Russia 110601 Basic Political Developments

NLMK receives license to explore and mine coal at Zhernovsky Gluboky field

http://www.steelorbis.com/steel-news/latest-news/nlmk-receives-license-to-explore-and-mine-coal-at-zhernovsky-gluboky-field-603758.htm
Wednesday, 01 June 2011 10:01:48 (GMT+2)

Russian steelmaker Novolipetsk Steel (NLMK) has received a license for the exploration and production of coal in the Zhernovsky Gluboky section of Zhernovsky coalfield in the Kemerovo region, Russia. The cost of the license is Ruble 420 million ($14.9 million). It is thought that the coal reserves in the area may reach 73 million mt. The license is valid till 2031. In 2011, NLMK plans to invest more than Ruble 1.0 billion ($35.6 million) for the development of Zhernovsky GOK.

GM to double output at St Petersburg plant by 2012

http://en.rian.ru/business/20110601/164360573.html

11:31 01/06/2011

American car giant General Motors (GM) plans to almost double output at its Russian plant in St Petersburg to 98,000 vehicles next year, Romuald Rytwinski, General Motors Auto CEO, said on Wednesday.

GM plans to produce about 64,000 cars in 2011, Rytwinski said.

"We plan to more than double output in 2011. In 2011, we plan to introduce a third shift and increase production capacities," Rytwinski told a business conference.

Chevrolet Cruze vehicles account for about 60 percent of the St Petersburg plant's output. Opel Antara's share amounts to 30 percent, while about 10 percent of its production is Chevrolet Captiva cars.

The St Petersburg plant started production in 2009. The company plans to launch the production of Cruze hatchback variants this winter, Rytwinski said.

ST PETERSBURG, June 1 (RIA Novosti)

Russia’s Supply of iPad 2 Sells Out in Two Days

http://readrussia.com/blog/business/00341/

Two days — that’s how long it took to sell out the 10,000-unit supply of the newest Apple tablet in Russia after the iPad 2 went on sale here, several months after it became available in the US.

Despite the fact that the device costs here 30 to 40 percent more than in Apple stores across the US, it’s hugely popular in Russia, among students and politicians alike. The latter group’s affection for the tablet is explained by that president Dmitry A. Medvedev’s is a big fan of Apple and the iPad. In fact, Russian Duma (the Lower House of Parliament) went ahead to order iPads for every single deputy “for work purposes”.

So far, Russia has been on the background of Apple’s marketing and distribution strategy despite the country’s large population and apparent high demand for Apple’s products. When the newest iPad went on sale last Friday, there were no lines or scuffles at the stores, probably because the majority of those who wanted the device, had already bought one, either abroad or in Moscow, where the iPad appeared the day after it became available in the US for the hair-raising price of $5000.

However, retailers report that two days after that supply of iPads ran out and they expect new shipments this week. According to them, iPad 2 had surpassed sales of the first generation tablet and likely to become the fastest-selling gadget in the modern history of the country.

Visa and MasterCard will be shown mercy

http://rt.com/politics/press/izvestiya/visa-mastercard-restrictions-russia/en/

Published: 1 June, 2011, 02:57

Edited: 1 June, 2011, 02:57

Yulia Krivoshapko

No restrictions will be applied to the operations of the international payment systems in Russia 

Visa and MasterCard owners can sleep peacefully. The establishment of the Russian analogue of the international payment systems is being postponed; therefore, nobody is planning to limit, or especially ban the “foreigners’” operations in Russia. The law on a national payment system, the draft version of which will go through its second reading in the State Duma on Friday, will simply stipulate the rules of the game and establish the Central Bank as the authority that will oversee the process.  

Initially, the reading of the new version of one of the most talked-about bills was scheduled for today, June 1. But because the document had received more than 100 amendments (they were discussed for over five hours at a special purpose committee meeting), the State Duma has decided to take a time-out to prepare.   

Since the first reading, the document has changed radically. In the very beginning, it was assumed that a Visa and MasterCard analogue would appear in Russia, which would allow us to be independent from international payment systems. Meanwhile, “the foreigners” were to be subject to some fairly stringent requirements. In the bill’s first draft it was suggested that they might be obliged to build processing centers in Russia, so as to ensure Russian consumers’ spending information was not transferred abroad. Naturally, foreign companies opposed the idea, threatening to stop providing services to Russian clients.   

The new version of the document is much more lenient. It simply sets the rules of the game for market participants. In particular, international systems will be able to use the services of the operation centers, located outside Russia. In return, they will be required to be transparent (declassify information about rates and fees), and demonstrate responsibility before clients – companies will be required to ensure uninterrupted system operations.   

