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FINANCING OILS, GAS & METALS IN THE RUSSIAN FEDERATION 25-26 MARCH 2003, MOSCOW. Overview. Ni. The world’s largest producer of nickel and palladium as well as a significant producer of copper, cobalt, PGMs and gold. Pd. - PowerPoint PPT Presentation
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FINANCING OILS, GAS & METALSIN THE RUSSIAN FEDERATION
25-26 MARCH 2003, MOSCOW
OverviewOverview
The world’s largest producer of nickel and palladium as well as a significant producer of copper, cobalt, PGMs and gold
Largest producers in 2001(In '000 tons, share of world production)
5%6%
8%
18%19%
0
50
100
150
200
250
NorilskNickel
Inco Falconbridge BHP Billiton WMC
Largest producers in 2001(Share of world production)
14%
9%6%
4%
>40%
0%
10%
20%
30%
40%
50%
NorilskNickel
AngloPlatinum
ImpalaPlatinum
Stillwater Lonmin
Largest producers in 2001(Share of world production)
22%
17%
12%
3%
36%
0%
10%
20%
30%
40%
50%
AngloPlatinum
ImpalaPlatinum
NorilskNickel
Lonmin Inco
Commodities produced by Norilsk Nickel are deliverable on
international exchanges: LME, LPPM, LBME, etc.
Exports from Russia represent over 90% of Norilsk Nickel’s revenues annually and remain a significant influence on the supply/demand balance in Western markets
Source: Company reports except for Norilsk Nickel
Ni
Pd
Pt
Production & Sales 2002 (preliminary)Production & Sales 2002 (preliminary)
Production, t% chg.y-o-y
Exports, t% chg.y-o-y
DomesticSales, t
Nickel 218’000 -2% 208’000 14% 11’000
Copper 454’000 -4% 354’000 -16% 83’000
Cobalt 4’200 -9% 4’100 - 9
Distribution 2002Distribution 2002
PLATINUM
Asia3%
USA4%
Europe93%
PALLADIUMAsia15%
Europe40%
USA45%
COPPER
Europe91%
Asia5%
USA4%
NICKEL
Asia19%
USA9%
Europe72%
Credit EnvironmentCredit Environment
Needs of the company:• short-term financing of working capital • medium-term financing for capital investments• long-term financing for investment / acquisition projects
Security:• required in form of future export proceeds assignment• minimum appetite yet for unsecured credits in the bank loan market
Available markets: • bank loans• bonds• equity and equity linked products
Limitations of the export contracts:• short or medium term • substantial volumes of spot sales• governmental regulation of PGMs’ sales
Working Capital FinanceWorking Capital Finance
Issues
• bulky and complicated documentation
• extensive preparation period
• considerable legal expense
Solutions
• long for big-ticket deals
• extend tenors from short-term to medium-term
• change structure from term loans to revolving facilities
Capital Investment and Project FinanceCapital Investment and Project Finance
restrictive Russian legislation
• strategy/investment programme is under consideration
• off-shore security
• secured deals require export collateral matching in tenors to the loan repayment and pay-back period of investments
Issues
Solutions
• corporate (unsecured) finance
• project finance (secured by incremental cash flow generated by the project)
• high financing costs«Escrow accounts»
• structured deals (bank market + capital market)
• ECAs
Trade FinanceTrade Finance
Bank guarantee
Tender
Selection of a supplier
Advancepayment
20%
Letter of credit(confirmed)
80%
Shipment from Dudinka
Norimet Ltd., LondonBills of Lading
Warehouse Receipts
Off-taker
Short-term banking commodity finance
14days
Payment methodagreed upon
$
$
IMPORTEXPORT
19981998
19971997
Cross-Border Credit HistoryCross-Border Credit History
$ 75’000’000 syndicated loan for PGM sale financing (4 months)
$ 110’000’000 loan for pre-export financing of copper sales (1 year)
$ 13’000’000 loan for equipment leasing financing guaranteed by Swedish export credit agency (EKN) (3 years)
$ 17’000’000 loan for equipment leasing financing (3 years)
$ 25’000’000 loan for pre-export financing of copper sales (6 months)19991999
20032003
20022002
Cross-Border Credit History (continued)Cross-Border Credit History (continued)
$ 200’000’000 syndicated loan secured by nickel inventory (3 years)
$ 250’000’000 syndicated loan for pre-export financing of nickel sales (3 years)
$ 75’000’000 syndicated loan for pre-export financing of copper sales (1 year)
$ 30’000’000 loan for pre-export financing of copper sales (1 year)
$ 30’000’000 loan for pre-export financing of nickel sales (8 months)
no international loans2000200020012001
$ 30’000’000 NIB loan (plus $ 30 million Norwegian government grant) for modernisation of Pechenganickel facilities (7 years)
syndicated among a number of large foreign banks
low cost of borrowing (3.5% over LIBOR)
the first and the only deal after privatization secured by sales of PGMs
Loan DetailsLoan Details
$ 75’000’000 syndicated loan for PGM sale financing (4 months):
19971997
$ 110’000’000 loan for pre-export financing of copper sales (1 year): low cost of borrowing (4% over LIBOR)
6 months grace period
survived the 1998 default crisis without disruption of disbursement schedule
$ 13’000’000 loan for equipment leasing financing (3 years):
the first leasing deal financed by a foreign bank
the only deal of Norilsk Nickel since 1997 guaranteed by export credit
agency (EKN, Sweden)
$ 17’000’000 loan for equipment leasing financing (3 years):
«Euromoney» named this deal «Deal of the year 1998»
no government guaranties which proved the evidence of acknowledgement of Norilsk Nickel as a sound borrower
