October 23, 2018 / 7:04 AM / 10 months ago

Russian steelmaker Severstal heeds Kremlin's investment call

CHEREPOVETS, Russia, Oct 23 (Reuters) - Russian steelmaker Severstal has prepared a long-term investment programme worth several billion dollars in response to a Kremlin call for major spending at home, the company’s chief executive Alexander Shevelev said.

Negotiations between the government and major Russian metals and mining firms have been taking place since August, when Kremlin aide Andrei Belousov first proposed imposing on them a windfall tax to raise additional revenue for the state budget, sending their share prices lower.

The proposal was subsequently watered down, replaced by a call for more investment by the companies in projects related to infrastructure, the environment and new technologies.

Speaking to reporters in Cherepovets, some 500 kilometres (310 miles) northwest of Moscow where the company’s key steel production site is located, Severstal CEO Shevelev said the government and metals and mining firms had found common ground, and that the steelmaker was committed to taking part in the scheme.

“These meetings started off with a slightly different order of the day, but they have now become very understandable and constructive,” Shevelev said.

Lists of social projects proposed by the government, and of capital-intensive investment ideas proposed by the metals and mining sector, have now been merged into a single document, the CEO said.

“We presented our investment programme at several billion dollars. It’s a programme that we plan to realise. And of course it’s one for which any government help would be very, very useful, and appropriate,” Shevelev said.

The steelmaker said participants are yet to find out what shape that government support will take, whether discounts, subsidies, or other benefits.

Projects in Severstal’s programme include the modernisation of a blast furnace and of a coke furnace battery, as well as the possible construction of a cellulose factory in the Vologda region, the CEO said.

Shevelev also confirmed earlier guidance that Severstal’s capital expenditure this year would reach 49.5 billion roubles ($759 million), adding this figure is expected to rise in 2019 and 2020.

He said Severstal’s financial performance in 2018 as a whole was expected to exceed that of the previous year, but 2019 would see the market under more pressure.

“The consensus forecast among analysts indicates a decrease compared to this year. We agree with this. How deep that fall will be, time will tell,” Shevelev said. ($1 = 65.2220 roubles) (Editing by Katya Golubkova and David Holmes)

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