Russia 090417 Basic Political Developments

Russia's Kerimov raises Polyus stake to 37% -paper

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Russia's Kerimov raises Polyus stake to 37% -paper
04.17.09, 02:41 AM EDT

MOSCOW, April 17 (Reuters) - Billionaire Suleiman Kerimov has raised his stake in Russian miner Polyus Gold to 37 percent in a deal that ends a protracted asset split between two of Russia's richest men, a newspaper reported on Friday.

Vedomosti business daily, citing two unnamed sources, said Kerimov had spent a total of $1.3 billion building up his stake. He bought 15 percent of Polyus, Russia's top gold miner, on April 15 after acquiring 22 percent last month, the paper said.

Kerimov bought the stakes from fellow billionaire Vladimir Potanin, Vedomosti reported.

Polyus was the last company under the joint control of Potanin and Mikhail Prokhorov, the former business partners who announced more than two years ago they were splitting their varied assets in mining and finance.

Prokhorov, who is chairman of Polyus, remains a shareholder.

Polyus was not immediately available for comment.

Gold, often sought as a safe-haven alternative to equities and currencies during economic strife, has performed better than other metals during the global financial crisis.

Polyus produced about a fifth of Russia's gold last year.

(Reporting by Robin Paxton, editing by Will Waterman)

Kerimov buys Potanin's remaining 15% in Polyus Gold – Vedomosti
MOSCOW. April 17 (Interfax) - Structures controlled by Suleiman

Kerimov have purchased Vladimir Potanin's remaining 15% stake in gold

producer Polyus Gold (RTS: PLZL), the business daily Vedomosti reported

on Friday, citing unnamed sources.

Kerimov had purchased 22% of shares in Polyus from Potanin in


The Federal Antimonopoly Service has yet to clear the purchase, but

it has been closed by the foreign-registered companies concerned. In

fact, Kerimov's shares in Polyus are spread among a number of his

companies, while clearance is only needed to raise a company's stake in

the gold producer above 25%. The application from Kerimov's Nafta Moskva

will be examined by the government commission on foreign investment in

early May.

The 37% stake in Polyus was worth $3.2 billion as of April 16, but

Potanin only realized about $1.3 billion from sale of the shares. The

discount to the market when the first part of the deal was closed in

March was 40% and the price of Polyus shares on the London Stock

Exchange has risen 21.05% since. The sale price might have been higher,

but was discounted because Polyus had less cash than was assumed.

Potanin's Interros group and Mikhail Prokhorov's Onexim group

declined to comment on the report.

Onexim, which controls Polyus by virtue of a majority on the board

of directors, claims to own about 30% of shares. Vedomosti reports its

stake is actually 35%.

The agency for restructuring of mortgage loans (ARIZhK) will revise the eligibility criteria of "problematic" borrowers

April 16, 2009

The Agency has denied 52% of refinancing applications from borrowers who applied for state support to help meet their mortgage payments, Vedomosti reports, quoting ARIZhK's CEO Andrey Yazykov. In order to change the situation, the Agency's Board will soften the requirements of the refinancing programme. In particular, the programme will become available to borrowers with mortgages on rooms and the requirement of obligatory registration of the purchased apartment/room will be cancelled. In addition, ARIZhK will determine refinancing procedures for borrowers on maternity leave and change the requirement to sell other properties prior to applying for refinancing.

Alfa Expects Bad Loans To Eat Profit
17 April 2009 Reuters
Alfa Bank expects no profit this year as provisions for bad loans soar, CEO Rushan Khvesyuk said Thursday.

Russia's banks were hit badly by the stock market collapse in the second half of 2008 and are weighed down with deteriorating assets as the economy feels its first contraction in a decade.

"We will channel a maximum of our profits to create provisions. ... We are urging everyone to work based on the most pessimistic, most conservative scenario. ... The most conservative scenario is a zero net profit for this year," Khvesyuk told reporters.

The bank reported a 10 percent fall in 2008 net profit to $230 million as provisions consumed up to $900 million.

"It's no use hiding your head in the sand -- everybody will suffer losses, and so will we," Khvesyuk said.

The bank's overdue loan ratio has ballooned to 9.83 percent at April 1, 2009, from 1.14 percent in October 2008.

"The share of loans with signs of impairment is two times bigger then that of overdue ones," deputy CEO Vladimir Tatarchuk said.

Government officials have said Russian banks could see their profits fully erased this year should bad loans triple to 10 percent of the total portfolio, triggering provisions of about $45 billion.