“It did not make sense to impose limitations on the foreign players. This would have led to a decrease in the quality of service,” Anatoly Aksakov, State Duma deputy and president of the Russian Association of Regional Banks, told Izvestia. “Therefore, it was decided to abandon the idea of creating obstacles for the international payment systems that might benefit any upcoming Russian system, especially considering that no such system exists as yet.”

Apparently, a Visa or a MasterCard analogue should not be expected in Russia. At least the new legislative draft makes no mention of it. The “toy” ended up being too expensive. According to expert assessments, dozens of billions of dollars are needed to create such a system. The international payment systems have a much better start-up platform as their costs are distributed over a large number of clients who use their services. In order for us to enter the payments market, we need to conduct some major start-up operations, mainly in terms of funding. Does it make sense to do this?   

“The establishment of a national payment system cannot be determined by law or the officials’ desire. The need for the system must be determined by the market,” says Aksakov. “If it were profitable to operate in this market then, objectively, we would have the necessary conditions to create a national payment system that, through higher quality of services and more effective operations, could push the foreign competitors out or, at least, compete with them. But it does not make sense to create something artificially.” 

“The creation of a national payment system is an interesting project. But the important thing is for it to be needed in the market – and not hinder it,” TelecomDaily’s general director, Denis Kuskov, agrees. “In regard to the attempt to ban the transfer of information abroad, I’ll say that our compatriots are more concerned about whether or not the Russian tax agency is aware of their spending.” 

The work of participants in the national payment system will be monitored by the Central Bank. The bank, managed by Sergey Ignatyev, will be able to conduct inspections and impose sanctions against unfair players (down to revoking their registration). However, specialists note that not all actors will be subject to monitoring – the work of non-bank agents is outside the Central Bank’s control, a situation which creates unfair competition.  

“Those who are under the Central Bank will have an advantage in the market. Besides, a lack of control promotes illegal things, attracts crime,” says Anatoly Aksakov. “For example, today there is an unyielding opinion that various payment terminals where there is no control over the cash flows are the suppliers of cash to various structures. The law must eliminate this gap, but there is no mention of this in the text.” 

On another hand, the document, if approved in the current form, will legalize mobile payments, after which mobile phones will turn into fully fledged “e-wallets”. This will require mobile service carriers to sign an agreement with banks.

“In practice, mobile payments are already being made, but due to the lack of legislative regulation, both the operators and the subscribers are taking a risk,” notes State Duma deputy, Liana Pepelyaeva.

Month Ahead: June 11 - Strategy and preview of selected corporate and industry events

http://www.bne.eu/dispatch_text15683

Metropol
May 31, 2011

We see the market range-bound but starting a slow recovery in June

In the Russian equity market, following outflows in May, we expect investors to start returning to the market on increasingly attractive valuations, rising corporate profits, a strong pace of macro recovery, anticipated continuing high commodity prices, a stronger ruble, high interest rates and the absence of capital control measures being introduced elsewhere in EM.

We favor defensive names in the short-term. This would include stocks with high dividend yields, consumer staples companies, and names that have higher earnings visibility going forward.

Norilsk Nickel AGM is scheduled for June 21. Dividend payments and board election will be decided.
Norilsk Nickel is scheduled to report full year 2010 IFRS results sometime in June. We expect to see improvement in the company's financial position compared to 2009 with results exceeding pre-crisis levels on the back of favorable base and precious metals price dynamics in 2H 10 coupled with slightly increased full-year production volume.

VTB is scheduled to post 1Q 11 IFRS financial results in mid-June. We anticipate strong results boosted by TCB and Bank of Moscow stake consolidations followed by a positive stock reaction

VTB is scheduled to publish 1Q 11 IFRS results in mid-June. We expect the bank to post earnings around RUB 17bn for the 1Q 11 due to consolidation of TCB (Transcreditbank) and the Bank of Moscow stake.

NLMK is scheduled to publish 1Q 11 IFRS results in June. We anticipate growth in line with the company's guidance, driven by higher average selling prices and improved product mix. The results should have little impact on the stock price, in our view.

NLMK is expected to publish 1Q 11 IFRS results some time in June. Increased output of high value-added (HVA) products coupled with rising steel price prices during the first quarter gives us confidence that the company will perform in line with guidance for the quarter. As such, we expect quarterly revenue to increase by 3% q-o-q to USD 2.3bn, with EBITDA rising by 3% q-o-q to USD 510mn.