MOSCOW, July 16 (RIA Novosti)
United Aircraft Building Corporation signs $2 billion deals at Farnborough / Rostelecom eyes CIS, Indian, Chinese markets / Russia, Saudi Arabia sign agreement on military technical cooperation / Steel prices rise by up to 47% in Russia in first quarter of 2008/ Ukraine could starve Europe of gas again /
Vedomosti
United Aircraft Building Corporation signs $2 billion deals at Farnborough
On Wednesday, Russia's United Aircraft Building Corporation (UABC) that consolidates private and state assets manufacturing, designing and selling military, civilian, transport, and unmanned aircraft, said it had signed $630 million and $1.5 billion contracts for the sale of 24 Sukhoi Superjet (SSJ) 100 medium-haul airliners and 31 Tupolev Tu-204SM-100 jetliners to Russia's Avialeasing and Ilyushin Finance leasing companies.
UABC CEO Alexei Fyodorov said Ilyushin Finance had plans to sign a contract for the sale of 100 Tu-204 airliners to Iran in the next decade. Russian air carrier Avialinii 400 operating under the brand Red Wings ordered 20 planes from Ilyushin Finance.
Most SSJ 100s will go to UTair, one of the Russia's largest airlines based in the Khanty-Mansi Autonomous Area in West Siberia. In all, 49 SSJ 100 contracts will be signed at Farnborough.
Aeroflot, the largest Russian airline, ordered five Airbus-321 planes worth $415 million; and Sibir, the second largest domestic carrier, said it would lease six Boeing B-737s.
Under the most expensive aviation contract in history, United Arab Emirates flag carrier Etihad Airways ordered 100 aircraft worth $21 billion from Boeing and Airbus.
On Tuesday, Russian aerospace holding company Oboronprom and AgustaWestland, a helicopter design and manufacturing company based in Italy and the United Kingdom, signed a framework agreement on establishing a joint venture on a parity basis.
Oboronprom CEO Andrei Reus said a new plant would be built in the Moscow Region, declining to comment on construction costs.
The joint venture will annually assemble 24 AW139 15-seater helicopters and will eventually produce helicopter components; the first helicopter will be delivered in 2011, Reus told the paper.
Sergei Chemezov, CEO of Russian Technologies Corporation, an industrial giant with assets in many sectors, from defense to automobles to civil aviation, said companies and private individuals would want to buy the new helicopters, and that he was looking forward to lifting a ban on helicopter flights over Moscow.
"Helicopters will be just as popular as cars," Chemezov told the paper.
Kommersant
Rostelecom eyes CIS, Indian, Chinese markets
The board of Rostelecom, a subsidiary of Russia's state-run telecoms giant Svyazinvest, held a meeting on Monday to approve its strategic guidelines for 2008-2012.
According to the document, Rostelecom is considering a foray into the CIS, India and China in 2008-2010 and the Middle East in 2010-2012.
"The operator's method of entering each specific market will depend on the situation," a source close to the company said. "The company is considering all variants, from mergers and acquisitions to exchanges with local players, as well as partnership schemes."
Rostelecom was set up in 1993 through the incorporation of 20 long-distance telephone companies. In 1994, it became part of the Svyazinvest holding, which at present owns a 51% stake in it. Its 2007 revenues calculated to International Financial Reporting Standards totaled 64.6 billion rubles ($2.8 billion), EBITDA 11.1 billion rubles ($480 million) and capitalization 8.63 billion rubles ($373 million).
Potential projects of priority interest for Rostelecom include the construction of the Aktau-Baku and Baku-Turkmenbashi communication lines between Turkmenistan and Azerbaijan, as well as communication lines between Georgia and Turkey and Georgia and Ukraine. The company is also considering the Two Valleys project in China.
Rostelecom may also buy local operators, including Azerbaijan's Aztelecom (to be merged with the Baku Telephone Communications for subsequent privatization), Belarusian Beltelecom (to be privatized in 2008; the share of foreign investor limited to 49%), Uzbektelecom (the Uzbekistan government expects to raise $45-$50 million for a 49% stake), Kazakhtelecom and Kaztranscom (Kazakh investors own 49% of Kazakhtelecom), and Ukraine's Ukrtelecom and Farlep.
Anna Zaitseva, an analyst with Finam Management, said the total cost of the assets Rostelecom might buy is as much as $4 billion.
