August 20, 2018, 15:27 / Business Exclusively by subscription

Transneft got rid of foreign currency debt

The company repaid ahead of schedule a $10 billion loan that it took out for the construction of a pipeline to China Galina Starinskaya Transneft allocated funds for the construction of a pipeline system in Russia, including for the branch from the ESPO to the border of the People's Republic of China / Yaroslav Chingaev for Vedomosti

Transneft . has completely gotten rid of its foreign currency debt, said company president Nikolai Tokarev “We fully repaid all our foreign currency debt obligations ahead of schedule, and also closed the Eurobonds that we issued. In July, we also paid off the Chinese debt – we converted it into rubles and also settled,” he said.

In 2009, Transneft received a $10 billion loan from China, and at the same time Rosneft received $15 billion for oil supplies. The loan repayment period is 2029. Transneft allocated funds for the construction of a pipeline system in Russia, including the pipeline from the ESPO to the border of the People's Republic of China. Loan payments are denominated in dollars, the rate is floating and depends on LIBOR. In December 2010, Transneft completed the withdrawal of all $10 billion. The company began paying off the loan in 2014.

Transneft . gradually reduced its foreign currency debt, replacing it with bonds and loans from Russian banks For example, in January 2018, Transneft attracted loans from Russian state banks for a total amount of 213 billion rubles. (repayment period – 2024–2028), including to repay the Chinese loan. If at the end of 2015 about 85% of the company’s debt was in dollars, then by the end of 2017 it was 48%, as indicated in its presentation.

Previously on the topic: Transneft wants to convert a Chinese loan into rubles

The Chinese loan is not cheap, plus it is in foreign currency, which makes it unprofitable against the backdrop of the weakening ruble, says Aton analyst Alexander Kornilov: “Transneft has a completely ruble-denominated business.” The tariff for the provision of services for Transneft is the only source of income. “On Chinese foreign currency debt, the rates almost doubled, so they did the right thing by moving away from it,” Tokarev explained.

In 2014, the company lost 75.3 billion rubles. on transactions with derivative financial instruments, in 2015 – RUB 5.1 billion. Transneft used them to hedge risks associated with a possible depreciation of the dollar.

Previously on the topic: The court annulled the unprofitable Transneft deal

A representative from China Development Bank could not immediately be reached for comment.