w w w. s c m . c o m . u a
NEWS April 2011
System Capital Management has announced that it has now repaid in full a $545m syndicated loan. The loan was taken out in March 2007 from a range of banks that included BNP Paribas, Bayerische Hypo-und Vereinsbank, part of the UniCredit Group, NATIXIS, Raiffeisen Zentralbank Österreich and Standard Bank. Initially the amount of the loan was $400m but it grew later (in August 2007) to $545m. The loan has now been repaid in seven separate instalments, the last one being settled in the first
three months of this year. SCM’s CFO Margarita Povazhnaya said: “By repaying this loan we have proved one more time that this company is a responsible and reliable partner.” “All seven payments have been paid both on time and in full. Our commitment to a balanced borrowing policy has helped us to continue to develop in line with our strategic goals. Perhaps more importantly, it has also allowed us to retain the trust of our partners and investors.” Ms Povazhanaya pointed out that the SCM Group has
SCM REPAYS $545m
SCM Repays $545m Syndicated Loan
4Margarita Povazhnaya, CFO of SCM traditionally been conservative in its borrowing policy. Its debt-to-equity ratio is currently the lowest among Ukrainian financial and industrial groups, but SCM follows
a balanced approach to borrowing and examines different opportunities of raising funds to implement long-term investment programmes.
Mining Machines Group, a heavy engineering holding of the SCM Group, has boosted operations by entering new export markets. In 2010 it supplied mining equipment to Russia, Belarus, Kazakhstan, Uzbekistan, Macedonia and Georgia. Its new customers are Navoi Mining and Metals Plant in Uzbekistan, Rudnik SASA Dooel
Tin and Zinc Mining Plant in Macedonia and Georgian Manganese Holding in Georgia. Maksim Nekrasov, the Director of Marketing and Sales at Mining Machines Group, said: “In 2011, we expect to double the amount of export sales in the company’s total revenue by boosting exports to existing markets and selling products to other countries.”
He said that other new markets for Mining Machines are likely to include Bulgaria, Vietnam, Armenia, Slovenia, Romania, Montenegro and Iran. In addition, the group will also open trade promotion offices in Russia, Kazakhstan, Vietnam and India in a bid to enhance its presence in what are considered strategically important countries.
The expansion is the latest in a highly successful period for the company, which ended 2010 with total revenues of over UAH 2 billion - more than twice as much as in 2009. Yevgeniy Romashchin, the company’s chief executive officer, said: “The demand for mining equipment is recovering in Ukraine and internationally.
DTEK Boosts Energy Exports Page 2
Metinvest Products Achieve REACH Compliance Page 3
SCM attends WEF in Davos Page 3
SCM joins Global Compact LEAD Page 4
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MINING MACHINES
Mining Machines Group Expands Export Markets & Doubles Revenue
NEWS
April 2011
SCM BANKING ARM
SCM Group Strengthens Banking Arm Following the merger of its banking businesses, First Ukrainian International Bank and Dongorbank, started last year, System Capital Management has continued to strengthen significantly its position in Ukraine’s banking sector and is acquiring the retail bank Renaissance Capital (brand Renaissance Credit). The SCM Group has obtained a permit from the Antimonopoly Committee of Ukraine to buy the controlling interest in the bank. The deal will be completed after obtaining all the required permissions from the National Bank of Ukraine. Ilya Arkhipov, Director of Business Development at SCM, welcomed the move, saying it “fully complies” with the banking development strategy of SCM. Mr Arkhipov added: “For SCM, banking is one of our top priorities, so we are clearly very interested in expanding in this area and entering new sectors of financial markets, in particular retail banking.”
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Mining Machines Expands Export Markets
DTEK ENERGY EXPORTS
Mining businesses are making significant investments in modernising and buying new equipment.” “In 2011 the company has set ambitious goals to raise revenues 52% to exceed UAH 3 billion. We will continue to develop the quality management system, invest in modernisation of our production facilities and engineering as well as improve customer service,” he added.
Mr Arkhipov said Renaissance Capital is a bank, which has been successful in consumer lending in the Ukrainian market before and during the economic downturn. “It also has real potential for strong continued growth,” he added. SCM’s new business acquisition has, says Mr Arkhipov, “a well-established consumer finance infrastructure and a highly professional team.” According to Mr Arkhipov it can also boast a “specialised retail network, product line and risk management system.” He said that while Renaissance Capital will remain a separate legal entity within the SCM Group, its integration into the company´s banking business will allow the Group to expand its portfolio in the financial services sector, enter new markets and enable SCM to diversify its core activities. Mr Arkhipov said that a range of
“different options” were considered in looking for future investment opportunities but that Renaissance Capital was selected because it is widely regarded as having an “efficient retail lending model.” He added: “We are acquiring an established business, including an excellent client base and a credit portfolio. SCM Group has all the required resources and expertise to develop in this area, something that is particularly important at a time when we are seeing the first signs of economic recovery.”