Ivan Shuvalov, chief analyst at Alfa-Bank, said: "Rostelecom will focus on the most densely populated markets. Acquisitions in the CIS in the next 12-24 months will allow it to accelerate its income growth and cut losses in profits due to the de-monopolization of the long-distance communication market and reduced traffic of cellular operators, which are laying their own long-distance communication networks."
Last year, Rostelecom income increased by just 5%, Zaitseva said. "The acquisitions will allow the company to become an international player and to increase its revenues by nearly 80%. However, Rostelecom plans mainly to buy former monopolies, which may therefore lose a share of their markets."
According to Shuvalov, Rostelecom's share on the long-distance communication market will decline from 56% last year to 51% in 2008. The value of long-distance communication market is expected to grow by 7% in 2008, to $3.2 billion from $3 billion (without cellular operators) in 2007.
Ilya Fedotov, an analyst at the Veles Capital brokerage, said Rostelecom has enough funds for the planned acquisitions. Last February, it sold an 11% stake in Golden Telecom, an independent operator providing integrated telecom and Internet services in major Russian cities and the CIS, to VimpelCom, Russia's second-largest mobile phone operator, for over $462 million.
Vremya Novostei
Russia, Saudi Arabia sign agreement on military technical cooperation
Russia and Saudi Arabia have taken the first step toward developing their military technical cooperation.
Mikhail Dmitriyev, head of the Federal Service for Military Technical Cooperation, and Prince Bandar bin Sultan, secretary general of Saudi Arabia's National Security Council, signed a relevant agreement on July 14 in Moscow.
Prime Minister Vladimir Putin attended the ceremony, held after the prince had talks with President Dmitry Medvedev and spent two hours discussing relevant issues with Putin.
Ali bin Hassan Jaafar, Saudi ambassador to Russia, said this important event reflected the two countries' sincere desire to develop military technical and other cooperation. "It will be one more bridge linking our countries," he said.
Russian sources of the popular daily Vremya Novostei said military contracts could be signed already this year, above all for Mi-17 transport and Mi-35 attack/transport helicopters.
Saudi Arabia also wants to buy the latest aircraft and air defense systems as well as the T-90S main battle tanks, which have proved their worth during desert trials. The country intends to integrate Russia's S-300 and S-400 air defense systems with the U.S. Patriot systems, which should be carefully negotiated.
The newspaper writes that the talks have been underway since President Vladimir Putin visited Saudi Arabia in February 2007.
Prince Bandar, aged 59, is responsible for the budding military cooperation with Russia. He is a son of Crown Prince Sultan bin Abdul Aziz Al Saud, half-brother of King Abdallah and Saudi Arabia's minister of defense and aviation, who visited Moscow in November 2007.
"Saudi Arabia wants to receive military equipment from different sources," he said in Moscow. "Our cooperation with Russia is not aimed at other countries. We will only cooperate in the interests of peace and security in the region."
The prince is reputed for his talent to negotiate major contracts and develop new ties.
Saudi Arabia, which had no diplomatic relations with the Soviet Union, established business contacts with Russia only four years ago. Before that, Prince Bandar helped negotiate major arms contracts with the United States, where he served as ambassador in 1983-2005, and with Britain.
It is the first time the oil-rich kingdom has shown interest in Russian weapons. This reflects the two countries' intention to develop cooperation also in other spheres.
Saudi Arabia does not want to deal only with the United States and Britain, but has been trying to diversify its foreign policy contacts. It is also concerned over instability on its borders, notably the continued war in Iraq and an outbreak of tensions over Iran's nuclear program.
The kingdom views Russia not only as an arms seller, but also as a country whose position in the UN Security Council and commitment to the principle of peaceful settlement of international conflicts can keep the region from another wave of violence.
Vedomosti
Steel prices rise by up to 47% in Russia in first quarter of 2008
On July 15, two Russian metallurgical companies reported an increase in steel prices in the second quarter of this year. Novolipetsk Steel (NLMK) said that its prices were between 5% - 47% higher than in the first quarter (a rise of no less than $130 per metric ton). The Magnitogorsk Iron & Steel Works (MMK) raised prices for rolled products and billets by 20%-46% over the same period. "The prices are following the market," Yelena Azovtseva of MMK told Vedomosti. The same explanation was given in an NLMK press release of July 15.
Pavel Shelekhov, an analyst at the Kapital investment group, said that a surge in prices could be expected as prices for basic raw materials used in steel production went up in early 2008. Georgy Buzhenitsa of UniCredit Aton recalls that the coal companies Belon and Raspadskaya announced a 60% price rise recently. Metallurgical companies are trying to compensate for the losses and not to lose their profit margins by shifting the burden onto the consumers, the expert said.
