Russian Federation Outlook Revised to Positive
Russian Federation Outlook Revised to Positive;
Ratings Affirmed Analyst: Helena Hessel, New York (1) 212-438-7349;
Konrad Reuss, London (44) 20-7847-7102
NEW YORK (Standard & Poor's) Feb. 22, 2002--Standard & Poor's
today revised its outlook on the Russian Federation to positive from stable. At
the same time, all the ratings on Russia were affirmed, including the
single-'B'-plus/single-'B' sovereign credit ratings. The outlook revision
reflects recent strong reform dynamics, which have created a genuine potential
for improving the economy's structure and reducing its vulnerability to oil
price fluctuations. The ratings on Russia remain constrained by:
Significant structural weaknesses. The political will and ability to implement
banking, corporate governance, judicial, and a host of other microeconomic
reforms are critical to creating a stable environment for sustainable growth.
Continued, though decreasing, vulnerability to oil price fluctuations. Although
the economy has started to develop nonenergy sources of growth, it remains
highly dependent upon oil and gas exports (22% of GDP and more than 50% of
exports).
Weak political institutions. The current high level of political and
governmental stability is anchored around one man, President Vladimir Putin. It
is difficult to gauge how the political situation would evolve if there were to
be a leadership change. Stable political institutions are still lacking, and
much already legislated reform could still be undone. The ratings are supported
by:
Reform momentum, which began in May 2001, and continued through the rest of last
year and into 2002. This has strengthened the country's economic structure and
bolstered economic prospects and policy flexibility. Although the oil sector was
an important trigger for current growth, the economy's strong performance in
2000-2001 would not have been possible without important underlying
institutional and structural changes.
The growing commitment and ability of Russian policymakers to service all debt
in the next few years, on the back of a reduced debt burden, ample resources,
and increased availability of financing from multilateral, official, and
commercial creditors.
OUTLOOK: POSITIVE
The outlook is underpinned by recent strong reform dynamics. Further progress
now hinges on continued macroeconomic prudence and effective implementation. A
sensible budget was tabled for 2002, which includes important contingency plans. A Reserve Fund established last year affords additional flexibility.
Recent active debt management policy is also encouraging. Continued efficient
reform implementation is key. There is some concern that "reform
fatigue" may set in, especially in the run-up to the parliamentary and
presidential elections scheduled for December 2003 and April 2004, respectively.
For the time being, however, Standard & Poor's expects further reform to be
formulated and legislated, as well as some progress on implementation this
year--which should strengthen creditworthiness. A complete list of ratings is
available on RatingsDirect, Standard & Poor's on-line credit research
service, or by calling the Standard & Poor's ratings desk at (44)
20-7847-7400.
ANALYTICAL E-MAIL ADDRESSES
helena_hessel@standardandpoors.com
konrad_reuss@standardandpoors.com
SovereignEurope@standardandpoors.com
BP and
Shell fuel rush to invest in Russia
Terry Macalister and
Patrick Collinson
Wednesday April 17, 2002
The Guardian
Confidence in the future of
Russia was underlined yesterday with BP investing $380m (£264m) to
increase its holding in local oil group Sidanco and Shell saying it was
interested in new projects there.
Britain's small investors are being encouraged by fund managers to buy into
Russia, on the back of corporate reforms and high oil prices.
BP yesterday brushed aside past problems in Russia by taking its stake in
Sidanco from 10% to 25%. Five years ago it spent nearly $480m buying into
Sidanco, only to lose much of it in bankruptcy proceedings against parts of the
Russian company.
"Over the last few years Sidanco has refined its costs, strengthened its
balance sheet and increased its focus in the upstream business," said BP
chief executive Lord Browne.
Meanwhile, Shell chairman Phil Watts met Russian prime minister Mikhail
Kasyanov. "They discussed current projects and Watts expressed interest in
new projects in Russia," said Mr Kasyanov's spokeswoman.
Western companies have become increasingly bullish about corporate
involvement partly because of corporate governance reform pushed by president
Vladimir Putin.
Past problems were highlighted on Monday when investors began legal action
against accountancy firm PricewaterhouseCoopers for alleged errors in auditing
Gazprom. The move was triggered by minority shareholders alleging asset
stripping at the Russian gas firm under its previous management.
These issues have failed to deter British fund managers who are pushing
"emerging Europe" to retail investors as one of the hottest stories
around.
Jupiter, one of the most popular British unit trust managers, is in the next
few weeks expected to announce an eastern Europe fund which will be largely
invested in Russia.
Foreign & Colonial is telling investors that prospects in Russia are
among the best of any global market, while Baring Fund Managers is also
enthusiastic.
Behind the surge in enthusiasm is a Moscow stock market that has outshone
every other bourse in the world in recent years. In 2001 it was the world's best
performing stock market, and so far this year it has advanced 24%.
Abu Leil-Cooper, manager of Baring Eastern Europe fund, has Yukos Oil and
Lukoil as the two biggest stocks in her portfolio.