DTEK Boosts Energy Exports DTEK, Ukraine’s largest private vertically integrated energy company and part of the SCM Group, has clinched a significant new deal that gives it access to Ukraine’s network of cross-border energy grids. Under the agreement with Ukrenergo, the Ukrainian state-owned operator of national grids, DTEK is expected to export 1,710 MW of electricity this year to a range of countries. The company will export 545 MW of energy to Slovakia, Romania and Hungary, 215 MW to Poland and 750 MW to Belarus. A further 200 MW will be exported to Moldova. The agreement gives the company a potentially lucrative source of additional income.
This January, DTEK exported 237m kWh of electricity with 300-450 MW supplied to Hungary, Romania and Slovakia. On 5 February 2011, DTEK resumed energy exports to Belarus. Director of Power Trade (DTEK) Andrey Favorov noted that power supplies to the country are expected to reach 300-400 MW. By the end of 2011 DTEK guarantees to export around 1.5bn kWh of Ukrainian electricity to Belarus. A further 1.5bn of kWh could be exported in 2011 subject to bilateral agreement between the parties. Starting from January 2010, DTEK supplied electricity to a range of Eastern European countries and exported 1.21bn kWh of electricity last year.
DTEK’s Key Production Indicators for 2010 INDICATORS CHANGES (% 2010 - 2009)
4Yevgeniy Romashchin, CEO of the Mining Machines Group
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Coal mining Coal processing 4 Run-of-mine coal processed 4 Concentrate produced Electricity generation 4 Vostokenergo’s electricity output 4 Dniproenergo’s electricity output Electricity sales and supply 4 Tradable electricity purchased on WEM
+8.7 +7.6 +1.5 +12.7 +21.6 +12.6
responsibility on industry to manage the risks from chemicals and provide safety information on substances. Importers and manufacturers such as Metinvest are legally required to gather information on the properties of their chemical substances, in order to allow their safe handling, and also to register this information in a central database run by the European Chemicals Agency (ECHA) in Helsinki. Metinvest Group products passed the REACH registration procedure in late November last year. Following the requirements of REACH, the Safety Data Sheets (SDS) on each product have been compiled in accordance with the new European
SCM Takes Part in the World Economic Forum in Davos System Capital Management took part for the fifth successive year in the Annual meeting of the World Economic Forum held from 26 to 30 January in Davos, Switzerland. SCM is the only Ukrainian business amongst the Forum’s 100 global strategic partners. The main theme for the 2011 Forum was “Shared Norms for a New Reality” reflecting the concern of global political and economic leaders about the erosion of common values that could undermine economic growth and political stability in different regions. The theme for the World Economic Forum Annual Meeting 2011 focused on four core elements: 4Responding to the New Reality 4The Economic Outlook and Defining Policies for Inclusive Growth 4Supporting the G20 Agenda 4Building a Risk Response Network Mechanism The event was attended by leaders from the G20 countries, over 1,000 member companies of the World Economic Forum, international and non-governmental organizations, academics and media. The SCM Group was represented at the Forum by Oleg Popov, Chief Executive Officer, SCM; Jock Mendoza-Wilson, Director of International and Investor Relations, SCM; Igor Syry, Chief Executive Officer, Metinvest Holding (SCM’s mining and metals holding); and Maksim Timchenko, Chief Executive
4The view from Davos Officer of DTEK (SCM’s energy holding). “Being the leading national investor and an international investor, SCM needs to know the latest international trends and different views on the global economy and politics. Davos is the best place to discuss these issues and their impact on business, and is a good platform for generating and sharing ideas,” noted Oleg Popov, CEO of SCM. “Consolidating efforts and sharing cutting-edge practices and ideas is especially important now that we see the signs of economic recovery. The meeting in Davos helps not only to see the opportunities of the new post-crisis reality but also to outline the ways to seize them effectively,” added Mr Popov. Additionally this year SCM Group launched a blog on its corporate website (www.blog.scm.com.ua) which was opened with a series of posts from the Davos forum.
format. A SDS database is being created which will enable customers to access the information through Metinvest’s website. Along with REACH, Metinvest is also actively implementing the requirements of the EU Regulation on the classification, labelling and packaging of its chemical substances and mixtures. Under EU law, all substances and mixtures to be shipped to EU member states must be notified to ECHA in the Helsinki agency by 3 January 2011.
