RBC Daily, Prime-TASS)
November 10, 2009
· Kremlin lawyers argued for the “gradual” elimination of the death penalty Monday as the Constitutional Court opened hearings into whether to lift a 10-year moratorium on capital punishment. Russia, as a member of the Council of Europe, has made a commitment not to enforce the death penalty, but legal experts said the lifting of the moratorium would not terminate Russia’s membership in the continent’s human rights watchdog. President Dmitry Medvedev supports the “gradual” abolition of the death penalty, his envoy to the Constitutional Court, Mikhail Krotkov, said at Monday’s hearing, Interfax reported. He did not elaborate. (The Moscow Times)
· Russian pipemakers asked the government for permission to supply as much as 840,000 metric tons of pipes for the second stage of Gazprom’s Nord Stream pipeline, Alexander Deineko, head of industry lobby group Fund for Development of Pipe Industry, said Monday. Pipemakers including TMK, Vyksa Steel Works and Severstal’s Izhora mill agreed to the amount, Deineko said. (Bloomberg)
· OAO Sberbank, Russia’s largest lender, needs to raise salaries to “market levels,” Vedomosti reported, citing a memorandum from Chief Executive Officer German Gref to employees. Spending allocated for salaries will be increased 15 percent from Jan. 1, the newspaper added, citing the memo. The number of Sberbank employees fell 3.6 percent, or by 5,800 people, in the first six months of the year. (Bloomberg)
· Hopes for a revival of the Russian car market did not come true in October, when 116,700 new cars were sold, down 1,281 against September and 52% less than in October 2008, the European Business Association's Automotive Manufacturers Committee has reported. The hopes emerged after carmakers sold 6% more cars in September than in August. The position of most of the car models has stabilized, but demand showed no signs of growth. (Vedomosti - Minus Again).
· Italy's insurance company Generali Group has become a co-owner of Russia's major electricals retailer Eldorado. A report for the first half of 2009, provided by the Czech Republic's PPF Group, says that with the Italian insurer the group has become a co-owner of a 50% plus one share stake in the retailer's head company. Generali's direct stake is about 11%. (Kommersant - Shareholders Continue Dividing Eldorado).
November 9, 2009
· Russia risks falling back into the “illusion of economic stability” that stopped it from reducing dependence on oil and gas exports before prices peaked last year, President Dmitry Medvedev said. “I get the impression that once again, everyone is starting to relax in the expectation of high profits,” Medvedev said, according to the transcript of a Nov. 2 interview with Der Spiegel distributed by the Kremlin press service. “If we can’t allocate the necessary money to overhaul manufacturing and we don’t invest in agriculture” the country will be on “a road to nowhere,” he said. Dmitry Medvedev said Russia’s relations with the rest of Europe could have developed differently in the 20 years since the fall of the Berlin Wall. “Some of the hopes that I and, probably, the people of our country had at that time were justified, some were not,” Medvedev said in an interview with Der Speigel. (Bloomberg)
· The fall of the Berlin Wall in 1989 and reunification the following year transformed Germany’s relations with Russia, bringing “a feeling of trust and gratitude,” Prime Minister Vladimir Putin said. “It’s one of the foundation stones in our relations,” Putin said in an interview with Russia’s NTV television channel, according to the transcript posted on the government Web site. “There is an understanding that we need each other.” Germany is celebrating the 20th anniversary of the Berlin Wall’s opening on Nov. 9, an event that brought an end to communist rule in East Germany and prepared the way for reunification less than a year later, on Oct. 3, 1990. Putin cited the Nord Stream AG venture to build a natural- gas pipeline under the Baltic Sea from Russia to Germany as an example of bilateral co-operation, saying that he hoped to convince European countries to approve the project. (Bloomberg)
· Finance Minister Alexei Kudrin said Saturday that it was time to begin discussing the eventual withdrawal of economic stimulus packages, after his G20 colleagues pledged to keep their support in place until a global economic recovery is assured. G20 finance chiefs and central bank governors, meeting in St. Andrews, Scotland, cited concerns over high unemployment and uneven growth in a communique released Saturday after the two-day summit. (The Moscow Times)
· The State Duma on Friday cleared in a first reading a bill that would triple duties on beer, a move the government hopes will help plug a budget deficit but that brewers fear could lead to factory shutdowns. The bill was approved by a majority of 315 votes in the 450-member chamber to include amendments to the Tax Code increasing the duty 9 rubles per liter, from the current 3 rubles. The bill implies that the duties will rise to 10 rubles from Jan. 1, 2011, and to 12 rubles from Jan. 1, 2012, for beer with an alcohol content of between 0.5 percent and 9 percent. Officials have said the changes will bring in an extra 65 billion rubles ($2.24 billion) of budget revenue in 2010. The federal budget is expected to run a deficit of 6.8 percent of GDP next year, or around 3 trillion rubles. (Reuters, Bloomberg)
· A Russian police major complained of corruption and investigations of predetermined outcomes in a video address to Prime Minister Vladimir Putin and fellow officers, and urged them to join his fight. “I’m sick of being made to uncover crimes that don’t exist,” major Aleksey Dymovskiy said in a video posted on YouTube and his Web site. “I’m sick of the pre-defined crime investigations and being told whom to send to jail.” Dymovskiy said his commander had told him corruption is “the essence” of police work, and that it was impossible to fight it. Dymovskiy also accused his commanders in the southern city of Novorossiysk of treating officers “like cattle” and depriving them of weekends, sick leaves and effectively encouraging bribe-taking because of low pay. Russian Interior Minister Rashid Nurgaliyev ordered an investigation into Dymovskiy’s accusations, RIA Novosti reported, citing spokesman Valery Gribakin. The regional police chief fired Dymovskiy today after local investigations failed to confirm his accusations, ITAR-TASS news agency reported, citing Gribakin. (Bloomberg)
· As deeply indebted United Company RusAl sweet-talks foreign investors ahead of a planned initial public offering, it has launched a “terror” campaign at home against a business newspaper. Vedomosti said RusAl and its lawyers were bombarding its journalists with threatening cell phone calls and e-mails after it published a front-page article on Oct. 26 that contained information from a closed-door investors meeting where RusAl announced its 2008 results. The article, titled “$6 Billion Found Missing,” revealed that RusAl had posted a net loss of $5.98 billion for last year and a $720 million loss for the first quarter of 2009. Vedomosti cited a presentation from the meeting as its source, without saying how it was obtained. RBC Daily provides an interview with Dmitry Afanasev (Egorov, Puginsky, Afanasev and Partners) on Rusal’s conflict with Vedomosti. (The Moscow Times, RBC Daily)
· Magna, General Motors and the GAZ Group are negotiating the construction of a new auto plant in Russia. The plans mean that the failure of the deal with Opel did not spoil relations between Magna and GM, Magna Chairman and key owner, Frank Stronach has said. GM and the GAZ Group had plans of building a plant in Russia already two years ago, an official from the Industry and Trade Ministry recalled. They even signed memorandums on the industrial assembly with the Economic Development Ministry. However, Russia has more than enough assembly capacities, experts believe. (Vedomosti - Extra Plant)
· The Cabinet has disbursed 1.1 billion rubles to Russian Technologies, instructions from Prime Minister Vladimir Putin say. The money is meant as compensation of expenses related to the AirUnion alliance, Putin's press secretary Dmitry Peskov explained to Vedomosti. A total of 3.5 billion rubles is allocated for the purpose in the budget out of which 1.5 billion rubles were paid earlier. Russian Technologies will use the funds received (2,6 billion rubes) for the payment of debts in which the corporation had acted as a creditor, specifically the debts of Atlant on a loan to Gazprombank and the State Reserves. It is apparent that the 3.5 billion rubles will not be enough for everyone, analysts say. (Vedomosti - Won't be Enough for Everyone)
· Electricity tariff growth should be capped at 10% in 2010, Vladimir Putin said at a government meeting on November 5. "Tariffs have grown 25% this year and I'd like to remind you that we agreed that they should not rise more than 10% in average this year," Putin said. At the meeting Putin also said that the government will aim, that power sector companies get benefits from expenses cut. “The state will aim that both gencos and energy consumers got pluses from cutting expenses. Gencos because of additional investment resources and consumers – because of reduction of tariff growth rates”, he stated. During the meeting prime minister speculated on Sayano-Shushenskaya GES accident. He ordered to allocate 4.33. billion rubles for construction of shore spillway at the plant. (Interfax, Vedomosti “Electricity tariff growth must be capped at 10% in 2010 – Putin”)
· Novatek has asked its shareholders to approve a 177.3 billion ruble ($6 billion) domestic gas supply deal with power trader Inter RAO. If the deal is signed, Gazprom, one of Novatek’s main shareholders, would see its gas purchases from Inter RAO reduced to nothing, said two sources at Inter RAO. According to a ballot mailed to Novatek shareholders, the company’s board has recommended that its shareholders approve a deal to supply power trader Inter RAO and its regional generation company OGK-1 with about 65 billion cubic meters of gas from 2010 to 2015. (Vedomosti, Interfax, RBC Daily “Substitute for Gazprom”)
November 5, 2009
· Russia’s state power companies must cut operating and investment costs into 2010, a government official said, urging private companies to reduce spending too. State-controlled companies must cut operating expenses by a total of 56 billion rubles ($1.9 billion) in 2009 and 2010, the official said, speaking on condition of anonymity in line with Russian government policy. Companies must cut investment by 138 billion rubles over the two years. (Bloomberg “Russia’s Power Sector Must Cut Costs Into 2010, Official Says”)
· UC Rusal has reached an agreement with power companies on electricity supplies. The price for electricity will be pegged to aluminum quotations on LME. Even paying the maximum prices, UC Rusal may save up to 13 billion rubles a year. Vedomosti has learned that the company agreed with the Krasnoyarsk Hydropower Plant and Irkutskenergo, both controlled by UC Rusal co-owner Oleg Deripaska's firms, on supplying electricity to three aluminum plants in Bratsk, Krasnoyarsk, and Irkutsk. The boards of directors of the power companies have endorsed the contracts for 2020 and 2018 respectively, although the contracts have not yet taken legal effect because of some law restrictions, two bankers who received this information from UC Rusal told the newspaper. They did not know what restrictions these were and when the contracts may actually come into force. (Vedomosti “Deripaska's Curve”)