At the same time, the demand for metal is still high. On July 15, MMK and NLMK reported production growth by 8% and 6%, respectively, in January-June 2008. Another major steel producer, Evraz Group, reported output growth by 12.6% in the second quarter of 2008, year-on-year.
Dmitry Smolin, an analyst at the Uralsib Financial Corporation, forecasts that steel prices will rise in the third quarter, too.
Buzhenitsa said that now Russia's domestic prices were 5% to 10% lower than the world prices. A surge in steel prices makes the infrastructure projects more expensive and affects pipe-making companies, car manufacturers and oil producers, Shelekhov said.
At an oil producers' meeting with Deputy Prime Minister Igor Sechin held on May 15, an idea to introduce steel export duties was raised. However, an NLMK representative said this measure would not help to regulate the domestic market.\
Metallurgical companies are proposing a switchover of the production chain (raw materials - processed products - consumers) to long-term contracts. Stanislav Naumov, deputy industry and trade minister, is of the same opinion: "Restrictive measures are ineffective while the [proposed switchover] is generally accepted practice. As a result, all market players will clearly understand the rules of the game."
While government officials are choosing between export duties and contracts, the Federal Anti-Trust Service (FAS) decided to take a closer look at the coal companies. On July 15, it initiated proceedings against the Mechel, Yuzhny Kuzbass and Yakutugol mining companies for the unjustified termination of coal supplies to NLMK and their monopolistically high coal prices as violations of anti-trust laws. Mechel's spokesman Ilya Zhitomirsky said his company had not received any documents yet. He was unaware of who had filed the complaints. Alexei Ulyanov, head of a FAS department, said that other companies, apart from Mechel, might also be involved.
RBC Daily
Ukraine could starve Europe of gas again
Naftogaz Ukrainy, the Ukrainian energy firm, has a shortage of 3.5 billion cubic meters of gas. The shortfall could result in irregularities in gas supplies to Europe, Ukraine's former Fuel and Energy Minister Yuriy Boiko told a news conference in Kiev.
As it appears European consumers are making the most of Ukraine's transit capacities to store gas and they are not ruling out possible difficulties in getting Russian deliveries.
Boiko said that the 3.5 billion cubic meters missing from the company's books makes the future look uncertain if Ukraine is to meet both its domestic needs and transiting requirements to Europe by the start of the 2008/09 heating season.
According to Boiko, by July 7, Ukrainian gasometers recorded 20.6 billion cu m of gas stored by physical volume, against a documented amount of 23.5 billion cu m. The breakdown of the reserves was as follows: RosUkrEnergo (11 billion cu m), Ukrgaz-Energo (7.5 billion cu m), and Ukrneft (5 billion cu m). No contingency supplies are being laid in against the 2008/09 season.
But a Naftogaz spokesman said his company had no problems with book balancing. "All our figures tally, and show no shortages," he said. The company has on several occasions challenged the words of Boiko, who often criticizes its management. For example, the former minister was one of the first to make public the debt owed by Naftogaz to Gazprom, which was later confirmed despite denials by the Ukrainian company.
Ukraine's gas transporting system is currently running at full capacity, pumping 350 million cubic meters of gas a day to Western Europe, its maximum, compared with the usual 250-270 million cubic meters a day. Working at this rate, Ukrtransgaz is physically unable to pump additional amounts of gas into storage capacities, including its own. This is because European consumers, sensing a fresh face-off between Russia and Ukraine, are exploiting Ukraine's transit capacities to the utmost to create reserves in their countries.
The reported shortfall means the company has not yet officially closed the last heating season, said Konstantin Borodin, head of the Energy Research Center in Kiev.
From the start of the year Naftogaz is switching over to higher-priced gas, and the government is unlikely to fail to review tariffs on gas for the utilities and the burden of payment will weigh heavily on Naftogaz. With no gas inventories of its own, or funds to purchase some from outsiders, it will have to face Gazprom and Ukrgaz-Energo and RosUkrEnergo. As a result, it could resort to a tried and tested technique of siphoning gas from the European pipe without authorization, which might cause disruptions to European supplies.
Borodin said it was also natural to expect another spat between Gazprom and Naftogaz as the heating season begins, with the Russian monopoly deciding to turn off all taps on Ukraine, making Europe suffer in the process.
"Naftogaz and Gazprom yesterday had another round of talks, but there was nothing to report. What Naftogaz showed up as an achievement was that the Ukrainian side was only assured of getting all the contracted volumes in 2008," the analyst said.
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