SCM Partners Energy Efficiency Initiative SCM is a partner of the UK Embassy’s public diplomacy project “Save energy! Save money!” implemented in Ukraine. At the end of 2010 a national photo competition “Save energy! Stop climate change!” took place within the framework of the project. The competition was aimed at drawing public attention to the environmental situation in Ukraine as well as to the issues of energy saving and climate change. The competition culminated in a photo exhibition in February 2011 dedicated to energy saving organized by the UK Embassy in Ukraine and KievPhotoCom International Festival of Photography. SCM supported the event as part of its own EnergyEfficiency.UA programme. At the awards ceremony held during the opening of the exhibition the winners and runners-up of the photo competition were presented with their awards and prizes. “Reducing the amount of energy we use is a challenge which all Ukrainians, whether in business or in our daily lives, need to address if we are to make our contribution to reducing green house gas emissions and preventing global climate change,” said Jock Mendoza-Wilson SCM’s Director of International and Investor Relations when opening the exhibition. “Each of us must understand the challenges arising from inefficient energy consumption. SCM clearly realizes the >> Continued on Page 4
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SCM AT WEF IN DAVOS
Metinvest has successfully completed the registration of its products under the European Community Regulation on chemicals and their safe use, commonly known as REACH. REACH, which entered into legal force in June 2007, relates to a landmark EU Regulation on chemicals and their safe use. The aim is to improve the protection of human health and the environment through better and earlier identification of the intrinsic properties of chemical substances. At the same time, the legislation aims to enhance innovation and competitiveness in Europe´s chemicals industry. In particular, REACH places greater
REACH COMPLIANCE
NEWS April 2011 Metinvest Products Achieve REACH Compliance
GLOBAL COMPACT LEAD
NEWS
SCM Among First to Sign New UN Global Compact Project On 28 January UN General Secretary, Ban Ki Moon, launched a new major UN initiative, Global Compact LEAD, to international business leaders at the World Economic Forum in Davos. The new platform brings together the leading businesses in a programme which will encourage new levels of corporate sustainability performance. The list of launch signatories includes 54 businesses that are at the forefront of corporate responsibility in the world (Daimler, Deutsche Telecom, Siemens, Heineken, Intel, KPMG, PriceWaterhouseCoopers, Nestlé and others).
The initiative was signed on behalf of SCM by Jock Mendoza-Wilson, the company´s Director of International and Investor Relations, who is also the Chair of the UN Global Compact Local Network in Ukraine. Mr Mendoza-Wilson described SCM´s involvement in the project as a “great honour.” He said, “Being invited to be among the first signatories of Global Compact LEAD gives recognition that in the area of corporate responsibility we have progressed from newcomers to trendsetters.”
Metinvest Places $750m Eurobond
METINVEST EUROBOND
April 2011
Metinvest, SCM’s vertically integrated mining and metals business, announced that it had successfully placed a $750m 7-year Eurobond with a coupon of 8.75%. The bond matures on February 14, 2018. The placement was implemented within the framework of a $1bn Euro Medium Term Notes (EMTN) programme. The proceeds from the issue will be used to finance the Company’s capital expenditure programme and for general corporate purposes. The orderbook was more than 3 times oversubscribed, comprising orders from over 200 international investors. The international rating agency Fitch Ratings has assigned Metinvest’s Eurobond issue a final senior unsecured B rating, while Moody’s Investors Service has assigned a provisional B2 rating. Metinvest believes that it is the first and, to date, only Ukrainian corporate issuer to have established a listed EMTN programme. Sergiy Novikov, Chief Financial Officer of Metinvest, commented: “It is extremely important to have quick access to the debt capital markets in the rapidly changing market environment. The success of this placement reflects the high level of interest in our business from foreign investors, as well as their confidence in our reputation as a reliable borrower.” In May 2010, Metinvest placed a debut $500m 5-year Eurobond with a coupon of 10.25%.
4 The Global Compact LEAD insignia “I can confidently say that this opens a new chapter in corporate responsibility. Next generation CSR will be much more focused on what are now core business performance issues such as health, safety, environment and energy efficiency, and in ensuring the long-term sustainability of business.” Participants of the first meeting also signed the Blueprint for Corporate Sustainability Leadership.
Eurobond Issue in Top 3 Eastern Europe Deals in 2010 SCM-owned DTEK is pleased to announce that its five-year $500m Eurobond issue closed in April 2010, was voted one of Top 3 Eastern Europe deals of the year by banks polled by EuroWeek. Russian Railways (RZD) and Turkey sovereign bonds
offerings were other deals in the top of the ranking. ING Bank N.V. (ING), The Royal Bank of Scotland plc (RBS) and Erste Group Bank AG acted as Joint Lead Managers, with ING and RBS as Joint Bookrunners for this transaction.
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SCM Partners Energy Efficiency Initiative need for changes. For this very reason, the SCM Group ranks among Ukraine’s leaders in terms of investments in energy-saving technologies.
For further information, or to subscribe, please contact: Jock Mendoza-Wilson, Director of International and Investor Relations System Capital Management, 117 Postysheva st., Donetsk 83001, Ukraine ir@scm.com.ua – www.scm.com.ua (Please visit our updated website)
Our goal is to lead by example and to encourage potential like-minded businesses and consumers to cut their energy use,” he went on to say.
4Photo by Vyacheslav Peretyatko, winner of the 1st prize