November 3, 2009
· Federal Grid Company (FGC) wants the law changed to enable it to combine grid operating functions with power generating, and to allow it to keep hold of the assets it inherited from RAO UES for a period of three years. The Russian Energy Ministry said it had received the proposal and that a working group looked at it yesterday. "A decision will be reached once the Energy Ministry has analyzed all the possible implications [of the proposed changes," it said. "The [grid] company wants to hold shares in generating companies and wait until the equity markets pick up before selling them to raise funds for its investment program," a grid company representative told Interfax. At the same time, "generating is not a core business for FGC.” (Interfax, Kommersant, RBC Daily “Federal Grid Co Seeks Three-Year Ownership of Generating Assets”)
· Gazprom is interested in the Italian power market, including signing cooperation agreements, Alexander Medvedev, Gazprom chairman, said in an interview with Italian television programme Ballaro. He explained that “on the basis of Gazprom’s cooperation with Eni and Enel, the Russian company can enter the [Italian] power market.” Medvedev underlined that Italy is a reliable partner for Gazprom. (PRIME-TASS “Gazprom Works on Possible Ways to Enter Italian Power Market”)
· The FAS said yesterday that Gazprom wanted to acquire 100% of Russian Energy Projects (REP), which owns 17.65% of TGK-1. Gazprom owns 28.69% of the genco directly. Thus, Gazprom would control 46.4% of the genco and be obliged to offer to buy its minority shareholders out. The FAS will take an additional two months to review the request as the transaction "could restrict competition." (Interfax “Gazprom eyeing control of TGK-1 genco – regulator”)
November 2, 2009
· The media discusses the quarterly results in Russia’s power and oil and gas sectors. OGK-4 and Irkutskenergo had increased income of 67%, 45%, respectively, but some companies like Moscow Energy Company have large debts. The combined debt of OGKs and TGKs in Q3 exceeded 358.7 billion rubles. (Vedomosti “Gazprom Losses”)
· Russian billionaire Oleg Deripaska is ready to invest in the reconstruction at the Sayano-Shushenskaya plant controlled by state-owned RusHydro in exchange for cheap energy. (Kommersant, RBC Daily “Oleg Deripaska Starts Repairs”)
· The Moscow United Energy Company and MTS are launching a joint project to develop a common automated system of controlling and metering energy transmission in Moscow. The energy company that supplies 70% of the city's facilities with heating and hot water can save at least 300 million rubles. MTS expects to benefit from the expansion of its clientele by reaping up to 20 million rubles in additional revenues a year. (Kommersant “MTS Infiltrates Meters”)
Russia Headline News
November 6, 2009
· Prime Minister Vladimir Putin lashed out at General Motors on Thursday after a Russian-backed bid to buy carmaker Opel fell through, hinting that there may be repercussions down the road because of GM’s “disregard for its partners.” “Nobody warned anybody about anything,” Putin said, referring to the surprise decision by the U.S. company not to sell its European unit. State-owned Sberbank and parts maker Magna had made preliminary agreements to buy the European carmaker, with GAZ Group named as a potential industry partner. “Everyone was notified after the fact, despite the agreements that had been reached and the documents that had been signed, including legal ones,” Putin said. The board’s ruling “doesn’t harm our interests, but it shows a rather peculiar communication style that our American partners use with their counterparts,” Putin said. “This is a good lesson. … We must take into account this kind of cooperation with our partners in the future,” he said, adding that the decision primarily showed disrespect to GM’s European partners. (The Moscow Times)
· Russia’s economy shrank in October at the slowest monthly pace in almost a year, a gauge of output showed, as conditions in the world’s biggest energy exporter continued to improve. Gross domestic product shrank 0.6 percent in October from a year earlier after a 2.1 percent contraction in September, VTB Capital said in a report today. “The manufacturing sector’s performance deteriorated slightly while activity in the services sector is approaching pre-crisis levels,” Aleksandra Evtifyeva, a senior economist at VTB Capital in Moscow, said in the report. “Another encouraging development highlighted by the October surveys was the deceleration in the pace of job cuts.” (Bloomberg)
· Finance Minister Alexei Kudrin led a government delegation Thursday to meet investors in London for a “non-deal road show” to discuss a planned issue of $17.8 billion in sovereign eurobonds, but the presentation left investors wanting for specifics. The eurobond issue would be Russia’s first since the 1998 default and is key to the government’s plan to narrow its budget deficit next year. But with oil prices well above forecasts made for the budget, the Finance Ministry has been downplaying the significance — and the size — of the issue. “We did not present a concept of a specific securities issue, no decisions on the maturity period and the currency were made,” Dmitry Pankin, a deputy finance minister, told reporters. The government, he said, will make specific decisions next year at the earliest, and “not even at the beginning of the year.” (The Moscow Times)
· The state treasury is being filled thus far as was planned in the Law on the 2009 Budget, Finance Minister Alexei Kudrin told Vedomosti. "But since the economic situation is better now than the budget envisions, and the oil price is higher, revenue is expected to be 40 billion rubles larger," Kudrin said. This is a rough figure and the actual increase could be even greater, he said. The Finance Ministry projects additional revenue at 100 billion rubles, and it will come exclusively due to the oil and gas gains. It could be put into a new package of anti-crisis measures. (Vedomosti, Budget Bloating).
· A year-long rally in Russia’s international bonds is pushing yields toward record lows as the country prepares to sell debt to foreign investors for the first time since the 1998 default. After the bonds lost almost twice the average for emerging-market debt in 2008, rates on Russia’s issues have fallen 4.5 percentage points or more from the past year’s highs to within 39 basis points of their lowest ever, data compiled by Bloomberg show. The cost of protecting against a default by Russia dropped more this year than for any other country with an investment-grade rating. Investors are piling into debt sold by the world’s largest energy-exporting nation as gross domestic product starts to rebound from a record 10.9 percent second-quarter contraction and the Central Bank boasts foreign reserves of more than $400 billion. (Bloomberg)
· The payment deadline for October gas shipments expires on Friday, but Naftogaz Ukrainy has warned it could default on its pledge to make payments on schedule. About 24 billion cubic meters of gas were imported in October, for which Ukraine is to pay some $470 million, according to the Ukrainian government. Fuel and Energy Minister Yuriy Prodan said on Wednesday that, Naftogaz would deliver on its promise to pay on schedule. "But domestic consumers' growing debt and a financial crunch in Ukraine slow an accumulation of resources for payments in full and on schedule," Naftogaz said in a statement. Naftogaz is trying to play safe. It currently lacks about one third of the sum due in payments. But the sum is larger, said the prime minister's fuel and energy advisor Oleksandr Hudyma. (Vedomosti, Naftogaz Cries Poverty).
· A plan by Russian-German consortium Nord Stream to build a gas pipeline under the Baltic Sea cleared two major hurdles Thursday as Sweden and Finland signed off on construction in their waters. Nord Stream has raised fears both among environmental groups, who are worried about the impact on the Baltic Sea, and countries such as Poland, Ukraine and the Baltic states, which view the project as a threat to their energy security. “Sweden gives permission for Nord Stream to lay two pipes on the continental shelf within the Swedish economic zone in the Baltic Sea for the transport of natural gas,” the government said in a statement. The Finnish government said in a separate statement: “The project must be implemented so as not to prevent any potential subsequent energy, data communications or other infrastructure projects.” It said the approval was valid for the next 50 years, after which it would have to be renewed. One approval from Finland has been secured already, but a second one is still needed. "The second go-ahead is not a mere formality, of course. But it is not a barrier, either. The issue will be decided positively before the end of the year, Nord Stream spokesman Jens Muller told Vedomosti. The first permit means that the project complies with the law on the exclusive economic zone. But it remains to decide whether the project complies with the law on the sea area, another Nord Stream source said. (Reuters, Vedomosti, Construction Okayed; Kommersant, Sweden Springs a Leak, Page 1).
· An Exxon Mobil-led consortium has beaten rival groups including LUKoil to bag initial rights to develop Iraq’s West Qurna field, the oil ministry said, adding momentum to Iraq’s bid to unlock its oil riches. With reserves of 8.7 billion barrels, West Qurna is among the prized Iraqi fields eyed by Western oil majors as they face flat or lower output at home and stiff competition from Chinese and Indian oil companies in bidding for oilfields elsewhere. “The consortium led by Exxon Mobil, which includes Shell, won the contract to develop the West Qurna Phase One oilfield,” Oil Ministry spokesman Asim Jihad said. The initial deal was signed in Baghdad on Thursday but needs to be approved by the cabinet before it can be finalized. (Reuters, Bloomberg, Vedomosti, LUKOIL Barred from Iraq, Kommersant, LUKOIL Fails to Reach West Qurna, Page 11)
· The Federal Anti-Monopoly Service fined LUKoil 6.5 billion rubles ($225 million) on Thursday for breaking anti-monopoly law, the service said on its web site. The service said last month that the oil major had abused its dominating position in the gasoline market by restricting supplies and artificially raising prices during the first half of 2009. It also accused LUKoil of obstructing the investigation that the service had started. LUKoil plans to challenge the fine, a representative for the oil producer said Thursday, declining to be identified in line with company policy. (The Moscow Times, Bloomberg)
· An International Energy Agency report due to be released next week says the world is facing a natural gas glut and Russia’s influence over energy supplies could be decreased, the Financial Times reported Thursday. “Global gas markets have evolved from a seller’s market, driven by tight supply and demand, to a buyer’s market as demand weakens while new supply comes on stream,” a draft of the World Energy Outlook says. The agency expects the world’s gas oversupply to reach 250 billion cubic meters by 2015, four times the spare capacity in 2007. (The Moscow Times)
· The list of fields, which Gazprom is re-registering to Gazprom Neft now includes a third area - the oil cap of the Orenburg field, whose reserves are estimated at 85 million tonnes. Whether or not the company will pay to Gazprom for the assets received, and, if it does, in what form, could be decided next week. One of the options is Gazprom Neft's additional share issue. (Kommersant, Page 11. Gazprom Neft Gets Oil Cap).
