Moscow press review for May 18, 2015
MOSCOW. May 18 (Interfax) - The following is a digest of Moscow newspapers published on May 18. Interfax does not accept liability for information in these stories.
POLITICS & ECONOMICS
Following U.S. Secretary of State John Kerry's visit to Sochi last week, President Obama sent two high-ranking representatives to Russia - Assistant Secretary of State Victoria Nuland and special envoy for Syria David Rubinstein. The common objective of the visits is to continue the new dialog begun by Kerry and Russia's leadership. But analysts said the activity by the White House should not be seen as a willingness to make concessions to Russia (Kommersant, p. 1).
The Russian economy contracted by 1.9% year-on-year in the first quarter of 2015, which was less than expected, preliminary estimates from Rosstat show. But data for March show that the downturn is deepening and it is not clear when the economy will hit bottom. Officials believe Russia has avoided the worst-case scenario and that growth will resume at the end of the year, while analysts warn there will be protracted stagnation without reforms (Vedomosti, p. 4; Kommersant, p. 2).
Ukraine has approved a plan to privatize more than 300 assets in the hopes of raising about $821 million in 2015. The country plans to sell coal mines, electricity assets, stevedoring and engineering companies, among others. However, given the economic slump and military conflict in the country, Ukraine is unlikely to meet the privatization targets, analysts believe (Vedomosti, p. 5).
OIL & GAS
The Sistema group is in talks to hand its 19.04% stake in petrochemical company Ufaorgsintez over to Bashneft in exchange for its debt of 1.3 billion rubles to the oil company. The stake is worth more, but Sistema is willing to exit with a discount as it does not need the shares after losing Bashneft (Vedomosti, p. 12).
UTILITIES
Foreign investors in Russia's electricity sector are trying to give a push to stalled reforms in the industry. Finland's Fortum, which has invested 4 billion euros in the sector, is asking the prime minister to keep promises to carry out reforms in heat supply throughout Russia and not only introduce a new model in some regions. But a total reform could push up prices so it has become mired in disagreements among ministries (Kommersant, p. 7).
METALS & MINING
Norilsk Nickel has reached an agreement with VTB for a loan of $1 billion to finance the development of the Bystrinskoye copper deposit. The state bank might become a financial investor in the project, with an option to buy up to 25% of the project company, sources said. The Russian mining giant, which had free cash flow of $4.7 billion in 2014, could develop the deposit on its own, but it wants to share the risks (Vedomosti, p. 10).
BANKING, FINANCE & INSURANCE
Nikolai Tsvetkov, who has been looking to sell Uralsib Financial Corporation for several years, could lose control over most of the business, which needs tens of billions of rubles of investment. Credit Bank of Moscow owner Roman Avdeyev could get 75% of Uralsib for one ruble. Avdeyev has reportedly promised to inject 15 billion rubles into the capital of Uralsib Bank (Vedomosti, p. 10).
The supervisory board of VTB has nominated the founder and principal owner of leading Russian retailer Magnit, Sergei Galitsky for a seat on the state bank's board. The billionaire has a good reputation among investors and this is good news for VTB, which might need his experience, analysts said (Vedomosti, p. 11).
REAL ESTATE & CONSTRUCTION
Nongovernmental pension funds will have a harder time investing in commercial real estate. The Central Bank has drafted changes to investment rules that prohibit the purchase of mortgage participation certificates backed by non-residential properties with pension savings. This will be a blow to fund shareholders whose businesses are related to real estate, but could benefit the Agency for Housing Mortgage Lending, which issues MPC backed by residential real estate (Kommersant, p. 1).
PIK Group, one of Russia's leading developers, has won the right to develop one of the former properties of the VDNKh exhibition center - the 34-hectare Otradnoye industrial zone. PIK, the only bidder for the property, is expected to build 650,000 square meters of real estate, including 500,000 square meters of housing. PIK will have to invest $1.3 billion in the project, including almost $300 million for infrastructure, one analyst estimates (Vedomosti, p. 11).
TELECOMMUNICATIONS, MEDIA & TECHNOLOGY
A Russian Proton-M carrier rocket was unable to put Mexican communications satellite MexSat-1 into orbit on May 16. According to preliminary information, a bearing in the turbine-pump system of one of the engines broke and the rocket burned up soon after launch. This is the second such incident for the Proton in the past year - a faulty bearing destroyed a Russian Express-AM4R communications satellite in May 2014 (Kommersant, p. 1).
The retail chain of MTS will stop being a business, as under the Russian mobile operator's new strategy the chain's objective will be to encourage subscribers to use more Internet services. MTS has slashed prices for mobile Internet devices to cost, and at the end of the year it will begin refunding a portion of the purchase price of smart phones to subscribers (Vedomosti, p. 1).
Leading brands in Russia have begun redistributing their advertising budgets in favour of regional television ads. While ad purchases on national TV fell by 8% in the first quarter of 2015, local ad placements were up by 12% in Moscow and 13% in other million-plus cities. Like during the 2008-2009 crisis, advertisers are trying to save money thanks to smaller audience coverage (Kommersant, p. 1).
