Russia 101014 Basic Political Developments

VimpelCom’s Shareholders Cautious About Sawiris Deal, FT Says

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VimpelCom’s Shareholders Cautious About Sawiris Deal, FT Says

By Ben Martin

Oct. 14 (Bloomberg) -- Alfa Group, the biggest investor in VimpelCom Ltd., is yet to decide whether it wants VimpelCom’s deal to acquire most of Naguib Sawiris’s telecoms assets to continue if the Algerian government nationalizes Orascom Telecom Algeria, the Financial Times said, citing Alfa Group.

VimpelCom’s second-biggest shareholder, Telenor ASA, also has concerns about possible regulatory objections in Pakistan and Bangladesh, the newspaper reported.

To contact the reporter on this story: Ben Martin in London at

To contact the editor responsible for this story: Ben Livesey at

Last Updated: October 13, 2010 21:27 EDT

Interros may hike up stake in Norilsk Nickel

      RBC, 14.10.2010, Sochi 10:57:14.Interros is satisfied with its current stake in Norilsk Nickel, but does not rule out the possibility of increasing it if the composition of the latter company's shareholders changes, head of the Russian investment fund Vladimir Potanin told journalists in Sochi on Wednesday.

      Potanin stressed that Interros enjoyed this investment in the mining and metallurgical company, but was "not seeking greater influence on the enterprise at the moment." He reiterated that in the future, however, the fund's economic interest in Norilsk Nickel's performance was likely to increase.

      Potanin currently owns a 25-percent stake in Norilsk Nickel's share capital.

Russia's Inter RAO seen sole real bidder for Norilsk Nickel's stake in OGK-3

12:24 14/10/2010

Russia's state-controlled power trader Inter RAO could be the sole real bidder for a 65.15 percent stake in power generating company OGK-3 currently held by metals giant Norilsk Nickel, analysts polled by RIA Novosti said on Thursday.

Russian billionaire Vladimir Potanin, head of Interros and a key shareholder in Norilsk Nickel, said on Wednesday that it would be economically expedient for Norilsk Nickel to sell its stake in OGK-3, adding that the deal could be valued at $2.5-3 billion.

Russia's aluminum giant RusAl, another key shareholder in Norilsk Nickel, said it backed the proposal that Norilsk Nickel should divest its non-core assets.

"I do not understand who could be interested in such a large asset at the moment. On the other hand, this is a good asset. The only company which could be interested in OGK-3 is Inter RAO because this is the only company on the market, which has financial resources (for that)," Director of Energy Development Fund Sergei Pikin told RIA Novosti.

OGK-3 unites six state district power stations with a total capacity at 8.4 GW.

Analyst from Alfa-bank Alexander Kornilov said that in the bank's estimate the deal could be worth $2-2.1 billion.

Head of the shares department at IFD Kapital Konstantin Gulyayev said, however, that the price of $2.5-3 billion for the 65.15 percent stake in OGK-3 was overstated.

"Potanin's figure is overestimated; nobody will buy it at such a price unless foreigners buy the asset with a view of the company's potential growth. Inter RAO will certainly buy at a lower price," Gulyayev added.


MOSCOW, October 14 (RIA Novosti)

Chelyabinsk Zinc swings to H1 net profit, sales up
Thu Oct 14, 2010 6:56am GMT

MOSCOW Oct 14 (Reuters) - Russia's Chelyabinsk Zinc Plant (CHZNq.L) (CHZN.MM) said on Thursday it saw a net profit of 678 million roubles ($22.50 million) in the first half of the year, versus a loss of 136 million roubles in the first half of 2009.

The plant, Russia's largest maker of the anti-corrosive metal, said its revenue increased by 59 percent in the first six months of 2010 to 5.62 billion roubles from 3.54 billion in the same period of 2009.

The company also said that its margin for earnings before interest, taxes, depreciation and amortisation (EBITDA) improved to 25 percent of revenues from 15 percent a year ago. (Writing by Lidia Kelly)

October 14, 2010 11:30

Moody's confirmed the B1 rating for Raspadskaya and changed the outlook to negative

MOSCOW. Oct 14 (Interfax) - On Wednesday, Moody's Investors Service has today confirmed the B1 corporate family rating for Raspadskaya and the B1 rating for the Loan Participation Notes due in May 2012 issued by Raspadskaya Securities totaling USD 300 million. At the same time Moody's Interfax Rating Agency, which is majority owned by Moody's, has confirmed Raspadskaya's national scale rating. The outlook to all ratings is negative, the agency said in a statement.