November 5, 2009
· The Finance Ministry will submit amendments to the 2009 budget to the State Duma next week, Deputy Prime Minister and Finance Minister Alexei Kudrin said. The matter will concern the redistribution of the funds reserved for increasing banks' capitalization through OFZ and for state guarantees. The government has decided that the 300 billion rubles allocated earlier for banks' capitalization will better serve the so-called backbone enterprises and the unemployed. Avtovaz is among the priority money receivers (Vedomosti, 'Avtovaz Instead of Banks'; Kommersant, page 1, 'Avtovaz to be Covered by State Bonds').
· Russia plans to redirect about 300 billion rubles ($10.3 billion) of aid slated for banks for this year and 2010 to state-controlled companies, including OAO AvtoVAZ, and for social spending, Vedomosti said, citing Finance Minister Alexei Kudrin. The Finance Ministry will enter amendments to the state budget for parliamentary approval next week to allow the government to divert funds from bond sales to jobless benefits and help for one-factory-towns, the newspaper added. AvtoVAZ, United Shipbuilding Co. and United Aircraft Corp. are among the companies that will benefit, Vedomosti said. Banks also have become less interested in swapping preferred shares for government bonds to boost their capital, the newspaper reported. (Vedomosti)
· The reasons why the French energy concern GdF Suez has still not made a decision on joining the Nord Stream project may be that Gazprom has suggested that the French company part with a 5.26% stake in Verbundnetz Gas, a major gas distribution company in eastern Germany. GdF Suez replied to this that it was considering the joining of the competing Nabucco project (Kommersant, page 11, 'GdF Suez to be Admitted to Nord Stream').
· Naftogaz Ukrainy will pay a $470 million gas bill to Russia on time, Ukrainian Energy Minister Yury Prodan said Wednesday, easing concerns that the state energy company might miss its payment for October supplies. “There’s still time to accumulate the funds, and Naftogaz will make its payment,” Prodan told a news conference, Interfax reported. He said the company could seek loans if necessary. Naftogaz has not missed any payments since Prime Ministers Vladimir Putin and Yulia Tymoshenko brokered a deal in January to end a supply disruption that left large swaths of Europe without gas for several weeks. (The Moscow Times)
· UC Rusal has reached an agreement with power companies on electricity supplies. The price for electricity will be pegged to aluminum quotations on LME. Even paying the maximum prices, UC Rusal may save up to 13 billion rubles a year. Vedomosti has learned that the company agreed with the Krasnoyarsk Hydropower Plant and Irkutskenergo, both controlled by UC Rusal co-owner Oleg Deripaska's firms, on supplying electricity to three aluminum plants in Bratsk, Krasnoyarsk, and Irkutsk. The boards of directors of the power companies have endorsed the contracts for 2020 and 2018 respectively, although the contracts have not yet taken legal effect because of some law restrictions, two bankers who received this information from UC Rusal told the newspaper. They did not know what restrictions these were and when the contracts may actually come into force (Vedomosti, 'Deripaska's Curve').
· The Cypriot company GLK Investment has filed a $200 million lawsuit with the Moscow Arbitration Court against Switzerland's Eurocement Holding AG owning the Russian holding Eurocement Group. The latter will act as the third party in the proceedings, the court said in a statement available on its website. The matter involves the debts by the companies belonging to Eurocement's prime beneficiary, Filaret Galchev, for Eurocement's shares bought in 2007 from companies belonging to Eurocement Group's former owner Georgy Krasnyansky, sources close to Eurocement and Krasnyansky told Vedomosti. Eurocement Group, Galchev, and Krasnyansky refrained from comments (Vedomosti, 'Cement Business'; Kommersant, page 9, 'Eurocement Splitting into Shareholders').
· Billionaire Mikhail Prokhorov has renegotiated the terms for his swap of debt for United Co. Rusal shares, Vedomosti reported, citing unidentified people close to both parties. Prokhorov will boost his stake in Rusal to 19.2 percent from 14 percent, the newspaper said. In March, he agreed to convert the $2 billion Rusal owes him to boost his stake to 18.5 percent. The renegotiated terms value Rusal at $30 billion, compared with $36 billion assessed in March, Vedomosti said. The accord dilutes Rusal founder Oleg Deripaska’s stake to 53.4 percent, that of Viktor Vekselberg and Len Blavatnik to 17.8 percent, and Glencore International AG to 9.7 percent. Prokhorov also wants $200 million in interest on missed debt payments and $785 million in compensation for not demanding his money back, the newspaper said. (Vedomosti)
· General Motors will not sell Opel to the consortium of Canada's Magna and Sberbank. The GM board of directors explained its decision by the improvement of the situation in GM's business over the past several months and Opel/Vauxhall's importance for the company's global strategy. Magna understands the GM board of directors' decision and promises to continue supporting Opel and GM, said Siegfried Wolf, Magna's co-chief executive officer (Vedomosti, 'Russians Won't Drive Through'; Kommersant, page 1, 'Magna and Sberbank Drive Past Opel').
· Prime Minister Vladimir Putin said the government would increase its funding for moviemakers by more than 50 percent next year but the cinema industry needs to step up to the plate and make a better product. “Most likely, the movie industry’s problems don’t lie in the amount of funds and tax preferences it gets. … The main problem is the management of these resources, the ability to create a competitive product, gain domestic and international audience,” Putin said Tuesday at a meeting of the governmental council on cinematography. “The state can provide material support and equipment, organize infrastructure, fix the educational process … but it can’t force the viewer to watch what is of no interest to him.” Putin toured the All-Russia State Institute for the Cinematic Arts, or VGIK, on Tuesday, which hosted the meeting, tested the institute’s newly built sound studio and was apparently pleased with the way that the state funds were spent. (The Moscow Times)
November 3, 2009
· Moscow and London agreed Monday on international issues like nuclear nonproliferation and Afghanistan, but neither side budged an inch on problems that have poisoned relations for the past three years. “We agreed today on three joint declarations: on the nonproliferation of nuclear weapons, a separate declaration … on Afghanistan, and one more declaration on the problems of a settlement in the Middle East,” Foreign Minister Sergei Lavrov told reporters after meeting his British counterpart, David Miliband. Lavrov thanked Miliband for “good, productive talks” and said he hoped that their meeting would help move the positions of the two countries closer. He also said the duo had discussed President Dmitry Medvedev’s proposal for a new European security pact independent of countries’ membership in other military blocs like NATO. Miliband called for a more balanced approach in relations. (The Moscow Times)
· On Monday Ukrainian President Viktor Yushchenko ordered the government to take urgent steps to change its gas contracts with Russia. Russia does not want to change the contracts and Prime Minister Yulia Tymoshenko is well aware of it, her aide Oleksandr Gudyma said: "This is why we are going to comply with the contract." Meanwhile, on Monday Russian Prime Minister Vladimir Putin accused the EU of inaction after promising to consider granting loans to Ukraine. "It's been three months already, it is time to make some document." "We have already paid $2.5 billion; they could give at least an odd billion. They do have money. Let them loosen their purse strings," Putin said. (Vedomosti, "Give them an odd billion"; Kommersant, page 1, "Yushchenko can't be taken with bare taps")
· The closer the winter is, the better Gazprom is doing: in October the company's production approached the 2008 level for the first time. Back in September Gazprom's production figures were 15% less than last year, and in October the gap narrowed to 1.6%. Last month the company produced 44.9 billion cubic meters, which is 20% more than in September. So far these are the company's best results since the start of the year. (Vedomosti, "The best month"; Kommersant, page 11, "Export stimulates production")
· Having received from Hungarian trader Emfesz a $1.785 billion bill, Rosukrenergo (RUE) retaliated. On October 22 it filed a lawsuit against Emfesz with the Stockholm International Court of Arbitration, demanding a payment of over $500 million from the former counter-agent. The sum includes the Hungarian trader's debt for the gas received from RUE in September 2008 - April 2009, the interest accrued on this debt, and the fee for the use of the commodity credit supplied in 2005-2007. (Vedomosti, "Retaliation"; Kommersant, page 11, "Gazprom suing Emfesz")
· The Hungarian government has reached a preliminary agreement with Vnesheconombank on the purchase of a part of its 49% stake in local national air carrier Malev. During the additional issue of the airline company's shares the Hungarian government will partially convert Malev's debt owed to the state budget into a majority stake, while that of VEB will be eroded into a minority stake. The deal could be profitable, experts said: VEB has been trying to get rid of Malev's stake virtually from the moment of its purchase and if the company is cleared of its debts, the minority stake could be sold for real money. (Kommersant, page 9, "Vnesheconomobank is flying out of Malev")
November 2, 2009
· British Foreign Secretary David Miliband arrived in Moscow on Sunday for “a frank discussion” with Foreign Minister Sergei Lavrov that will cover contentious issues like Russia’s refusal to extradite a murder suspect and the British Council as well as pressing international problems like Iran and Afghanistan, a British diplomat said. The visit, the first after five years of intense diplomatic disputes between the two countries, follows Lavrov’s declaration last month that Russia was ready to “reset” relations with Britain, just as it did with the United States earlier this year. But foreign policy analysts played down hopes of a rapid thaw in relations, given the number of sore points between the two sides. (The Moscow Times)
· Russia is planning extensive research to support its claim to a broad swath of energy-rich territory beneath the Arctic Sea, a senior official of the country’s icebreaker fleet said Friday. Icebreakers will lead research vessels into the Arctic in a series of missions over the next three years to conduct a detailed geological analysis of the seabed, said Andrei Smirnov, deputy director for operations at Atomflot. Smirnov said researchers are planning an Arctic mission that will depart in June. It will include an atomic icebreaker and a research ship. (Associated Press)
· The rate of popularity of the Medvedev-Putin tandem fell in October, the daily quotes the data obtained by Russia's two leading public opinion polls conducted last week. (Vedomosti)
· Russian President Dmitry Medvedev has warned against attempts to rehabilitate those responsible for extermination of their own people in Stalinist purges, under the pretext of restoration of historical truth, the daily reported. (Nezavisimaya Gazeta)
· Prime Minister Vladimir Putin said Friday that Ukrainian President Viktor Yushchenko blocked a money transfer for Russian gas and risked provoking a new supply crisis that could disrupt flows to Europe. “It seems we have problems with payment for our energy supplies again, which is extremely deplorable,” Putin said at a meeting with United Russia party leaders at his residence in Novo-Ogaryovo after a call with his Ukrainian counterpart, Yulia Tymoshenko. Putin’s comments come in the run-up to a Ukrainian presidential election Jan. 17, in which Tymoshenko will challenge Yushchenko and former Prime Minister Viktor Yanukovych. Analysts have interpreted Putin and Tymoshenko’s relatively constructive partnership as a tacit endorsement from Moscow. (The Moscow Times)
· Polskie Gornictwo Naftowe i Gazownictwo, Poland’s state-controlled gas company, and Gazprom agreed on increased gas deliveries under a deal running until 2037, PGNiG said Friday. The deal, which still needs to be approved by both governments, follows months of negotiations between Warsaw and Moscow and lessens risk of winter gas shortages in the country. A major sticking point had been disagreement over the functioning of Europol Gaz, a joint venture between PGNiG and Gazprom that manages the Yamal pipeline in Poland. (Reuters, Bloomberg, The Moscow Times)
