Pjsc Tatneft Regulatory News (ATAD)

29 Aug 2006 16:40

O.A.O. Tatneft29 August 2006 On August 29, 2006 OAO Tatneft issued the following press-release: OAO Tatneft comments on withdrawal of its credit rating by Standard & Poor's 29 August 2006 On 25 August 2006 Standard & Poor's (S&P) announced the withdrawal of the creditrating of OAO Tatneft (A-) in connection with, in the opinion of S&P, acontinuing lack of information. OAO Tatneft is surprised at S&P's decision andbelieves that the withdrawal of its credit rating is not justified, given itsrecent increased financial disclosure, actions taken and commitment to ongoingtransparency. However, the company underlines that it respects S&P's policy intaking decisions with respect to credit ratings. The press-release regarding withdrawal of the company's credit ratingdistributed by S&P says that "the rating withdrawal reflects a lack ofinformation on the company's consolidated financial position and its strategy".The S&P statement further says: "for the third year in succession Tatneft hassubstantially delayed publishing its audited U.S. GAAP accounts, which have beenmuch more belated compared with those of local peers. The 2004 accounts werepublished in June 2006, and the 2005 financials are not yet available. Thenature of relationships with the government of the Republic of Tatarstan (BB-/Stable/-) and other related parties is further unclear and there is a lack ofclarity regarding financing of the major Nizhnekamsk refinery project (for atotal estimated cost of $4.8 billion)". On 26 June 2006 OAO Tatneft published consolidated financial statements ofTatneft Group for 2004 prepared in accordance with US GAAP with an unqualifiedauditor's report on these financial statements (as a part of the annual reporton Form 20-F for 2004), as well as unaudited US GAAP financial statements ofTatneft Group for the first half of 2005. In addition, the company, on aconfidential basis, provided S&P with draft US GAAP financial statements ofTatneft Group for 2005, as well as explanations to these statements. OAOTatneft recognizes and agrees with S&P's statement that "the rating withdrawaldoes not necessarily indicate a deterioration of the company's credit quality",particularly given the increased cash and profit generation of the company andimproved liquidity of the Group and its financial strength. The company has regularly provided S&P with information on OAO Tatneft'sfinancial position. Information about the financial position (under RussianAccounting Rules or RAR) of OAO Nizhnekamskshina, the largest subsidiary of thecompany, is regularly published by the former in its issuer's quarterly reports.Therefore, the company believes that S&P has a good deal of currentinformation about OAO Tatneft's consolidated financial position. The Company has indeed delayed release of audited consolidated financialstatements of Tatneft Group for 2005 and filing of its annual report on Form20-F for 2005 with the U.S. Securities and Exchange Commission because of delaysin the preparation of audited US GAAP financial statements for 2003 and 2004.The above-mentioned delays were primarily caused by an investigation intocertain transactions involving Tatneft Group companies reflected in the US GAAPconsolidated financial statements of Tatneft Group for 2003 which was completedonly in beginning of June 2005. The reasons for the investigation, and themanner in which it has been resolved, have been discussed by the company innumerous press-releases. The US GAAP consolidated financial statements ofTatneft Group for 2005 are currently being audited by an independent auditor,and the company expects the completion of the audit in the fourth quarter of2005. OAO Tatneft is planning to announce a more detailed timetable forcompletion of the audit of the US GAAP consolidated financial statements for2005 in the first half of September 2006. Annual reports of the company (including on Form 20-F) clearly define thestrategic goals of the company which include, in particular, maintaining oilproduction levels at existing oil fields; increasing the resource base,including outside of the Republic of Tatarstan; strengthening verticalintegration by developing the company's refining and petrol stations network;and compliance with advanced principles of corporate governance. OAO Tatneftregularly informs investors and the public in press-releases about its actionsto reach these strategic goals. For example, the following steps to improve corporate governance have been takenin the last few years: independent directors were elected to the Board ofDirectors of OAO Tatneft; the following committees of the Board of Directorswere formed and are now operating: audit committee, human resources andremuneration committee, disclosure committee and corporate governance committee;department of internal audit was reorganized; consolidated financial reportingdepartment was expanded; and communication with investors and shareholders hasbeen improved. OAO Tatneft discloses information about transactions with related parties incompliance with regulatory requirements and applicable accounting standards. Thecompany believes that it has provided S&P with explanations regarding relatedparty transactions. As to the relationship with the Republic of Tatarstan, itis built on the basis of mutual benefit and observance of interests of allshareholders of the company. The Republic of Tatarstan (through OAOSvyazinvestneftekhim) is the largest shareholder of OAO Tatneft that holding33.59% of all shares of the company. "Tatneft is the most important company inTatarstan. The Republic of Tatarstan, as the largest shareholder, is interestedmore than anyone else in Tatneft's successful operations and that Tatneftreaches its primary goal - making profit" said Rustam N. Minnikhanov, the PrimeMinister of the Republic of Tatarstan and the Chairman of the Board of Directorsof OAO Tatneft speaking at the meeting of the Board of Directors of the companyon 28 August 2006. In particular, the Government of the Republic of Tatarstansupported the company in connection with the approval of amendments to theRussian Tax Code related to differentiation of oil production tax and grantingfinancing from the Investment Fund of the Russian Federation for theconstruction of infrastructure of the oil refining and petrochemical complex inNizhnekamsk. In connection with financing of the oil refining and petrochemical complex inNizhnekamsk, as reported to S&P, ZAO Nizhnekamsk Refinery, together withfinancial advisors of the project, is developing a structure for the financingof the construction of the complex. As reported earlier, a significant portionof the funds for the construction of the complex is expected to be attracted ona project finance basis. Until this work is completed, the company believesthat it is not possible to provide S&P with finalized plans for financing of theconstruction of the complex. In addition, on 26 June 2006 the GovernmentCommission for Investment Projects of National Importance approved co-financingfrom the Investment Fund of the Russian Federation for construction andreconstruction of external transport infrastructure of the oil refining andpetrochemical complex in Nizhnekamsk in the amount of RR16.5 billion. Theinvestment program of OAO Tatneft provides for extension in 2006 of RR6.7billion for financing of works related to the construction of the complex untilexternal financing for the construction is obtained by ZAO Nizhnekamsk Refinery. As of 30 June 2006, cash of OAO Tatneft under RAR was RR12.5 billion, while thelong-term and short-term loans of OAO Tatneft under RAR as of 30 June 2006 wereRR2.3 billion and RR1.3 billion, respectively. According to Evgeny A.Tikhturov, Head of Finance Department of OAO Tatneft, the company is currentlyable to repay all indebtedness under its loans and credits upon creditors' firstrequest. OAO Tatneft is repaying its debt under loans and credits in time instrict compliance with the terms of the loan agreements. Long-term and short-term loans and credits of OAO Nizhnekamskshina, the largestsubsidiary of OAO Tatneft, under RAR as of 30 June 2006 were RR229 million andRR1.8 billion respectively. OAO Tatneft's net income under RAR for the firsthalf of 2006 was RR23.4 billion, and OAO Nizhnekamskshina's net income under RARfor the same period was RR68 million. Forward-looking statements: This press-release may contain certainforward-looking statements of OAO Tatneft. OAO Tatneft does not guaranteeoccurrence of any events mentioned in such statements as well as term of theiroccurrence. This information is provided by RNS The company news service from the London Stock Exchange