Russian billionaire readies an offer for Warner Music

Russian billionaire readies an offer for Warner Music

M&A

RUSSIAN billionaire Len Blavatnik is said to be on the verge of making a binding offer for Warner music, the record label behind Madonna and Oasis, in a deal valued at more than $3bn (£1.8bn).

He will lead a consortium of bidders including the Gores brothers, the US billionaire financiers, to buy the company in which he already owns an interest.

Yet a late challenge to the offer could be lodged at the eleventh hour by BMG Rights Management, jointly owned by German music giant Bertelsmann and US private equity firm KKR, and Universal Music Group.

The two are also said to be interested in buying British music label EMI from its creditors, Citigroup, as part of a plot to split up the assets held by both publishing firms.

Russian company to manufacture robots in Estonia

Sergey Gadalov, a Russian businessman whose company Kvadrat SG manufactures robots in St Petersburg, says that he chose Narva in Estonia as a new production base since there is plenty of technically qualified people and it was easy to do things, writes Äripäev.

“We are not doing simple assembly, our customers include Ford Motor Company, Caterpillar, Electrolux and Henke-Era,” said Gadalov who has set up ASG Robotics AS in Estonia for high-tech production in Narva with a grant from Enterprise Estonia.

Gadalov added: "I have been doing business in Russia over 20 years. I am starting business in Estonia only now, but it is important to see that all state structures such as tax authority are operating properly. Things get done quickly and people here are friendlier”.

http://www.bne.eu/storyf2660/Alfa_puts_1bn_price_tag_on_its_25_stake_in_Russias_CTC_Media

In a sign of the growth potential of Russia's advertising market, Alfa Group has slapped a $1bn price tag on its stake in the country's largest commercial broadcaster CTC Media.

Russia's leading financial-industrial conglomerate Alfa said on April 28 that it's in talks to sell its 25.3% stake in CTC (pronounced “STS” – the company uses the Cyrillic version of its name in print) to Russia's National Media Group, but has first offered the stake to fellow shareholder Sweden's Modern Times Group, which is owner of 38.3% of CTC shares, at a price of just over $27 per share, or $1.07bn. That's an 18% premium to Wednesday's closing price on Nasdaq and almost double what the shares IPO'd at in the summer of 2006.

Modern Times has until May 25 to respond, though analysts say it's unlikely that the Swedish firm will acquire Alfa's stake because Russian legislation restricts the stake held by foreign investors in television companies at 50%.

More's the pity for the Swedes, because CEO Anton Kudryashov claims that CTC is not only the most successful commercial TV company in Russia, but the most profitable media company in the world, and it looks set to benefit from the surge in advertising spending over the coming years. "In terms of ad spend, Russia is already the ninth biggest market in the world, the fifth largest in Europe and, if current growth continues, it will be the largest in Europe as soon as 2013," Kudryashov told bne in an interview just before the news broke that Alfa is looking to sell its stake.

Television is by far the most important media channel in Russia. In a country that spans half the globe, sets in the front room remain the main source of news and entertainment for millions of Russians living in the far-flung regions and the only way that multinationals can cost-effectively sell their fast-moving-consumer-goods (FMCGs) to the entire 142m strong population. The upshot is that while TV advertising typically accounts for a third of the total ad spending in the West (in the UK online ad spending recently overtook that for TV), in Russia half of every ruble spent on advertising goes on TV ads.

Russia's total ad spending in 2010 was $4.2bn – more than 10 times that of Ukraine's, the second largest in the region with a third of the population – and has been growing by 25-30% a year. The crisis took the edge off this ballistic growth, when the total ad spending in Russia fell 18% in ruble terms in 2008 and by more than 40% in dollar terms, but Kudryashov reckons it will have recovered all the ground lost by the end of this year.

And there's still a lot of room for growth: in the West the total amount of GDP spent on ads is typically equivalent to 1.0-1.5%. Russia's spending hit a peak in 2008 of 0.7%, but fell back to 0.5% in 2010. "The Russian market is large in size, but still immature in nature," he says. "In the West, cars and financial services are amongst the top-five biggest spenders, but in Russia these products only account for 2% of the total spend - of course this will be a major source of growth as these areas develop."

All this makes CTC a valuable proposition. Nadeem Moulvi, an equity research analyst, picks CTC as one his top-10 growth stocks. He says the company should grow its profits at an annual rate of 60% compared with the 19% growth rate of the wider US broadcasting and cable TV industry. The company is debt free and has maintained a net profit margin of 24% during the past five years, he says.

