Rising coal costs to hit India power projects - Fitch

Tuesday, Dec20, 2011

MUMBAI(Reuters)-The rising cost of imported coal, coupled with a weakening rupee, could force some Indian power projects to default on their debt obligations, ratings agency Fitch said on Tuesday. Fitch estimated that the average cost of generation could rise to 4.41 rupees (8 cents) per kilowatt hour for projects relying entirely on imported coal, from the current average of 2.29 rupees, if current trends continue.

Coal accounts for 55 percent of India's power generation capacity of 182,344 megawatts.
But while the country holds 10 percent of the world's coal reserves, power companies often struggle to access local supplies due to environmental and land acquisition delays, forcing expensive imports. The higher costs could put massive pressure on plants that cannot pass on higher fuel costs to customers, and in some cases this could render projects unviable, the ratings agency said.

"Financial margins of power projects will also come under severe pressure in the absence of a significant tariff revision or injection of additional sponsor equity," Venkataraman Rajaraman, director at Fitch's Global Infrastructure group, said in a statement accompanying a report on the industry. Most new Indian power projects are dependent on imported coal and have seen their costs jump over the past year.

Asia's third-largest economy has a peak-hours power shortage of 13 percent of requirements as rising demand from industry, homes and shopping malls outstrips capacity growth, but investments in the power sector have been slowing.

(sourced Reuters)

Russia Evraz revives dividends, shares soar

Wed Oct 12, 2011

* H1 net $263 mln, Reuters poll forecast $614 mln

* H1 EBITDA $1.62 bln, poll forecast $1.65 bln

* Shares up more than 10 percent in London

* Will pay interim, special dividend

Oct 12 (Reuters) - Russian steelmaker Evraz on Wednesday announced its first interim dividends since the global financial crisis hit in 2008, sending its shares sharply higher despite missing estimates with its first half results.

"As a result of the 1H 2011 performance and the strength of our balance sheet the directors have decided to resume the payment of dividends to shareholders," chief financial officer Giacomo Baizini said in a statement.

"We are declaring an interim dividend of US$89 million or 34 percent of our net income in 1H 2011. We are also declaring the payment of a special dividend of $402 million."

The payout is equivalent to $0.60 a share, and the special dividend equals $2.70 a share.

At 1656 GMT, the shares were up 10.4 percent or $1.63 at $17.25.

Evraz, part-owned by billionaire Roman Abramovich, has improved its liquidity position this year by reducing total debt to $6.04 billion at the end of the first half, compared to $7.81 billion at the end of 2010.

Fitch Ratings last month upgraded Evraz's debt rating to 'BB-' from 'B+' on the back of the company's successful refinancing and debt reduction efforts.

"All in all, the much improved balance sheet with no significant short-term maturities makes the results decent and the company less vulnerable in case of weak market conditions," VTB analysts wrote in a note.

Although the shares surged, the company's first-half net profit and earnings before depreciation, taxation and amortisation (EBITDA) came in below market expectations.

First half net profit was $263 million, while analysts polled by Reuters expected $614 million, up from a year-earlier loss of $270 million.

Evraz also said one-off losses related to the conversion of debts had reduced the figure from $494 million.

First half EBITDA was $1.63 billion, up from $1.15 billion in the year-earlier period and just below the $1.65 billion poll forecast.

Sales were $8.4 billion, up from $6.38 billion and more than the $8.14 billion poll forecast.

CHALLENGING MARKET

Evraz also warned that it has experienced weaker trading in recent weeks due to lower production and export prices in part caused by the challenging global economic environment.

"The group's recent trading has been impacted by scheduled repairs, lower production volumes, a weak market environment in the Czech Republic and a change in product mix in South Africa," Chief Executive Alexander Frolov said in a statement.

"In addition, in recent weeks, there have been some decreases in export prices," he added.

In China, the world's leading steel producer, Shanghai rebar prices dropped 11 percent in September.

The company, which does not ship significant volumes there, earned 34 percent of its revenues in Russia last year and 24 percent in the Americas, with another 10 percent of sales to the European market.

In a separate interview with Reuters Insider, Baizini said the company is prepared for any market slowdown.

"We make sure that we are not producing any steel which is unsold," he said.

"We do keep monitoring the situation, early days, but we're ready for it."
(sourced Reuters)

Costs the key for Europe steel outlook-Fitch

Thu Mar 31, 2011 3:45pm GMT

* Non-integrated steel makers face higher raw material costs
* Auto, engineering demand healthy, construction weaker
* Fitch sees European steel demand up 5-6 pct in 2011

PARIS, March 31 (Reuters) - The performance of European steel makers this year will be shaped by their ability to pass on higher raw material costs and by contrasting growth in the industries they supply, a Fitch analyst said on Thursday.

"Possibly the biggest issue for steel producers this year is their ability to pass through costs," Peter Archbold, European head of basic materials at Fitch Ratings, told reporters.

The price of most mining commodities was expected to be higher on average this year because of supply tensions, with coking coal expected to be the most bullish following floods in Queensland, Australia, that have cut output, he said.

"There is going to be some margin pressure for non-integrated companies," he said, stressing that steel demand was not as strong as in 2006-08 when producers were in a better position to pass on rising raw material costs.

However, conditions for steel makers would also depend on demand from different industries, he said, noting that while Thyssenkrupp (TKAG.F: Quote) did not have integrated mining activities it was benefiting from brisk demand from the German car industry, one of Thyseenkrupp's main outlets.

Fitch expected steel demand from the automotive sector in Europe to rise by 5-6 percent this year, in line with its outlook for overall growth in European steel demand.

Demand growth would be faster in mechanical engineering, a key sector in Germany, at 7-8 percent but much weaker in construction at 1-2 percent, he said.

Fitch sees 2011 global steel demand rising by 6-10 percent.

The European steel sector as a whole was expected to continue this year its "progressive recovery", which has seen output climb back up to 80 percent of 2007 levels, lagging the global market which has already reached pre-crisis levels, driven by Chinese production, Archbold said.

The pushing through of production costs should support steel prices in Europe, he added.
(Reporting by Gus Trompiz, sourced :Reuters)