Nikolay Podlevsky, head of the Analytical Department of Zerich Capital IC

— Rosatom’s grandiose long-term program to increase the capacities of the nuclear industry is one of the drivers of our national industry

State Atomic Energy Corporation Rosatom is planning to conduct a large loan over its affiliate JSC Atomenergoprom (the company unites civil nuclear enterprises).

Rosatom’s grandiose long-term program to increase the capacities of the nuclear industry is one of the drivers of our national industry. The guarantee of long-term contracts for the machine building and construction sectors will have a strong multiplier effect on the whole economy. That’s why Rosatom’s projects will be among the key beneficiaries of the state support. 

NPP construction projects take 5 years and, with site selection and preparatory work inclusive, 10 years. Such long-term projects need long-term investments. Today, we have very few ways to attract long-term money and bonded loan is one of them.

Rosatom’s guarantees and the state support make such bonds a very reliable investment instrument. But the key risk for investors here is the long time horizon. Hence, it will be hard to find a big number of investors for ensuring a maximally long horizon. The range of the yields on long-term bonds is very wide. For example, the yield on three-year bonds ranges from 11.5% to 20%. So, only a couple of investors, at best, would agree to buy bonds with a duration of as many as 5 years. In this light, Atomenergoprom’s decision to divide its loan into 10 issues seems to be quite pertinent. This will allow the company to manipulate the parameters of the issues and to adjust them to the changing demand.

As on the terms of loan placement 10 documentary interest-bearing inconvertible bond series are planned for emission whereas each bond will be 1,000 RUR. The bond’s maturity is five years. The bonds will be placed during a year starting from the state registration of issue.

The bonds will be placed by public subscription by means of purchase and sales transactions at tenders held by CJSC MICEX. ROSATOM is securing all the bond emissions.

Part of the attracted funds is planned be channeled to refund short-term loans attracted by the industry’s enterprises. Another trend is financing part of investment program for subsidiaries and affiliates in 2009 – 2010. In particular among the fund receivers are JSC Energoatom Concern (implementation of NPPs construction program), JSC TVEL (modernization and renewal of nuclear fuel production), ARMZ Uranium Holding (development of mining assets in Russia and abroad within the set up joint ventures), JSC TENEX and JSC United Company Enrichment Sublimation Complex (modernization and renewal of production facilities with the shift to a new generation of gas centrifuges), and JSC Atomenergomash (investments into nuclear engineering for implementation of the NPPs’ new units commissioning program).

JSC Atomenergoprom provides full production cycle in nuclear power industry consolidating leading enterprises and organizations of the industry (its history is over 60 years) and the experience accumulated over the whole range of NFC and NPP building technologies (at present the issuer’s consolidation perimeter incorporates the largest enterprises of nuclear energy industry namely: Atomredmetzoloto, TENEX, TVEL, Energoatom Concern, separation and sublimate complex enterprises as well as enterprises of engineering and service, development of new technologies, etc). According to the consolidated reporting of the company, the issuer’s revenue in 2008 (disregarding the joining date of subsidiaries and affiliates) was 290.5 bn. RUR, the revenue was 146.5 bn. RUR in the first half of 2009, and the profit was 14.4 bn. RUR.