The statement said: "This rating action concludes the review initiated on May, 12, 2010 when the company was placed under review for a possible downgrade following the explosions at the largest mine of the company which accounted for an app. 70% of the total production volume. The review focus was identified as: (i) the potential length and extent of interruption of production at the Raspadskaya mine and the possible mitigates that other producing assets of the company or existing inventories could bring to revenue flow, (ii) the ensuing revenue loss and financial consequences if such suspension of mine operations was to last for an extended period, (iii) the importance of investments and expenses that may be required to re-launch the mine's operation, and (iv) the potential company's liability arising from this event.

"The B1 CFR reflects Moody's view that the currently benign operating environment for coal mining with undersupply of premium coal and historically high prices should allow Raspadskaya to weather the low output period until restart of production at the Raspadskaya mines without material cash flow shortfalls compared to the weak fiscal year 2009 while absorbing the larger part of repair and reconstruction cost in operating cash flows.

"The rating is supported by Raspadskaya's low operating cost and conservative capital structure tempered by liquidity management that relies on cash balances and continued support by its bank lenders. Raspadskaya had entered this troubled period for its operations with a strong financial profile supported by conservative credit metrics, a solid cost competitiveness with high margins potential, and a good cash position which provides some degree of protection to negative developments. Raspadskaya estimates that the cost to rebuild the affected mine will not exceed app. USD 280 million, most of which as increased operating expenses, and is planning to restart operations there in the last quarter of 2010.

"Though the 1H 2010 performance was strong, the agency comments that it largely reflects strong pre-accident (which occurred in May 2010) performance on the back of increase in prices. The negative outlook is premised on: (i) the expected weakening of cash flow generation linked with the unavailability for production of the principal mine of the company for several months and the fact that the restart of operations at the Raspadskaya mine is likely to be only progressive, which increases the dependence on market prices for coal remaining high; (ii) the remaining uncertainties associated with repair work to be completed on time and on budget; and (iii) the possible delays in expected volumes increases at other mines to mitigate the loss of production from Raspadskaya mine.

"The company benefits from favorable market conditions for mining companies in 2010 with current prices for coal concentrate in Russia at app. USD 120/t (for Raspadskaya grades of coal), ie much better than in 2009, which should support a reasonably solid cash flow generation and help the company to maintain healthy credit metrics despite the Raspadskaya mine interruption.

"Furthermore, 3Q 2010 operating performance indicates that the price assumption for the full year could hold allowing the company to have decent financial metrics in spite of the significant loss in volumes of coal produced. For 2011 volumes are expected by Raspadskaya to pick up from the start of the year following a substantial but progressive recovery at Raspadskaya mine and increased production at other mines.

"Moody's also expects that the cost for reconstruction of the damaged mine will primarily be absorbed in its operating costs. At the end of 1H 2010 Raspadskaya had USD 286 million in cash balances and short-term deposits which would be available to fund potential cost overruns.

"In order to maintain the current rating, Moody's would expect that the issue of maturing USD 300 million LPN in 2012 will be addressed in a timely manner. Negative pressure would develop on the rating should the major assumptions supporting the current rating not materialize, ie that (i) the company may not be able to re-start limited operations at Raspadskaya mine by the end of 2010; (ii) that the effective costs and capital expenditures for the restoration of the affected mine may materially exceed management estimates; and (iii) the company may not be able to generate positive free cash flow on an on-going basis because of either continued low production rates or a collapse of coal prices or a combination of both. The last rating action was on May 12, 2010 when Moody's placed OAO Raspadskaya's B1 corporate family rating and B1 rating for Loan Participation Notes due in 2012 issued by Raspadskaya Securities and totaling USD 300 million on review for possible downgrade.

"At the same time Moody's Interfax Rating Agency, which is majority owned by Moody's, placed Raspadskaya's national scale rating on review for possible downgrade. The action reflected the uncertainties surrounding the impact of the recent accident at Raspadskaya mine in Kemerovo region on the company's operating performance going forward."

October 14, 2010 11:09

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