Pure entertainment

CTC began life as a small broadcaster in St Petersburg in 1994 and only went nationwide in 1996. Things started to move fast for the company when Modern Times bought out the founders in 1999 and then brought in Alfa in 2003. This investment cycle culminated in an IPO on Nasdaq in 2006 that raised $200m, which provided the funds for a rapid expansion and a string of acquisitions including two more broadcasters – Domashny, the only channel in Russia to specifically target women, and DTV, which specialises in reality tv – as well as some production companies to produce content in-house.

CTC focuses solely on entertainment, broadcasting a mix of domestically produced content - which makes up two-thirds of its programming - and international shows, targeting viewers aged 6–54, especially younger audiences. Kudryashov says the station made a conscious choice to carry no news or socially orientated programming. "News is not dangerous, but it does require a lot of coordination with the supervising authorities," says Kudryashov. "News is expensive, as you need a big staff and the state can lose money on news production, we can't."

While it's hard to compete as a news broadcaster, it is easier to cater to the demand for pure entertainment. With its in-house production and extensive market research, this is where CTC has a market advantage, which allows it to capture the advertising spending.

This is a crucial advantage in Russia's highly competitive TV market. There are 20 free-to-air channels, but the top five account for 68% of the audience share and 80% of the advertising revenues, says Kudryashov. By 2003, the broadcaster had built up an 11% audience share and taking into account its small channels CTC is the third or fourth largest channel in the country, reaching over 100m people and nine out of every 10 households in the country.

The main challenge has been to keep up with the changing tastes of Russia's viewing audience. A year after the Soviet Union collapsed, a wave of Brazilian and Mexican soap operas appeared on Russia's airwaves and were a smash hit; shows like Mexico's telenovelas "Simply Maria" and "The Rich Also Cry" could clear the streets of Moscow for a particularly dramatic instalment.

These days, tastes have become more sophisticated, says Kudryashov, and CTC either makes or buys two-thirds of its content domestically, with the rest being mostly Hollywood blockbusters. Many of the home-grown shows are adaptations of successful formulae developed overseas and transposed into a Russian cultural setting. For example, CTC bought a license to produce the sitcom "Born not pretty" based on the popular Colombian telenovela that is better known as "Ugly Betty" in the West. "Nowadays, there is more and more demand for original Russian produced content, but the problem is where to get it from. Production is not mature and there are not enough writers to create the content needed to meet the demand," says Kudryashov.

Activity in the Oil and Gas sector (including regulatory)

Russia reimposes duty on Kyrgyz fuel imports

BISHKEK – Russia imposed a stiff new duty of US $408.30 per tonne on exports of gasoline to Kyrgyzstan effective May 1, 24.kg reported April 29. Russian officials attributed the re-imposition of the duty to the need to supply the Russian internal market.

However, Russia might cancel that duty after two or three months, once supply to its domestic market stabilises, Russian Deputy Finance Minister Sergei Shatalov said, according to AKIPress.org.

About 90% of fuel and lubricating oil that Kyrgyzstan imports comes from Russia, analyst Zhumakadyr Akeneyev told 24.kg.

Russia has lifted and reimposed duties on Kyrgyz purchases of fuel several times in the past year, EurasiaNet reported April 29. It cancelled those duties at the end of March.

GE Technology Helps Drive Russia Oil and Gas Industry

ENP Newswire - 02 May 2011

Release date- 28042011 - HOUSTON, TEXAS and ASTRAKHAN, RUSSIA - One of the world's leading oil and gas companies, LUKOIL, will use GE's (NYSE: GE) innovative aeroderivative technology to provide additional energy for its operations in Astrakhan, Russia, continuing GE's history of growth in the region.

Four GE LM6000-PF dual fuel dry low emissions (DLE) Sprint aeroderivative gas turbines will help provide heat and power for LUKOIL's operations in the region where oil and gas production is a primary industry. The project represents the first dual fuel DLE LM6000-PF units packaged from GE's Houston facility. These units use two fuels- diesel and natural gas. These new turbines will join two LM6000s that began service for LUKOIL in Astrakhan on April 26, 2011.

'The LM6000's proven track record and GE's steadfast commitment to develop innovative global energy solutions, coupled with the ability to use two types of fuel and to reduce emissions, made this a good choice for LUKOIL,' said Darryl Wilson, vice president-aeroderivative gas turbines for GE Power & Water.

'The LM6000 product heritage of nearly 1,000 installed units and 20 million operating hours with more than 99.8 percent reliability and complete operational flexibility has made it the engine of choice in its class by the energy industry over the last 15 years. We will continue to provide solutions that drive customer success and productivity.'

The LM6000-PF dual fuel DLE capability gives it the capability to operate at low emission levels in gas or liquid fuels without the need for water injection. The LM6000-PF reduces CO2 emissions by 15,000 metric tons, reduces gas consumption by over 278,000 GJ, reduces NOx emissions by 360,000 Kg and saves 37,400 cubic meters of water yearly.