· TNK-BP vice president Maxim Barsky may be named acting chief executive in a move to end a shareholder dispute, people familiar with the company’s plans said Friday. The 50-50 venture between BP and investor group AAR is set to make a decision at a Nov. 13 shareholder meeting, the sources said, declining to be named because the selection process is private. AAR represents TNK-BP’s billionaire shareholders Mikhail Fridman, Viktor Vekselberg, Len Blavatnik and German Khan. (The Moscow Times, Bloomberg)
· LukOil International Finance B.V., a Lukoil subsidiary, on Friday placed two tranches of Eurobonds for $1.5 billion: five-year bonds for $900 million and 10-year bonds for $600 million. The yield of the first issue is 6.5% (the coupon rate is 6.375%, the placement price 99.474% of the par value), the second - 7.375% (7.25% and 99.127% respectively). The figures were disclosed by a source close to an organizer bank. Lukoil rates are record low. Previously a Russian issuer placed Eurobonds at such rates in June 2008: Sberbank sold LPN for $500 million with coupon yields of 6.468% per annum. (Vedomosti, "Record Low")
· Due to changes in legislation that stripped private companies of the right to develop oil and gas fields on the shelf Lukoil may lose the right to two major projects on the Caspian shelf. The government will have to decide whether to prolong the license of the Lukoil JV with Gazprom that expired last Friday for developing Tsentralnoye field and whether to allow private Lukoil to represent Russia in the Russian-Kazakh production sharing project of developing Khvalynskoye field. (Kommersant, p. 11 "Lukoil clings to Caspian Shelf")
· Vedomosti reports that starting from 2010 Gazprom subsidiary OGK-1 is going to buy fuel from independent gas producers. It is still unclear if other gencos are going to refuse Gazprom fuel, the newspaper writes. OGK-5 representatives declined to comment on the issue. (Vedomosti “Threatened With Fines”)
· The board of directors of OGK-3 might make decisions on whether to sell treasury stock and the stake it holds in MMC Norilsk Nickel in the next four to six weeks, General Director Vladimir Kolmogorov told journalists. "No decision on the treasury stock has been made. It is being examined by the board of directors," he said. OGK-3 will sell the shares in RUSIA Petroleum that it purchased from Interros companies in one to two years. Most likely the asset will be sold on the open market. OGK-3's investment program to 2020 will total about 92.3 billion rubles. Previously the investment program to 2013 had totaled an estimated 90 billion rubles. Interfax and Kommersant also report today that OGK-3 could slash net profit to International Financial Reporting Standards (IFRS) 40.1% this year to 4 billion rubles.Net profit was 6.7 billion rubles in 2008. OGK-3's IFRS profit for the first half of 2009 increased by almost 18% to 3.8 billion rubles. (Interfax, Kommersant “OGK-3 to make decisions on sale of treasury stock, Norilsk shares in 6 wks”)
October 22, 2009
· Ministries and agencies now agree that just one document should be issued to endorse the rules and pricing aspects of long-term power capacity, Maxim Balashov, a departmental chief at the Russian Energy Ministry, told reporters. The Energy Ministry had suggested issuing separate governmental decrees - one defining the regulations and the other the parameters for pricing existing and new capacity. Balashov said the Markets Council, which regulates this market, was valuing old and new capacity and that the results of this work should be submitted to the Energy Ministry soon. (Interfax “Same document should approve power capacity market rules and prices – Energy Ministry”)
· The management board of RusHydro has approved an investment program for 2010 totaling 98.9 billion rubles and a revised investment program for 2009 totaling 60.1 billion rubles. The program for 2010 calls for adding 1,124 MW of capacity, including 1,000 MW to launch the first three hydropower units at Boguchansk GRES, 65 MW at Kashkhatau GRES, 17 MW in renewable energy and 42 MW via technical re-equipment and repair. Restoration of Sayano-Shushenskaya GRES will receive 16.1 billion rubles in investment, to restore 2,560 MW to service through the reconstruction of four hydropower units. Another 3.5 billion rubles will go to construction of a spillway at the plant. Construction of Boguchansk GRES, which is being built jointly with RUSAL, will receive 28.8 billion rubles in investment. Financing for technical re-equipment and renovation projects will total 12.3 billion rubles. The company's 2010 investment plans must be agreed with the relevant ministries and agencies, after which RusHydro’s board of directors will give its final approval. (Interfax “RusHydro to Increase 2010 Investment Program by 60%”)
· The newspaper continues reporting on this week’s State Duma hearing devoted to the investigation of the Sayano-Shushenskaya GRES accident. Izvestia discovered that the parliamentary commission has already come to some conclusions which could lead to Ministry of Energy reform. According to Izvestia’s source close to the investigation, the Ministry of Energy has its remit expanded to give it oversight of equipment condition. The newspaper reminds that in Soviet times there was a Chief Technical Department that fulfilled this control function. Such a department could be re-established. (Izvestia “Accident at GRES Will Lead to Reform”)
October 21, 2009
· Vedomosti has obtained a draft government directive on restoration operations at the Sayano-Shushenskaya GRES, along with an estimate of the expenses that the plant's owner, RusHydro, will incur in 2009-2013. The plant's restoration will require 40 billion rubles in the next four years, of which 26.9 billion rubles will be spent on the reconstruction and restoration of all 10 power units. All 10 turbines will be manufactured and supplied by Power Machines. Sergei Pikin, the Energy Development Fund director, is of the view that this estimate will be cut by about 20%. (Vedomosti, Kommersant, Interfax “Primary Estimate”)
· The newspaper reports on yesterday’s hearing in the State Duma, which was devoted to the investigation of the accident at Sayano-Shushenskaya GRES. The parliamentary commission does not believe the Rostekhnadzor report and decided to look into the cause of the accident itself. But, according to RBC Daily, the commission has not done a good job of it. Instead of discussing the problems the accident brought to light, delegates complained that the situation in the power sector was better than in Soviet times. Despite uselessness of such emotional meetings, delegates decided to continue the discussion at the next hearing, at which they will invite Anatoly Chubais, who, according to the journalist, is always blamed. (RBC Daily “Chubais is the Next”)
October 20, 2009
· The Ministry of Energy plans that the law “On Energy Saving and Increase of Energy Efficiency” will be enacted by the end of the year. According to officials, the State Duma will begin the second hearing of the law on October 23, 2009. (Interfax “Ministry of Energy Plans Energy Efficiency Law to Be Enacted by the End of the Year”)
October 19, 2009
· Viktor Vekselberg’s power utility IES signed an accord with the Czech Republic’s PSG International to build a power plant in Russia. The Novo-Sverdlovskaya station, with a projected capacity of 250 to 320 megawatts, should be completed by the end of 2013 under the agreement, IES said in an e-mailed statement. The Sverdlovsk regional government also signed the agreement, according to IES. (Bloomberg “Vekselberg’s IES Signs Power Plant Accord With Czech’s PSG”)
· Three energy sales companies in Rostov region – Energosbyt Rostovenergo, Donenergosbyt and Norem – will lose the right to trade on the wholesale power market. The decision was taken by the Market Council because of debts totaling 3.7 billion rubles. Consumers, however, won’t suffer. Grid companies will fill the gap until new suppliers are chosen. In future up to 17 companies which have postponed payments may lose their status, Kommersant adds. (Vedomosti, Kommersant, RBC Daily “Out of Market”)
· Atomstroyexport is preparing the documents to participate in a tender to build two new energy blocks at the Temelin nuclear power plant in the Czech Republic, Russian Deputy Prime Minister Alexander Zhukov said during the Days of Czech and Slovak Business Circles in Moscow on Monday. He said, "The winner of the tender will receive the opportunity to participate in the development of an additional three nuclear blocks: two at the Czech Dukovany station and the Slovak Yaslovske Bogunitse station." (Interfax “Atomstroyexport Readies Documents For Tender to Build Power Blocks at Czech NPP”)
Russia Headline News
October 23, 2009
· Customs officers have come up with an interesting way of making domestic products more attractive. They want to get a three-year right to check not only importers and sellers but also anyone who held an imported product in their hands. Currently, customs officers can control imported goods for a year from the import date, but this does not apply to everyone. Only a direct importer, customers and sellers can be checked. New checks are needed to find out whether the product is distributed legally, a source told Vedomosti. According to an explanatory note to the amendments to the Customs Code, they are harmonizing the Russian laws with some of the laws of the EU countries, China, Belarus and even Thailand. (Vedomosti, ""Like in Thailand")
· Russia may start gas supplies to Europe through a Black Sea pipeline before westbound deliveries will flow under the Baltic Sea, Prime Minister Vladimir Putin said in a surprise announcement Thursday. Gazprom and Italian energy company Eni have planned to complete the South Stream pipeline under the Black Sea by the end of 2014, three years after Gazprom and its other foreign partners want to start the Baltic Sea pipeline, Nord Stream. Putin’s statement that the southern project — worth at least 19 billion euros ($28 billion) — may move ahead of schedule comes less than three months before presidential elections in Ukraine, which could end up losing its key transit role and substantial revenues because of the new pipeline. (The Moscow Times, Vedomosti, Kommersant)
· To revive the economy central banks and governments deployed large-scale programs of cash injection: better inflation than another Great Depression. High inflation in the nearest future is also very likely for this reason: it devaluates debts, of which the governments of the developed countries have piled many while struggling with the crisis. A default or inflation, the choice is obvious, according to a report by Morgan Stanley, "Debtflation". (Vedomosti, "Debtflation coming")
· The Bank of Russia is increasing supervision over banks' foreign-currency risks. As of 2010, the CB will be regularly tracking the quality of large corporate foreign-currency loans. Tougher control will enable the regulator to project banks' losses from the deteriorated quality of foreign-currency loans due to the ruble's volatility and to respond promptly to the banks' overly risky credit policy. (Kommersant, page 9, "Foreign-currency loans will go to CB")
October 22, 2009
· The ruble could surge back to its 2008 highs next year, reaching 23 against the dollar, if oil prices remain high and there is an influx of foreign investment, Deputy Economic Development Minister Andrei Klepach said Wednesday. But the comments from the ministry’s top forecaster were more of a warning than a prediction. The stronger currency could keep economic growth anemic and threaten the budget with bigger deficits, as exporters’ commodities become more expensive on the global market and taxes paid from their foreign-currency revenue are worth less in ruble terms. (The Moscow Times)
· The State Duma gave preliminary approval Wednesday to the federal budget for next year in a session where the Communists reappeared after a weeklong boycott to slam the budget proposals and berate their Cabinet nemesis, Finance Minister Alexei Kudrin. The Duma passed the budget in a first reading with 315 votes, the exact number of United Russia deputies, after the three other Duma factions said they wouldn’t support the Cabinet’s spending plan. Kudrin presented the budget before the vote, reiterating that its priority would be to raise pensions 46 percent and fund high-tech industries. (The Moscow Times)
· The Federal Antimonopoly Service (FAS) opened another case dealing with access to Gazprom's (GAZP) pipeline system after receiving a complaint from Gazenergo Alliance, which accused Gazprom of avoiding a gas transportation contract despite having enough capacities for that. Gazprom is also suspected of obstructing Gazenergo Alliance's operations in St. Petersburg, the Leningrad and Tver regions, and Karelia (Vedomosti, 'Letting to the Pipe').