Loan Details (continued)Loan Details (continued)
19981998
«Trade Finance» named this deal «The best deal of 1999»
the first foreign loan after the crisis of 1998
a sign for foreign banks to resume lending activities in Russia
$ 25’000’000 loan for pre-export financing of copper sales (6 months:
Loan Details (continued)Loan Details (continued)
19991999
Loan Details (continued)Loan Details (continued)
0
200
400
600
800
1000
1200
'97 '98 '99 '00 '01 '02
0
100
200
300
400
500
600
700
Palladium
Platinum
0
2000
4000
6000
8000
10000
12000
'97 '98 '99 '00 '01 '02
0
500
1000
1500
2000
2500
3000Nickel
Copper
High metal prices ensured robust
cash flows
2000200020012001
2002 - Norilsk Nickel resumes borrowing from foreign banks *
total funds raised $ 335’000’000
margin over LIBOR 2 - 3.8 %
tenors 1 - 3 years
secured borrowings 100%
Loan Details (continued)Loan Details (continued)
ING Barings Natexis Societe Generale Standard Bank
Creditor banks:
Citibank Commerzbank CSFB Deutsche Bank
* Norilsk Nickel also enjoyed short-term borrowing from Russian banks
2002 Loan Details2002 Loan Details
part of $ 93’500’000 modernisation project also financed by Norwegian government grant ($ 30’000’000) and own funds of Norilsk Nickel ($ 33’000’000)
anticipated substantial improvement in ecology conditions (reduction by
95% of sulfur dioxide) in the Russian-Norwegian border area, as well as other Scandinavian countries by 2006
$ 30’000’000 NIB loan for modernisation of Pechenganickel facilities:
margin 2.75% over LIBOR
tenor 7 years
NIB Ecological Project
2002 Loan Details (continued)2002 Loan Details (continued)
US$ 200 Million Secured 3 year Loan Facility
tenor 3 year (amortising from 18th month on a quarter basis)
margin 2% over LIBOR
Nickel Inventory Finance
scurity pledge of nickel located in international warehouses, stock
is freed up by repayments
United Financial Group, Russia Morning Comment, 5 April 2002
Killing two … first, it [Norilsk Nickel] replenishes its cash reservebirds with one … secondly, this [the deal] lifts the pressure off the nickelstone…again market, which is well aware of Norilsk’s nickel stockpile
2002 Loan Details (continued)2002 Loan Details (continued)
Long-term Loan Facility Secured by PGM
secrecy terms and conditions were subject to state secrecy laws
creditor Ministry of Finance of Russian Federation
Repayment of Government PGM Loan…
purpose financing of “Northern deliveries”
repayment in metals in August 2002 ahead of schedule
…provided for improved transparency
disbursement 1994
since then no more loan agreements subject to state secrecy
2003 Debt Programme2003 Debt Programme
US$ 250 Million Structured Pre-Export Finance Facility
structured as a combination of• a revolving credit line for USD 100 mln
margin 3% over LIBOR
tenor committed for 1 year + 2 extension options
• a term loan of USD 150 mln
margin 3.25 over LIBOR
tenor 3 year
deal oversubscribed to USD 320 mln
first revolving credit facility for a Russian corporate to be syndicated in the international markets
grace 18 months
First Ever Revolver Syndicated In International Markets
Credit PolicyCredit Policy
promote Norilsk Nickel to a diverse pool of international investors and build up international investor confidence
penetrate the high-quality, international financial investor base
minimise debt servicing costs on new funds raising
diversify funding base beyond the bank loan market
selection of arrangers on the competitive basis
further co-operation with relationship banks
Further StepsFurther Steps
Intention to diversify credit portfolio of Norilsk Nickel
• increase tenors
• provide for the optimal balance of secured and unsecured loans
• step in the international bond market
Improvement of the image of Norilsk Nickel as an international borrower
• access to the international capital markets
• improve disclosure / transparency
• enhance Norilsk’s credit profile
• get credit rating
Credit RatingCredit Rating
• As the world’s leading producer of base and precious metals, Norilsk Nickel has the ability to be rated at par with leading Russian corporates. The following should facilitate the company’s potential rating:
binging financial accounts and reporting in line with IAS. Audited financial statements for 2002 will be announced in June-July 2003.
improvement of corporate governance
increase transparency
develop long-term strategy
pursue efficient M&A policy
Recent Corporate DevelopmentsRecent Corporate Developments
announced dividend policy disclosed base metals production, sales and
reserves started prepation of a base metal reserves
audit at two largest orebodies initiated program for reduction of sulfur
emissions to international standards
better access to international
capital marketsin 2003 and 2004
Acquisition ofZAO «Polyus»
Acquisition of51% interest in Stillwater Mining Company
Russia’s most profitable gold company with a net profit margin of 40% or $54 million from 2001 revenues of $135 million
- approved by the boards of both companies- requires Stillwater shareholder approvaland US antitrust clearance
Funding Needs For 2003Funding Needs For 2003
• current market prices ensure sufficient cash flows for working capital and capital investments needs
• strategic development plan in elaboration
Nataly LoginovaDebt Finance Department
phone:fax:
e-mail:
+7 095 787 76 45+7 095 787 04 [email protected]