Norilsk Nickel not planning to borrow now, but "not closed to market" in future - CFO
MOSCOW. Aug 30 (Interfax) - Norilsk Nickel is not planning any additional borrowing at the moment, but does not rule out entering the market "in future" in order to improve its debt structure, the Russian mining giant's chief financial officer, Sergei Malyshev said in a conference call following the release of IFRS results for the first half.
Answers to other questions that investors are interested in, particularly dividends for 2013 and capex in 2014 and the subsequent few years, will be provided by an updated corporate strategy that Norilsk Nickel plans to unveil in the fourth quarter of this year.
Borrowing
The company is happy with its current level of liquidity, Malyshev said. "But plans to improve the structure of borrowing remain. We're not closed to the market in future. At the moment there are not specific plans," he said.
Norilsk Nickel raised 35 billion rubles in February with the placement of 7.9% exchange-traded bonds, and in May the company placed a debut Eurobond issue of $750 million at 4.375%. In June, the company's board approved raising a syndicated loan of up to $2.5 billion. The loan, which sources said would be extended for five years at LIBOR+2.6%, will be used to refinance debt and maintain medium-term liquidity, Norilsk Nickel said earlier.
Asked what the company considers an acceptable debt to EBITDA ratio, Malyshev said this figure should be at a level that supports an investment rating, in other words no higher than 2. Norilsk Nickel sees no threat of exceeding this threshold, he said.
The company's net debt stood at $5 billion on June 30, and the net debt/EBITDA ratio was up to 1.1 from 0.8 a year earlier. The ratio will be at the same level at the end of the year, according to a company presentation. Norilsk Nickel's short-term debt totalled $1.3 billion at the end of the first half of 2013.
Dividends
Malyshev did not comment on the possibility of the company changing its dividend policy in light of the slump in metal prices, saying this was up to shareholders. Nonetheless, dividend policy is part of the corporate strategy, he said.
For 2012, Norilsk Nickel more than doubled dividends, in line with obligations assumed in an agreement between principal shareholders Interros and Rusal and Roman Abramovich's Millhouse. Overall payments totalled about $2 billion.
The shareholder agreement called for Norilsk Nickel to pay annual dividends of $3 billion in 2014-2015. In addition, in 2013-2015 the company could pay out an additional $1 billion in dividends if it sells foreign or noncore assets, the largest of which is its 11% stake in power company OJSC Inter RAO UES . Starting in 2015, Norilsk Nickel will pay dividends equivalent to 50% of EBITDA.
However, in August there were reports that the dividend plans look inflated given the steep drop in metal prices, and Norilsk Nickel management might propose that the principal shareholders reconsider. Interros, Rusal, Millhouse and Norilsk Nickel did not comment on these reports.
Interros owns 30.3% of Norilsk Nickel, Rusal owns 27.8%, Millhouse owns 5.87% and Metalloinvest has 5%.
Average realized prices in the first half of 2013, according to Norilsk Nickel's financial statement, fell 12% to $16,400 per tonne for nickel and 6% to $7,740 for copper. The price of palladium rose 11% to $726 per ounce, while the price of platinum slipped to $1,541 per ounce.
Capex
The company's strategy will include capital expenditure targets for the next few years, Malyshev said. He did not give a capex forecast for 2014.
The company's capex this year will not exceed $2.2 billion, taking into account savings achieved in the first half, Norilsk Nickel's presentation indicates. The company expects to save at least $300 million on essential capex by the end of the year.
Norilsk Nickel reduced capex by 21% year-on-year to $0.9 billion in the first half of 2013. The company's board in February approved an investment program of 75.4 billion rubles for 2013, but actual capex might total 60 billion rubles, former Norilsk Nickel first deputy chief executive Yevgeny Yakovlev said in June.
Investment projects costing more than $16 million are being reviewed by the investment committee headed by Norilsk Nickel CEO Vladimir Potanin. The company has divided all projects into essential and so-called commercial. One of the main criteria for assessing projects is that it have an internal rate of return of at least 20%.