· The Economic Development Ministry disagrees with a plan proposed by the Energy Ministry, the Federal Property Management Agency (Rosimushchestvo) and Gazprom under which the state should get direct control of the gas monopoly through swapping 0.89% of its stock for 76 gas distributing organizations. The ministry has proposed that the stake be left on Rusgasification's balance sheet and the gas distributing organizations be exchanged for 0.23% of Gazprom's treasury stock. However, in this case the state will have to wait for the completion of another deal, i.e. the exchange of E.ON's participation in the development of the Yuzhnorusskoye field for 2.93% of Gazprom's stock (Kommersant, page 11, 'Gazprom Offered to Part with Shares').
· Gazprom said it may consider acquiring a U.S. shale-gas producer to gain the know-how to exploit similar fuel deposits at home. “An acquisition of a shale-producing company could make a lot of sense,” John Hattenberger, president of Gazprom’s U.S. energy-trading unit, said late Tuesday. “Russia has huge shale reserves.” Shale developments, where rock formations are fractured and injected with substances such as water and sand to make gas flow, drove a jump last year in U.S. output of the heating and power-plant fuel. Norway’s StatoilHydro said in May that it may invest in shale formations from Europe to Asia after the purchase of a stake in Chesapeake Energy projects in the U.S. northeast gave it access to shale-gas expertise. (The Moscow Times, Bloomberg)
· Kommersant has learned that Alrosa has completed the sale of its gas assets, Geotransgaz and Urengoi Gas Company. The buyer of these assets, VTB Capital, transferred $620 million to Alrosa's bank account on Wednesday, and the diamond monopoly spent most of this money the same day on repaying its debts to a number of banks, including Alfa Bank, Bank of Moscow, and VTB. Experts are sure that VTB Capital has bought these assets to resell them later (Kommersant, page 9, 'Alrosa Lets Of Gas').
October 21, 2009
· The Russian Finance Ministry plans to submit a draft regulation on long-term targeted programs to replace the federal targeted programs by the end of 2009. Long-term programs should account for 70%-80% of the federal budget, and this should be viewed as a strategic goal, said Finance Minister Alexei Kudrin. Alexei Lavrov, the director of a Finance Ministry department, said there is a fundamental difference between federal targeted programs and long-term targeted programs. "As a rule, federal targeted programs imply construction or research and development expenditures that have almost no connection with routine and much bigger expenditures of agencies for the same purposes." As a result, the same expenditures are financed twice (Vedomosti, 'On the Same Account').
· The overall cost of a project on enlarging the capacity of Rosneft's 556-kilometer long oil pipeline running from Vankor to Purpe may reach as much as 120 billion rubles, Alexander Dashevsky, the general director of Vankorneft, a Rosneft subsidiary, said on Tuesday. This is about $4 billion and nearly half of the costs for the construction of a 1,223-kilometer long Nord Stream. The project envisions the enlargement of the pipeline's annual throughput capacity to 33 million tonnes of oil from the current 25 million tonnes (Vedomosti, 'Pipe of Gold').
· The Inter-Regional Oil and Gas Complex Exchange plans to start trading oil on the domestic market. The exchange intends to involve small companies in the trading, expecting that they would sell about 1 million tonnes of oil a year. However, small oil companies themselves are apparently not prepared yet to enter the exchange (Kommersant, page 11, 'Exchange Needs Small Oil').
· Denmark gave approval for Gazprom’s Nord Stream to place its natural gas pipeline through its territorial waters in the Baltic Sea on Tuesday, making it the first country to grant final permission for the project. Denmark approved the 137-kilometer Danish stretch of the pipeline that will connect Russia with Germany, the Danish Energy Agency said. The 1,220-kilometer link will also pass through Finnish and Swedish waters and requires permission from all five nations. (Bloomberg)
· A plan to sell stakes in thousands of state-owned companies has piqued foreign investors’ interest, but they also want to see corporate balance sheets restructured and clearer indications of where their capital is welcome, said Steven Meehan, CEO of UBS in Russia. The Swiss banking giant is also expecting an economic revival next year to pick up its investment operations in Russia, including new share listings and debt offerings, he said. (The Moscow Times)
· Carrefour is seeking a franchise partner in Russia after deciding to leave the country, Kommersant reported, citing an unidentified person close to Carrefour’s Russian office. Magnit rejected a proposal for a franchise partnership, the newspaper said, citing an unidentified executive at a food retail chain. (Bloomberg)
October 20, 2009
· President Dmitry Medvedev said Monday that ordinary Russians would help write his next state-of-the-nation address, which he is expected to deliver early next month. Medvedev, speaking during a meeting in his Gorki residence outside Moscow, said he wanted to depart from the practice of drafting presidential addresses behind closed doors and invite Russians to participate in the shaping of national issues. He told officials from his administration and the Cabinet that people’s ideas about his “Go, Russia!” article, which was published Sept. 10, should be incorporated into the speech. (The Moscow Times)
· The government presidium on Monday discussed the possibility of lowering import duties, upped on some goods in the second half of 2009 "to protect the domestic market." Giving up protectionism has proved a lot more difficult than resorting to it: the announced decision not to increase duties on timber exports from 2010 has yet to be confirmed. The Customs Union will be another problem: starting from 2010, playing with duty rates will be impossible without Kazakhstan and Belarus' consent, which already have questions about Russia's trade policy, transit, oil and gas exports, and railway tariffs. (Kommersant, Page 1, Duties Become Unilaterally Flexible).
· LUKoil chief Vagit Alekperov on Monday blasted the Federal Anti-Monopoly Service’s suggestion that it might force oil companies out of the retail business, saying it would lead to a less stable market. “Nowhere in the world has separating retail, refining and drilling ever led to positive trends,” Alekperov told reporters in Yekaterinburg, Interfax reported. “We can guarantee quality along the entire production chain.” Earlier this month, Anatoly Golomolzin, a deputy head of the anti-monopoly service, said the agency would consider forcing oil companies to leave the gas station business unless they change the way they price oil products. Alekperov also said U.S. major ConocoPhillips, which owns 20 percent of LUKoil, was not planning to sell shares. “I met with the president of ConocoPhillips last week, on Friday, and we talked about these matters,” he said. (The Moscow Times)
· Iraq, aiming to award development rights for its West Qurna-1 oil field within two weeks, said Monday that ExxonMobil and LUKoil agreed with the country’s Oil Ministry on a fee for the project. The two are willing to work on the field for $1.90 a barrel, Abdul Mahdy al-Ameedi, deputy director general of Iraq’s Petroleum Contracts and Licensing Directorate, said in Istanbul. France’s Total and China National Petroleum Corp. are also in negotiations to develop the field, he said. (Bloomberg, Reuters)
· Italy, Russia and Turkey signed an agreement on building the Samsun-Ceyhan oil pipeline, Eni said Monday. The project underscores a “joint commitment to enhance energy security,” according to a statement issued by Eni, Italy’s biggest oil company. The pipeline will run between Samsun on Turkey’s Black Sea coast and the Mediterranean port of Ceyhan. (Bloomberg)
· The Central Bank has reported that the non-bank sector's foreign debt had reached this year's maximum level of $303.5 billion by October 1, of which loans were worth $237 billion - another record for the year. Banks' foreign debt has shrunk since the start of the year, but not so impressively - by 17.2% down to $137.7 billion. This has prompted the Central Bank to put a curb on foreign borrowings by law. "The Tax Code now passed by the Duma stimulates foreign borrowings," Central Bank Vice Chairman Sergei Shvetsov complained. The rate must stand at 3%, not 15%, which will be a financial obstacle to foreign borrowing," he said. The Central Bank's proposals deserve attention, a Finance Ministry official said. This idea has a sense ahead of Russia's road show as a sovereign borrower. (Vedomosti, Three Percent Curb on Borrowings).
