Yelena Ustinova, Head of Financial-Economic Analysis Department of PPP Development Center

– The decision of the Board of Directors of Atomenergoprom to issue bonds was quite timely

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

I think that the decision of the Board of Directors of Atomenergoprom to issue 5-year bonds worth up 195mln RUR in 2009–2010 was quite timely.

The money will be spent for two purposes. First, it may be spent to refinance part of the short-term high-interest debt made in late 2008-early 2009. They in Atomenergoprom say that some 25% of the loan may be spent for this purpose. This will certainly enhance the financial stability of the company. Restructuring of short-term debt into long-term one will raise the liquidity and will reduce the cost of borrowings for Atomenergoprom and its companies. The second purpose is to finance Rosatom’s investment program to develop the national nuclear industry and to build nuclear power plants on a large scale. The Government has instructed Rosatom to increase the share of NPPs in the total energy balance to 25% by 2030. This task requires heavy financing. The cost of the program is almost 1.5trl RUR with 700bln RUR to be provided by the Government and the rest to be own resources and borrowings. In this light, bonds seem to be quite an effective way to attract long-term funds in the program.

The guarantees of Rosatom are a big advantage. This and the active state support makes Atomenergoprom’s bonds a low-risk and attractive instrument. I think that a certain part of the loan will be bought by private subscription by big banks, including banks where the Government has stakes. They in Atomenergoprom say that the circle of potential investors will not be limited.   

The general situation on the corporate bond market is improving. So, I think that Atomenergoprom will be able to place the bonds at quite a favorable interest by the end of this year. The bonds may also be included in the REPO list of the Bank of Russia. This requires acceptable credit rating and favorable credit history. In order to further enhance its transparency and investment appeal, Atomenergoprom should make it data open and should transit to international accounting standards.

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.