Alfa Bank president Pyotr Aven has said the level of bad loans in the banking sector is likely to hit 15 percent to 20 percent by the end of this year.

Russian government to subsidize Transmashholding: will LTPL benefit?

April 16, 2009

Transmashholding, a large Russian railway equipment producer and disputed owner of 76% of the Ukrainian locomotive builder Luganskteplovoz (LTPL) should receive government subsidies this year, according to the State Budget that is now entering its second reading in the Russian Parliament, PM Putin announced on Wednesday. The interest rate at which State assistance is to be made available should be 10%-14% p.a.

We see this development as negative for Luganskteplovoz, since in the absence of a clear situation regarding the ownership of LTPL, we doubt that Transmashholding will be eligible to allocate any funds to Luganskteplovoz until the situation is resolved. Also, we believe that it would be more logical for the Russian company to direct any proposed government aid towards its other subsidiaries that compete directly with Luganskteplovoz and have no ownership issues outstanding. This should hold back the technical modernization of Luganskteplovoz at least until 2010, negatively impacting its ability to compete both domestically and internationally. Nevertheless, this news should not hamper the cooperation of Transmashholding and Luganskteplovoz in the production of locomotives for Russian Railways.

We believe that LTPL should receive new orders from Russia in May, while we see the earlier announced plans to produce 120 locomotives in 2009 for the Russian railway monopoly as less realistic, and we expect that the order will be reduced to just 70-80 units this year.

Novorossiysk Commercial Sea Port Braced For Headwinds

VTB Capital

April 16, 2009

In 1Q09, Novorossiysk Commercial Sea Port maintained strong operating performance, with cargo turnover increasing 14% YoY to 21mn tonnes. The rise was primarily driven by the growth in oil (10%), oil products (25%), grains (247%) and iron ore (up 16 times).

The results feature the trends observed in previous months.

- The increase in oil products and grain was largely driven by the expansion of handling capacity: for oil products it increased by about 1mn tonnes in October 2008, while a new 4mn-tonne grain terminal reached its projected capacity in 2H08.

- The volume growth is partially explained by disruptions in cargo handling in early 2008 due to bad weather conditions. We note that oil volumes were flat YoY in March.

- Low-margin cargo volumes (iron ore) increased significantly while high-margin cargoes (containers) saw a strong decline.

The rising share of low-margin cargoes in the total mix might put some pressure on the margins. However, NCSP is likely to maintain relatively stable profitability because:

- over 70% of the company's revenues are dollar-denominated but some 90% of costs are rouble-denominated, so the rouble devaluation is favourable for the company;

- grain is a relatively high-margin cargo and we expect the significant increase in grain volumes to support profitability;

- NSCP's new capacity is more efficient;

- there is a residual positive effect from tariff increases in April 2008.

We are reiterating our view that NCSP's diversified and resilient business model will allow the company to maintain stable volumes despite the current crisis, including by switching between cargoes to increase capacity utilisation. This makes this stock, which has dropped more than 70% since its May 2008 peak attractive.

Atomenergoprom gains control of Energomash UK

April 16, 2009

State company Atomenergomash (a part of Atomenergoprom) and majority holders of Energomash UK (A. Stepanov and A. Pleschev ) have signed an agreement according to which Atomenergomash will buy 50% plus two shares in Energomash UK. The price will be finalised in one month, after Atomenergomash completes due diligence with regard to the deal. According to a company press release, the funds from the deal will be spent on the repayment of Energomash's main debt to commercial banks. The rest of its debt will be restructured. The head of Rosatom, Sergey Kirienko, supported the deal as Atomenergoprom will gain control over Atommash, which produces reactors with a capacity of eight to 10 reactors per year. Stepanov will provide operating management. Atomenergomash plans to extend its cooperation with Energomash in the nuclear segment, and participate in the strategic management of Energomash. Energomash UK includes Atommash, Belenergomash, Tchekhovenergomash, Barnaul boiler , Uralelectrotyazhmash and Uralhydromash.

Energomash UK is one of Russia's largest power engineering groups, and one of the most efficient in terms of revenue per employee. Energomash's financial position became vulnerable due to the high level of debt raised for the development of GT-TEC Energo, which is focused on power unit construction and generation. We estimate Energomash's total debt at over $1.3bn as of last summer, mainly borrowed from Sberbank and other state banks. We believe the high debt level and significantly increased cost of borrowing resulted in the final acquisition agreement of Energomash by the state corporation. A small stake of about 10% was sold through a private placement in Aug 2008. Shares of Energomash UK are not traded.

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