· Gazprom’s ambitious plan to build a 400-meter skyscraper in St. Petersburg has created a rare split in the government that indicates the project is far from assured. In a sign of the division, two state-controlled television channels aired competing reports on Sunday night about Okhta Center, which is to serve as the headquarters for Gazprom Neft but has met with fierce public opposition. (The Moscow Times)
October 19, 2009
· The government could extend the program for subsidizing car loans until 2010, Economic Development and Trade Minister Elvira Nabiullina said. The curb on the price of the car - currently 600,000 rubles - could be lifted. The program for subsidizing car credits was launched in April 2009. In all, 25,401 easy car credits had been extended by August 13 and their number had grown to 43,263 by October 16, the ministry said. "The scheme is raw thus far. The ministry has just started working on it and it has not yet submitted an estimate for increasing the funds for this program," a high-placed official with the Finance Ministry said. (Vedomosti, Aid for All; Kommersant, Page 9, Aid to Curtsey Cars).
· The Economic Development Ministry said Friday that it agreed to shelve Prime Minister Vladimir Putin’s plan to submit a joint membership bid to the World Trade Organization with Belarus and Kazakhstan after accepting the global trade arbiter’s accession rules. The country will still seek to form a customs union with the countries, Maxim Medvedkov, the country’s chief negotiator on the WTO talks, said ministry in a statement Friday. (Bloomberg)
· Gazprom and Gazprombank have devised a plan for making the bank a gas exporter without breaking the law on the single export channel. The plan involves Gazprombank's main gas asset - Sibneftegaz. The bank's subsidiary, OOO Status, bought a 51% in it in 2006 from Itera structures for $131 million. The scheme is as follows. Status buys gas from Sibneftegaz, then sells it to Gazprom Group, and Gazprom Group, as the single export channel, delivers it to Europe and sells it back to Gazprombank Group, namely to bank Tancredo Enterprises Ltd's Cyprus subsidiary. Details are laid down in Gazprom's budget already. The pre-crisis edition of the budget said that Gazprom would buy gas from Tancredo Enterprises in Germany in 2009-11, including gas worth 30 billion rubles in 2009, 28.3 billion rubles in 2010 and 30.4 billion rubles in 2011. (Vedomosti, Scheme Worth $1 Billion).
· The news that Russia's Nobel Oil Group, owned by Grigory Gurevich, has found Chinese partners, surfaced in September. A few days ago, China Investment Corporation (CIC) announced that the deal had been finalized and a new holding company - Nobel Holdings Investments Ltd - had been formed, in which Nobel Oil's owners contributed their shares, and Chinese companies their money. One hundred million dollars has been paid for Nobel shares, $50 million will be put into operating expenses, and another $150 million will be spent in nine months to buy and develop oil near the Nobel oil fields, CIC reports. Nobel could soon get a new Chinese co-owner. The Kaisun Energy holding company, based in Hong Kong, has announced it has signed a memorandum on a contemplated purchase of Nobel. (Vedomosti, China's Nobel).
· The Russian government thinks it has given enough aid to oil and gas companies, and its presidium on Monday will discuss refunds of the export duties on liquefied carbonic gas. This will be no blow for gas companies, since carbonic gas exports are not large. But exporters have proposed changing the method of calculating the duty rate and tying it to market quotations. (Kommersant, Page 11, Government Activates Export Duties).
October 30, 2009
· Vladimir Putin has signed an order to allocate 4.3 billion rubles ($145.9 million) to RusHydro to speed up the completion of a shore spillway at the Sayano-Shushenskaya plant. "The order to allocate additional funds to RusHydro in the amount of 4.3 billion rubles to accelerate the construction of a shore spillway at the Sayano-Shushenskaya plant has been signed," Putin said at a session of the presidium of the government. Deputy Prime Minister and Finance Minister Alexey Kudrin said RusHydro would also spend 8.9 billion rubles of its own funds on the spillway. (Interfax “RusHydro Gets 4.3 bn Rubles for Sayano-Shushenskaya GRES”)
· The cost of Fortum's project to build a third steam-gas block at Chelyabinsk CHP-3 will come to 9.5 billion rubles, the company said in a statement. The launch of the block, which will have an electricity capacity of 220 megawatts and a heat power of 146 Gcal per hour, is slated for July 2010. The introduction of the new capacity will increase the efficiency of electricity supply to enterprises in Chelyabinsk and its region, while also securing heat to new consumers and lowering fuel costs and emissions into the atmosphere. (Interfax “Fortum estimates costs for construction of third block at Chelyabinsk CHP-3 at 9.5 bn rubles”)
October 29, 2009
· Vekselberg’s IES Holding has new troubles with TGK-7 and TGK-6. IES has not received its controlling stake, but last year’s FAS on the sale of 741 mega watts has come into effect. In the winter 2008 FAS allowed IES Holding to buy TGK-7 and TGK-6 but with conditions – it must report to the FAS within 10 days if it accumulates more than 50% of a company’s shares and then sell 741 mega watts of a TGK to an external investor after a year. If IES violates the terms the FAS may file a court claim and fine the company. Currently IES Holding has less than a 50% stake in the gencos. In 2008 IES agreed to purchase additional shares from RAO UES, but only paid an advance. Now it is negotiating with the current owner, Federal Grid Company, to complete the sale. However, since 2008 IES has been managing both companies, and taking actual control of the assets into account, its share in TGK-7 is 69.65% and in TGK-6 is 61.49%. Neither Federal Grid Company nor IES have commented on the agreement allowing IES to manage the assets, but an IES representative has said that the company is not in violation of the FAS terms and will be complying with all the conditions before the deadline. (Vedomosti “Vekselberg at the crossroads”)
· Shareholders in Russian electricity trader Inter RAO will vote on a gas supply deal with Novatek and on subscribing to new shares in the OGK-1. Inter RAO told Interfax that at a meeting on Wednesday directors recommended that shareholders vote in favor of both items. (Interfax, Vremya Novostei, Kommersant “Inter RAO shareholders to vote on Novatek deal, OGK-1 share issue on December 7”)
· The Market Council previously deprived three energy sales companies in Rostov region – Energosbyt Rostovenergo, Donenergosbyt and Norem – of the right to trade on the wholesale power market because of their large debts. The Ministry of Energy hasnow overruled the Council’s decision regarding Energosbyt Rostovenergo and Donenergosbyt but not for Norem. (Kommersant, RBC Daily “Southern sales companies will remain in market”)
· Germany's RWE has dropped its plans to take part in the construction of the Belene nuclear power plant in Bulgaria, an RWE spokesperson told Vedomosti. The plant was to make Bulgaria the leading exporter of electric power in the Balkans. However, the project got stuck after a recent government change. Bulgaria first announced its decision to suspend joint projects with Russia and then said it could not finance the Belene project because of the crisis. Now Bulgaria is planning to announce a tender for taking part in the project. Rosatom chief Sergei Kiriyenko said earlier that Russia would be interested in joining the project, and Finance Minister Alexei Kudrin said Russia could finance the power plant construction if "Russian specialists" are involved in it. (Vedomosti “Unlucky Belene”)
October 28, 2009
· OGK-3 has agreed with Russia's Energy Ministry and System Operator to adjust its investment program to account for the timing and scale of building new facilities, according to Deputy General Director for Energy Markets Alexandra Panina. OGK-3's investment program until 2020 will come to 92.3 billion rubles. (Interfax, Vedomosti “OGK-3 agrees with Energy Ministry on changing investment program”)
· Dispute between Rusenergosbyt and Mosenergosbyt has started again. State-owned Mosenergosbyt won’t conclude a 2010 agency contract with Rusenergosbyt, a private company, to gather electricity payments in Moscow. Rusenergosbyt has already concluded contracts on energy supply with Moscow management companies. A similar situation occurred at the end of 2008/beginning 2009 and led to conflict between supply companies, double payments and complaints by citizens. Andrey Potapenko, director of town departments in Mosenergosbyt, said yesterday that Mosenergosbyt will reject the services of Rusenergosbyt, which is currently operates in Eastern and Southeastern districts of Moscow. Potapenko explained that the use of intermediaries is inefficient. But Rusenergosbyt is not ready to withdraw from the Moscow market. The company’s CEO, Igor German, said that Rusenergosbyt signed contracts with 28 management companies in two districts for 2010 and volumes on energy supply are written in the contracts. At the same time a request to define tariffs was introduced by the Moscow Regional Energy Commission. And on October 5 Rusenergosbyt sent Mosenergosbyt an offer agreement to buy electric energy. The supplier must take a decision within 30 days. A source familiar with positions of the sides told Kommersant that Rusenergosbyt’s position is closer to the Housing Codex and Mosenergosbyt’s position is based on power sector retail market rules. (Kommersant “Conflict of Energy Supply Companies Remains for the Second Year”)
· Officers from a special riot police task force (OMON) and the Investigative Committee within the Russian prosecution system confiscated some documents at the Sayano-Shushenskaya GES on Tuesday, Interfax reported citing its sources. A source from the prosecution authorities confirmed this information to Vedomosti. The police and investigators worked only at the Sayano-Shushenskaya GES in Khakassia, and there were no searches at the Moscow office of its owner, RusHydro. The documents seized at the hydropower plant concerned its business operations, labor protection regulations, the organization of work and measures in emergencies, the source said. Continuing the topic of Sayano-Shushenskaya GES, Interfax adds that Anatoly Chubais won’t take part in the meeting of parliamentary commission which is investigating the accident at RusHydro’s plant, because he is currently in the USA. (Vedomosti, Kommersant, Interfax “Produce Your Documents Please!”)