"We are seeing far more in the way of internationally acceptable
accounting standards, with Lukoil and Yukos both giving us US GAAP-standard
accounts. Quoted companies now understand that if they don't produce
international standard accounts, they won't find support from foreign investors
and will trade on a much lower multiple of earnings."
Oil companies make up 63% of the Moscow market capitalisation, and the recent
spike in the oil prices has sent stocks soaring.
But Barings says that even without supercharged returns from the oil price
the market is good value. It trades on 7.5 times earnings - compared with
typical price-earnings ratios in London and New York of 25-30.
Guardian Unlimited ©
Guardian Newspapers Limited 2002
Back
A
return to Russia
Encouraged by a
favourable oil price and a more stable business environment, European companies
are moving into the country’s energy market, say David Buchan and Andrew Jack
Published: April 24 2002 20:32 | Last Updated: April 24 2002 20:35
It
is a measure of how fast Russian energy is moving up Europe's political agenda
that Alexei Miller, head of Gazprom, has been invited to this weekend's meeting
of European Union energy ministers in Pamplona. The ministers will want to quiz
him on how far Europe can rely on Russia, holder of a quarter of the world's gas
reserves.
Europe's oil majors are already clear on Russia's rising
importance. On Wednesday, TotalFinaElf said it was negotiating to buy a majority
stake in the licence for the Vankor field from Anglo- Siberian Oil, a small
UK-listed company. It is considering investing up to $2.5bn in the west Siberian
field, providing it gets a production-sharing arrangement.
Other oil majors are placing even bigger bets on Russia. Shell is
close to finalising a $1.5bn (£1bn)joint venture with Gazprom on the
Zapolyarnoye gas field. And BP said last week it had spent $375m to raise its
stake in Sidanco and so end what had been a bitter wrangle over this
medium-sized Siberian oil producer with other shareholders.
Lord Browne, chief executive of BP, said the move underscored BP's
"confidence in Russia and its improving business environment". Alex
Knaster, chief executive of Alfa Bank and general director of Sidanco, predicted
that BP's move would "make a lot of other oil companies take notice and
seriously consider a more aggressive investment policy towards Russia". more…
(www.FT.com
(Financial Times) http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT3C59AJF0D)
Weekly
Brief N 61, April 22-26
 | Danish investment in Russia has exceeded $300
million, while Belgian investment in Russia now amounts to $170 million and
is expected to grow, according to Mikhail Kasyanov, chairman of the Russian
government.
|
| In January through March 2002, fixed capital
investment in Russia grew 1.2%, compared to the same period of 2001, to
254.4 billion rubles, according to Russia's Ministry of Economic Development
and Trade.
This growth was accounted for mostly by a significant increase in investment
in March 2002. During that month, fixed capital investment grew 13.6% in
Russia, compared to February.
|
| The European Bank for Reconstruction and
Development (EBRD), Caterpillar Inc., the world's largest construction
machinery manufacturer, and Moscow's Raiffeisenbank Austria have signed a
leasing agreement providing for Raiffeisenbank Lising's leasing of the
Caterpillar machinery and equipment to Russian companies and opening a
$12-million credit line for the purpose, according to Dmitry Tulin, EBRD
senior advisor.
According to Michel Perirain, head of Moscow's Raiffeisenbank Austria, risks
will be distributed among all the participants in the agreement. Two-thirds
of the funds for opening the credit line will be provided by Moscow's
Raiffeisenbank Austria, while one-third will be provided by the EBRD. The
funds will be provided for three to five years at 12% to 15% per year, with
account for the property tax and LIBOR.
The Caterpillar machinery and equipment will be leased mostly to Russian
mining and construction companies, according to Jim Tevebaugh, Caterpillar's
CEO.
|
| Moscow's Sheremetyevo international airport
plans to attract foreign investors to finance the development of the entire
airport complex, including Sheremetyevo-1, Sheremetyevo-2 and
Sheremetyevo-3, rather than the Sheremetyevo-3 project alone, as it was
planned earlier, according to Sergey Belyaev, Sheremetyevo international
airport general director.
The new terminal will be built simultaneously with the expansion of
Sheremetyevo-2. One of the requirements to a prospective investor will be
development of a modernization project for Sheremetyevo-2 in order to
increase its capacity. According to Belyaev, foreign investors will not
participate in the airport's property. However, they will participate in the
management of the airport, though temporarily, during the payback period.
|
| OOO Wimm Bill Dann will open a drinking water
bottling plant in the Novgorod Region in October 2002, according to Sergei
Plastinin, chairman of Wimm Bill Dann executive board. The project cost is
$15 million.
|
Coca-Cola
has announced that it is re-launching the BonAqua brand in the territory of
Russia.
BonAqua in a new bottle, designed specially for Russia, will be targeted at
active, successful people from 20 to 39 who care about their health. In November
2001, Coca-Cola Eurasia Bottlers sold all its plants in Russia to Coca-Cola HBC
S.A. (Greece). As a result of the deal, Coca-Cola HBC S.A. acquired 11 of
Coca-Cola Eurasia Bottlers plants and more than a hundred distribution centers,
whose total investments in Russia exceed $750 million.
More…
http://www.ivr.ru/english/indexen.shtml
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