The CO2 emissions reduction is the equivalent of removing 7,600 cars from E.U. roads and water savings is the equivalent to filling 15 Olympic-size swimming pools every year.

The LM6000-PF is the second aeroderivative gas turbine to receive GE's ecomagination certification, joining the LMS100 in providing customers with additional proven frame and gas turbine technologies to meet the growing need in the world marketplace.

LUKOIL is one of the world's leading vertically integrated oil and gas companies. Main activities of the company are exploration and production of oil and gas, production of petroleum products and petrochemicals and marketing of these outputs. Most of the LUKOIL's exploration and production activity is located in Russia, and its main resource base is in Western Siberia. LUKOIL owns modern refineries, gas processing and petrochemical plants in Russia, Eastern and Western Europe, near-abroad countries. Its products are marketed in Russia, Eastern and Western Europe, in near-abroad countries and in the United States.

For more than 100 years GE has been supplying equipment to develop Russia's energy infrastructure. GE Energy has had a significant presence in Russia and CIS since the early 1900s. Today more than 600 gas-turbine units, 69 steam turbines, 660 compressors, 400 of GE's reciprocating gas engines and more than 600 units of other equipment including air coolers, condensers, gas separators and pumps produced by GE Energy and GE Oil & Gas have been installed in Russia and CIS to date.

This contract is the latest in a series of announcements from GE's aeroderivative business. On Nov. 17, GE announced its first contract to provide two LMS100 aeroderivative gas turbines to meet current and future energy growth in Brazil for Bertin Energia. On Oct. 7, GE announced that following the initial success of the world's first use of sugarcane-based ethanol in a gas turbine system, it has received a contract from Petrobras to convert a second unit at the site to burn this alternative fuel.

That same day, the company announced that it is building a US$ 10 million facility in Petropolis, dedicated to servicing the aeroderivative and oil and gas sectors in Latin America.

Gazprom

http://www.steelguru.com/russian_news/Negotiations_to_amend_10_year_natural_gas_deal_start_with_Russians/203224.html

Ukrainian Journal reported that Ukraine and Russia began formal negotiations aimed at amending the 10 year natural gas supply agreement signed in 2009 in response to Kiev’s persistent demands for lower natural gas prices.

Mr Yuriy Boyko energy minister of Russia traveled to Moscow for a meeting with Mr Alexei Miller CEO of Gazprom begin the talks. The talks are a breakthrough after Russia has been refusing to discuss even the idea of amending the agreement over the past 12 months.

(Sourced from www.ukrainianjournal.com)

MAY 2, 2011, 4:00 P.M. ET

Gazprom To Drill First Sakhalin-3 Production Well This Year

By ISABEL ORDóñEZ

"We are going to drill the first production well this year in the Kirinsky field and next year we are going to be able to supply the gas into the pipeline system," Vsevolod Cherepanov, Gazprom's head of gas Russia, told Dow Jones Newswires on Monday.

Gazprom—the world's biggest producer of natural gas—originally planned to start production from the Kirinsky block at the Sakhalin-3 off Russia's Pacific Coast in 2014.

Instead, the project will begin this year so that production will coincide with the completion of a major pipeline from Sakhalin via Khabarovsk to Vladivostok. Production from Sakhalin-3 will use that pipeline, said Mr. Cherepanov, who gave a presentation at the Offshore Technology Conference here.

The project's schedule was speeded up due to increased market demand and because Gazprom wants production under way in time for the 2012 Asia-Pacific Economic Cooperation summit, Mr. Cherepanov said. The region is the leading market for liquefied natural gas, or LNG.

He said some Japanese consortia, including a group led by Mitsui & Co., are in discussions with Gazprom to have some production from Sakhalin-3 going to Japan and to build LNG plants in Russia.

The Sakhalin island holds vast hydrocarbon reserves and is a part of Russia's ambition to diversify energy exports away from Europe to Asian markets.

Natural-gas reserves at the Sakhalin-3 project are estimated at 1.4 trillion cubic meters, of which one trillion are in the Kirinsky block.

Russia is in talks with China about a long-term gas supply deal and hopes to reach a final agreement in July.

In 2009, the Gazprom-led Sakhalin-2 consortium started exporting LNG to Asian-Pacific markets from Russia's first LNG plant.

—Jacob Gronholt-Pedersen in Moscow contributed to this article.

Write to Isabel Ordóñez at isabel.ordonez@dowjones.com

http://caspionet.kz/eng/business/KazRosGas_was_defined_in_charge_of_Imashevskoye_gas_field_1304395674.html