· RBC Daily runs an interview with Andrey Konovalov, new chief of the Siberia division of RusHydro. He replaced Alexander Toloshinov on Monday. He comments on the accident at Sayano-Shushenskaya GES and asks for 100 days to study the situation. The current task is to regulate the company’s management, laying special emphasis on security and energy supply issues. Andrey Konovalov’s main aim is to make RusHydro a global standard company. Andrey Konovalov stated that he does not support Oleg Deripaska’s idea to divide RusHydro into four parts, because the company has already developed its corporate management and therefore the idea is now absurd. (RBC Daily “If One Person is Responsible for Everything, Only Mirrow Might Help”)
· The media reports that Oleg Budargin was appointed as Federal Grid Company chairman with 99.7% of votes. Oleg Budargin stated that the main priority of the company will remain reliability and investments will total 170 billion rubles. (RBC Daily “FDC Got Chairman”)
October 27, 2009
· The rules of the market of system services in the electricity sector could take effect before the end of 2009. The government will confirm the procedure of compensating generators' spending on the maintenance of technical parameters of the energy system. The seriousness of the problem was demonstrated by the accident at the Sayano-Shushenskaya hydroelectric plant, when reserve capacities, bringing losses to generating companies, had to be used. (Kommersant “Energy Ministry Will Pay for System Stability”)
· Alexander Toloshinov, head of the Siberia division of RusHydro and Sergey Yushin, the company's executive director, economics and finance, could quit the company, RusHydro said in published materials. The company said its board of directors discussed removing the two from the executive board at a meeting on Monday. Toloshinov might be replaced by Andrei Konovalov, former general director of Irkutskenergo. Yushin might be replaced by David Kuznetsov, a top manager at LLC Levit and a former vice president of Alfa-Bank. LLC Levit is a shareholder in gas producer Novatek, and Novatek’s chief executive, Leonid Mikhelson, is its main beneficiary. (Vedomosti, Kommersant, RBC Daily “RusHydro's Siberia, finance chiefs could quit”)
October 26, 2009
· Inter RAO, a state-controlled utility that manages power exports, said Friday that it chose Novatek to supply its North-West generator with gas. Novatek offered the best terms on delivery and price in a tender, Inter RAO said in a statement on its web site. Novatek also offered better terms than under existing contracts for four other power plants managed by Inter RAO’s OGK-1 unit, the company said. (The Moscow Times, Kommersant “Novatek Closes Deal With Inter RAO”)
· TGK-2 is planning to issue 15 trillion additional shares, which is 10 times more than its current equity. Shareholders will debate corresponding amendments to the company charter on November 10. The money may be needed for implementing its investment program. (Vedomosti, RBC Daily “New Shares”)
Russia Headline News
October 30, 2009
· Ecuadorian President Rafael Correa on Thursday made his first visit to Moscow, where he signed a series of deals while admiring the Kremlin palace but kept mum on a widely anticipated recognition of South Ossetia and Abkhazia. Correa’s visit to the Kremlin was the first in the history of diplomatic relations between Ecuador and Russia and yielded a strategic partnership agreement that covers politics, trade, culture, tourism, sports, science, technology and the environment. (The Moscow Times)
· Interior Ministry officers tested out their newest techniques for dispersing rallies Thursday, in exercises that news agencies said were focused on dealing with angry pensioners. According to the ministry’s scenario for the drill, a group of pensioners gathered for an unsanctioned demonstration and blocked an important highway to seek social support, Interfax reported. Within several minutes, the crowd was dispersed with water, tear gas and stun grenades, while some of the elderly demonstrators were arrested. (The Moscow Times)
· The government plans to sell 25 tons of gold from the state precious metals and gems repository, Gokhran, possibly on the local market, Interfax quoted a Finance Ministry official as saying Thursday. “Maybe we will not sell abroad, but how can we refrain from selling altogether, when there is a presidential decree and a sales plan approved by the government?” said Alexander Akhpolov, head of the ministry’s administrative department. “We plan to sell … some 25 tons.” Akhpolov could not be reached for comment. (Reuters)
· Gazprom Neft has borrowed about $900 million from Sberbank and become a creditor of Gradison company which is the subject of a legal dispute between Shalva Chigirinsky and Ruslan Baisarov. A 25.66% stake in Sibir Energy is the collateral and the debt is overdue. (Vedomosti, "To Sibir with Sberbank Money")
· After buying controlling shares in the Serbian NIS oil refinery Gazprom Neft at the height of the crisis discovered that the asset was encumbered by debts totaling $1 billion 80% of which are short-term loans due during the year. By the end of September NIS succeeded in negotiating a payment restructuring plan for three to five years. To be harmonized with Gazprom Neft standards the debt should be cut by half from its size at the start of 2009. (Kommersant, p. 11 "Gazprom Neft meets Surprise Debt")
· The Central Bank on Thursday unveiled its eighth interest rate cut since April, as lower inflation enabled it to press on with the easing campaign aimed at setting the recession-struck economy firmly on the path to recovery. The Central Bank reduced all key rates by 50 basis points effective from Oct. 30, taking the benchmark refinancing rate down to a historic low of 9.5 percent. The move comes a day after data showed October would likely be the third month of zero inflation, putting investors on alert for another rate cut. (Reuters)
October 29, 2009
· Serbia will open new talks with Russia on securing a $1 billion loan to cover the budget deficit and finance infrastructure projects, the Balkan nation’s Finance Ministry said. The talks will be held in Moscow starting tomorrow and are expected to last two days, a statement from the ministry in Belgrade said today. (The Moscow Times)
· North Atlantic Treaty Organization Secretary General Anders Fogh Rasmussen will travel to Moscow Dec. 15-17, aiming to advance the military alliance’s relations with Russia, NATO spokesman James Appathurai told reporters in Brussels. (The Moscow Times)
· Bosco Sport, a Russian sportswear brand, has become a Tier One sponsor of the 2014 Winter Olympics and Paralympic Games in Sochi, Russia, in a deal worth more than $100 million. Bosco has been awarded “general partner” status, under which it can use the symbols of the Games, the organizing committee said today in an e-mailed statement. (Bloomberg)
· Pirelli & C. SpA will start construction of a tire plant next year in Russia, where it will invest 250 million euros ($369 million,) daily Il Giornale reported, without saying where it got the information. The investment in the region of Samara is part of a joint venture Pirelli formed last year with Russian Technologies State Corporation, and construction may be completed within 2 years, according to the Italian newspaper. The venture may also build a second plant in the country, Il Giornale reported. (Bloomberg)
· Gazprom expects its consumers to honor existing long-term supply contracts, Alexei Miller, the Russian gas monopoly's chief executive, told reporters, commenting on plans by electricity trader Inter RAO to change its own gas supplier. Miller said Gazprom had supported Russian industry and the power sector over the years, providing it with the conditions it needs to function and grow. "Gazprom has not only supplied gas to Russian consumers at a loss, but it has made a lot of effort to replenish and expand its resources and lifting capacity and modernize and develop the gas transmission system, even at times when the domestic market situation has not been attractive for the supplier," Miller said. "The power generators and management at RAO UES of Russia in their time criticized the rules for gas supply that existed, preventing Gazprom from signing long-term supply contracts. We resolved that systemic problem, contracts were signed and not they have to be honored," Miller said. (Interfax)
· The Federal Anti-Monopoly Service said Wednesday that it would get involved in a feud between Rosneft and Gazprom over access to the gas giant’s pipeline network. The watchdog opened a case after Rosneft filed a complaint alleging that Gazprom limited Rosneft’s access to the country’s main gas pipeline network from April to August. Because it was unable to sell the gas, Rosneft said it had to flare off associated gas in quantities exceeding the maximum amount permitted by environment legislation, thus incurring a fine. (The Moscow Times)
· Taiwan increased imports of the fuel for a second straight month in September, adding to signs of an economic recovery. Taiwan’s energy consumption rose for the first time in a year in July on increased electricity demand from manufacturers as the decline in orders slowed. Taiwan bought its first ever LNG cargo from Russia’s Sakhalin LNG project on spot terms and a cargo from Nigeria in September, at volumes unchanged from August, the data showed. At an average price of about $9.50 per million British thermal units, that’s more than twice the price of U.S. benchmark gas in New York and U.K. gas. (Bloomberg)
· A major merger is being prepared on the Russian banking market. Following MDM Bank and URSA Bank, the Russian banks incorporated in Societe Generale are also going to start a merger process. The French group currently incorporates four banking assets in Russia, i.e. Rosbank, Bank Societe Generale Vostok (BSGV), Delta Credit Bank, and Rusfinansbank, and this business structure may be not optimal enough in the post-crisis period. Consolidation would enable the French investors to optimize the management of the financial assets and cut expenditures (Kommersant page 1, 'General Method to Overcome Crisis').
October 28, 2009
· The government said Tuesday that it had postponed its plans to sell up to 50 tons of gold this year, after information about the sale was leaked to the market, but the gold market failed to react. “Due to the leak of the information, the sale in the reported period and in the reported form will not take place,” said Sergei Gorny, deputy head of the government agency for precious metals sales, Almazjuvelirexport. Gorny declined to say when he thought the sale may take place. (Reuters)
· The state corporation Russian Technologies owned shares or stocks of 242 joint stock companies worth nearly 156 billion rubles as of September 30, according to the Russian Federal Property Management Agency (Rosimushchestvo)'s estimate. Russian Technologies head Sergei Chemezov confirmed this information to Vedomosti, saying that this estimate is "not final and does not take into account some other assets." In particular, the estimate does not account for 185 federal state unitary enterprises to be incorporated by the end of 2009, a 49% stake in the Russian-Mongolian joint venture Erdenet, which was valued at 1.3 billion tugriks, or 26.4 million rubles, 49% in Mongolrostsvetmet (601.1 million tugriks, or 12.2 million rubles), 51% in Saratov Airlines and 38% in Telemekhanika (Vedomosti, 'Sharing Billions').
