As part of its commitment to the Russian power sector and the development of local capital markets, the EBRD has bought 800 million roubles of an initial 10 billion rouble domestic bond issued by Federal Grid Company (FGC), the first Russian corporate bond ever to achieve a 10-year maturity.
This is the second FGC domestic bond issue that the EBRD has supported in the less than a year. In November 2010, the EBRD bought 3.66 billion roubles of a 15 billion rouble bond issued by FGC whose seven-year maturity was at the time the longest in Russia’s power sector.
The EBRD sees the success of the placement of this latest FGC non-callable fixed interest rate bond as key to the growth of the rouble debt capital market since it will provide a new long-term instrument critical for the development of the country’s pension funds and insurance sectors.
The bond’s 10-year maturity deepens Russia’s domestic market and sets a new pricing benchmark for issuers. It helps create a supply of instruments that meet the requirements of local and international investors, particularly institutional ones who are looking for long-term rouble exposure, and thus contributes to widening the investor base.
The latest FGC bond is the first of a series of nine issues planned to raise a total of 125 billion roubles to fund the company’s extensive investment programme. The proceeds of the Bank’s participation will finance the modernisation of a Kamala substation which plays a pivotal role in connecting the energy systems of western and eastern Siberia.
The bond has been included in the Central Bank of Russia’s Lombard List, thus increasing its liquidity since this allows it to be used as collateral in repo transactions with the Central Bank. The annual coupon on this bond was fixed at 8.5 percent through a book-building process.
The FGC owns and operates Russia’s high voltage transmission networks. This publicly listed company is majority owned by the Russian state. Its shares are traded on Russia’s MICEX and RTS exchanges.