· The Federal Anti-Monopoly Service fined Rosneft 5.28 billion rubles ($180 million) for abusing its dominating market position and warned LUKoil that it could expect similar fines soon. The service found the firms in violation of the law in July, accusing them of deliberately driving up wholesale prices for gasoline and other oil products in the first half of 2009. The service has already fined TNK-BP and Gazprom Neft a total of 9 billion rubles for similar violations. Earlier Tuesday, the service’s head, Igor Artemyev, had announced that fines would be levied on both Rosneft and LUKoil. (The Moscow Times, Vedomosti, Kommersant)
· Russia and Turkey will build an oil refinery in the Mediterranean to maximize profits from a joint pipeline project, Energy Minister Sergei Shmatko said Tuesday. “We want to build a major refinery and jointly sell oil products from the Mediterranean coast,” he said. The comment follows a deal between Italy, Russia and Turkey last week under which Russia agreed to participate in building a pipeline from the Turkish Black Sea port of Samsun to Ceyhan in the Mediterranean. Russia and Kazakhstan also said they would supply crude for the new link, which is designed to reduce tanker traffic through Turkey’s narrow and busy Black Sea straits. Italy’s Eni and Turkey’s Calik hold 50 percent each in the 550-kilometer pipeline, which will have a maximum capacity of 1.5 million barrels a day. “I think [this project] is a new rising star,” Shmatko said. (Reuters)
· TNK-BP said Tuesday that better third-quarter trading would help deliver a solid performance for 2009 despite a near halving in nine-month profit. The company said its net income for the three months to the end of September came in at $1.7 billion, up 34 percent on the previous quarter, helped by higher oil prices and the sale of its oil services business. The figures contrasted sharply with net income for the nine-month period, down 44 percent year on year as the company suffered the effects of a recession-driven oil price plunge in the first half of 2009. “The third-quarter results show that TNK-BP is well-positioned to deliver solid performance for 2009,” interim chief executive Mikhail Fridman said in a statement. The benchmark price for Russia’s benchmark Urals crude halved to an average of $56.6 a barrel over the nine-month period, but improved to a mean $68 in the third quarter. (Reuters)
· The dream of Russian bureaucrats, who have been trying to create a Russian exchange sort of oil and have "fair" oil prices, is likely to come true soon. The Eastern Siberia-Pacific Ocean oil pipeline will start operating at the end of 2009, and exchange trading in deliverable futures for Eastern Siberian oil will begin several months later. Sergei Maslov, the president of the St. Petersburg International Commodity Exchange, said in an interview with Kommersant what needs to be done to persuade companies to come to the exchange and why they may be in need of this trading floor (Kommersant, page 14, 'They Appeared on Exchange with Ridiculous Volumes').
· At least 16 investment banks are in the running for a planned $2 billion stock market flotation by United Company RusAl, sources said Tuesday. “The list [of candidates] already includes 16 banks,” one banking source said. The sources named Credit Suisse, Chinese BOCI International and BNP Paribas as possible global coordinators of the placement. Rusal plans to sell stock in the first half of December, Interfax reported. (Reuters, Bloomberg)
October 27, 2009
· The current crisis has defeated inflation as citizens consume less due to shrinking incomes, while sellers and suppliers have to hold prices over a shortage of circulating capital and loans, the Economic Development Ministry said in a report. Prices did not rise in August, September and the first three weeks in October. The reason for that is not merely a bountiful harvest: the price rise on foodstuffs, except vegetables and fruits, slowed down to 1% in the third quarter, against 1.2% in the second and 4% in the first quarter. Basic inflation (housing utilities, gasoline, and vegetables and fruits not included) slowed down to 1.3%, compared to 1.6% in the second quarter. (Vedomosti, Inflation in Crisis).
· Following scandalous mutual accusations of releasing misinformation and being unprofessional, the Finance Ministry and the Moscow government have hammered out an agreement. A federal loan worth 16.5 billion rubles will allow Moscow in 2010 to cut the budget deficit by 8%-9% of the planned figure. An unscheduled growth in the city's budget deficit, caused by a new method of distributing excises on fuel in the regions, the Finance Ministry uses, sparked a fierce argument between Finance Minister Alexei Kudrin and Moscow Mayor Yury Luzhkov. The mayor blamed the Finance Ministry for instigating Muscovites' anger with the mayor and Prime Minister Vladimir Putin. (Kommersant, Page 1, Finance Ministtry, Moscow Will Get Along on Credit).
· Energy Minister Sergei Shmatko said Monday that oil companies in remote regions might need exemptions from export duty for more than five years in order to make producing from the areas profitable. Crude producers in eastern Siberia will need a break from the duty for a “minimum of five to seven years,” Shmatko said. The government has proposed granting an exemption for an unspecified period for 13 deposits in eastern and northern Siberia, including developments run by Rosneft and TNK-BP. The country has pledged breaks to encourage development of largely untapped eastern Siberian fields as it opens up new pipelines to Asia. Prime Minister Vladimir Putin signed an order in July to exempt the 13 fields. The order applies to such fields as Rosneft’s Vankor, which started output this year and is expected to pump 220,000 barrels per day by the end of 2009. (Bloomberg)
· By the end of the year, the price of a barrel of American WTI oil is likely to reach $85, Goldman Sachs investment bank said on Monday. This means that Russia's Urals oil will cost about $80. Official forecasts are more conservative. The Economic Development Ministry predicts $57 this year and $58 in 2010. A more optimistic forecast puts the price at $68 per barrel. But Russian oil companies remain watchful and are not planning to cut capital investment. TNK-BP plans capital investment at $3.5 billion - $4 billion in 2010, compared to $3 billion in 2009. Tatneft will invest in extraction as much as in 2009 - up to $500 million (Vedomosti, Watchful Growth).
· The average price of oil will be 8,200 rubles per tonne in Russia in November, up 11% against October, according to results in domestic trading. Growth in domestic prices will not tell on the price for gasoline. Its price remains overstated, analyst Mikhail Turukalov of the Kortes analytical center said. In his estimate, from July 1 to the middle of October, 1 tonne of AI-95 gasoline, sold at home, brought the company 6,960 - 7,700 rubles more than exported oil. But the price for diesel fuel will go up. Exporting it brings more benefits. (Vedomosti, Oil Price Growing).
· United Company RusAl said Monday that banks holding half its foreign debt approved a restructuring of the company’s borrowings. RusAl will meet foreign creditors, who hold a total of $7.4 billion of the company’s debt, after agreeing new terms with Russian banks and shareholder Onexim Group, said Oleg Mukhamedshin, head of capital markets, on a conference call. RusAl, which is seeking an initial public offering in Hong Kong, might extend a deadline to agree on repayment terms with foreign banks for a fifth time should an accord on key terms not be reached by Oct. 28, four people familiar with the matter said last month. The producer said July 30 that it had agreed on key terms of a debt restructuring with a coordinating committee of eight banks representing the interests of foreign creditors. (Bloomberg)
October 26, 2009
· Prime Minister Vladimir Putin said Sunday that Russia would extend a moratorium on planned timber export duties for another year, easing the risk of new trade tensions with neighboring Finland and the European Union. The pledge drew a warm but cautious response from Finland, which had previously threatened to make the hike an issue for Russia’s long-running World Trade Organization accession talks. “We still have differences on [the export tariffs]. … But Finland believes that Russia’s place is in the WTO,” Finnish Prime Minister Matti Vanhanen said during his address to a timber industry forum in St. Petersburg. Vanhanen said Finland would likely issue permission for the construction of Russia’s Nord Stream gas pipeline in its territorial waters following an environmental check. “We hope it will be done before the year’s end,” he said. (The Moscow Times)
· Trading in oil from Eastern Siberia at the exchange should begin in December. Such instructions were given to the St. Petersburg raw materials' exchange by First Deputy Prime Minister Igor Sechin, a participant in a conference held at TNK-BP reports. "We intended to launch trading in January but the vice premier gave instructions to organize it immediately after the commissioning of Eastern oil pipeline," Sergei Maslov, president of the exchange, stated. Eastern Siberian oil is approximately of the same quality and is best suited for forming a traded brand, he said. The purpose is to concentrate all deliveries via port Kozmino at the exchange and start selling the new brand abroad. (Vedomosti, "Oil to the Exchange")
· Turkmenistan is completing the construction of its own section of the pipeline which will take Central Asian natural gas to China. Turkmengaz state-owned corporation announced the completion of ground welding operations on the Turkmen section of the Turkmenistan-Uzbekistan-Kazakhstan-China gas main. Preparations are under way for testing the pipeline. The line will be over 7,000 kilometers long and have throughput capacity of up to 40 bcm. Its commissioning is scheduled for mid-December. (Vedomosti, "Discovering Turkmenistan")
· Different authorities have still not found compromise on the mechanism of reducing the export duty on oil from fields in Eastern Siberia to zero. Nikolai Tokarev, head of Transneft (RTS: TRNF), believes that the decision will be made in November and enforced retroactively as of October 1. The Energy Ministry is staking on November. The Federal Customs Service believes that the future of the duties is in the hands of the Transportation Ministry. According to Kommersant, if all the formalities are observed duties cannot be cut before February 2010, even though Prime Minister Vladimir Putin gave instructions to launch the process back in July. (Kommersant, p. 2 "Zero can't be written retroactively")
· The Mongolian government has announced the short list of participants in a contest for the development of the Tavan-Tolgoi coalfield. The very fact of the contest signifies another defeat for Russia's RZhD in the rivalry for Mongolian subsoil resources. However, the monopoly is not losing hope that the Mongolian government will drop the contest. (Kommersant, p. 11 "Mongolia coals Investors")
· RusAl paid $89.9million to Alfa Bank on September when the bank filed bankruptcy lawsuits against two of the company's subsidiaries - SUAL and RusAl-Krasnoyarsk. The lawsuits totaled $73.8 million. RusAl also paid the debts of one more subsidiary - RusAl-Sayanogorsk (about $12 million). However, the sum of $85.9 million only comprised the fines and penalties that had accrued by the time of filing lawsuits for debt repayment (March-April). Now Alfa is fighting to get compensation for its losses between spring and September, a spokesman for the bank said. If the debt is not settled, the bank may file suits against BasEl group companies this week, Vladimir Tatarchuk, Alfa BANK Deputy CEO, said. (Vedomosti, "Alfa does not give in")
· In 2010 inflation may drop below 9% and the refinancing rate may go down to the same level, Alexei Ulyukayev, Fist Deputy Chairman of the Central Bank, said calling the assumption quite cautious. "There is every chance and possibility that it [inflation] would be significantly lower than this estimate," he said. With the macroeconomic situation improving banks will be able to dismantle provisions for possible losses on loans starting with 2010, he hoped. "In 2011 they will definitely be able to ease provisions and become more attractive from the viewpoint of investments," he said. Meanwhile, financials compiled according to Russian accounting standards show an increase in overdue payments but it is not too radical, he added. "More importantly, the banks are building up reserves even faster," he said. (Vedomosti, "Banks are promised Growth")
