Britain launches independent review on plain tobacco packaging

LONDON Thu Nov 28, 2013 5:22am EST

LONDON Nov 28 (Reuters) - Britain launched an independent review on tobacco packaging on Thursday and said it was ready to introduce new laws banning branding on cigarette packets if the report found sufficient evidence to support it.

The government, which in July delayed a decision on the issue, said the review was due to report back in March 2014 and would look into whether standardised packaging is likely to have an effect on public health, and particularly in relation to children.

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UPDATE 1-Russian officials play down rouble slide to 4-yr lows

Thu Nov 28, 2013 5:22am EST

MOSCOW Nov 28 (Reuters) - Senior Russian policy makers played down the weakness of the rouble on Thursday, arguing that its weakness was natural and the result of external factors rather than the result of any deeper economic malaise.

The currency steadied in morning trade after hitting a four-year low to the dollar a day earlier, underperforming other emerging market currencies that have been hurt by anticipation of a reduction in monetary stimulus by the U.S. Federal Reserve.

The agreement by OPEC member Iran with world powers to put its nuclear programme on hold has increased downside risks to the price of oil, Russia's main export. Energy taxes account for half of federal budget revenues.

In contrast to previous rouble slides, however, this time the falls may be as much about a broadly darker economic outlook that reflects declining confidence among investors in a country that has failed to modernise in many areas.

At current prices, oil revenues still keep Russia's current account in positive territory so it is also difficult to blame oil prices for the drop generally.

"According to the central bank's estimates (the weakening) is the result of external factors," Ksenia Yudaeva, first deputy governor of the central bank, told journalists.

"In the last three days I don't see any serious, exotic things happening," she added.

The central bank has set a goal of shifting to an unfettered rouble free float in 2015, but still conducts automatic interventions to curb volatility. It has lowered its 7-rouble target band for the rouble against a basket of dollars and euros in six small steps this month.

During the 2008-financial crisis, the central bank spent $200 billion - or a third of its reserves - in an ultimately futile defence of the rouble that averted financial collapse but deepened the ensuing economic slump.

Officials now show little sign of wanting to repeat that mistake. According to their thinking, a weaker rouble would help restore Russia's export competitiveness and offer some support to a slowing economy.

At 0945 GMT the Russian currency was up 0.1 percent against the dollar at 33.15, but down 0.2 against the euro at 45.10, leaving it two kopecks weaker at 38.53 against the dollar-euro currency basket.

SEASONAL IMPACT

Analysts have also attributed the rouble's weakness in recent days to large foreign debt repayments that fall due in December, as well as seasonally high imports ahead of New Year holidays.

However, some have also speculated that a tightening of banking regulation in Russia, signalled last week by the closure of mid-sized Master Bank, has encouraged more capital outflows.

Economy Minister Alexei Ulyukaev also played down the rouble's weakness on Thursday. "This is entirely natural," he said.

He said that the weaker rouble was connected with a downward revision of the country's current account surplus, and consistent with the central bank's policy shift towards targeting inflation rather than the exchange rate.

A further weakening of the rouble was possible after the end of the monthly tax period. "There is such a possibility, a small one, but it exists," he said.

Russian exporters pay major taxes at the end of each month, requiring conversion of foreign currency into roubles. Such liquidity flows are closely watched by traders as they can move the exchange rate.

Finance minister Anton Siluanov also weighed in on the issue. "It's impossible to call this a fluctuation. I would call it ... a ripple," he said.

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UPDATE 1-Britain announces independent review of plain tobacco packaging

Thu Nov 28, 2013 5:43am EST

LONDON Nov 28 (Reuters) - Britain announced an independent review of tobacco packaging on Thursday and said it was ready to introduce new laws banning branding on cigarette packets if the report found sufficient evidence to support it.

The government, which in July delayed a decision on the issue, said the review was due to report back in March 2014 and would look into whether standardised packaging is likely to have an effect on public health, particularly in relation to children.

The long-standing debate on the issue pits health campaigners, who back the move, against big tobacco firms which say it would put jobs at risk and encourage smuggling. In Britain, the subject has also prompted criticism from the opposition Labour party over the extent to which the tobacco industry is able to influence government policy.

The news hit stocks of British tobacco firms. British American Tobacco shares were down 0.9 percent at 3243.5 pence at 1009 GMT, while smaller rival Imperial Tobacco Group's shares were down 2.5 percent at 2304 pence.

After a lengthy public consultation, Prime Minister David Cameron in July delayed a move to force manufacturers to sell tobacco in plain packets, saying he wanted to see more evidence from other countries on the effectiveness of such a move.

Almost exactly a year ago, Australia passed a law saying cigarettes must be sold in dark brown packets with no colours or logos, with the name of the product printed in a standardised small font.

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BRIEF-NioCorp says TSX venture exchange grants extension for filing material for private placement

Fri Nov 22, 2013 7:55pm EST

Nov 22 (Reuters) - NioCorp Developments Ltd : * Announces private placement update * TSX venture exchange granted extension for filing of final material for brokered private placement to December 23, 2013 * Source text for Eikon * Further company coverage

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Three men found guilty in New York City payroll fraud case

By Nate Raymond and Joseph Ax

NEW YORK Fri Nov 22, 2013 8:00pm EST

NEW YORK Nov 22 (Reuters) - A U.S. jury convicted three men on Friday in a massive kickback and fraud scheme while implementing a new payroll system for New York City that eventually cost more than $600 million.

Mark Mazer, 50, who was accused of playing a central role in the fraud, was found guilty on all six counts including conspiracy to defraud the city, wire fraud, and conspiracy to commit bribery.

The jury also convicted Dimitry Aronshtein, 53, Mazer's uncle, and Gerard Denault, 52, a former employee at lead contractor Science Applications International Corp, on charges including conspiracy to commit money laundering.

The government accused Mazer and a network of relatives and other conspirators of masterminding a fraud that netted more than $40 million.

Five other defendants had already pleaded guilty to aiding the scheme, including Mazer's wife, mother and cousin, while two others charged in the fraud remain at large and are considered fugitives.

During the trial, prosecutors said Mazer, Aronshtein and Denault pocketed millions of dollars while managing the CityTime payroll project, an initiative intended to modernize the city's payroll system that was originally budgeted at $63 million.

Costs ballooned to more than $600 million as a result of the scheme, prosecutors alleged. Mazer steered business to consulting firms controlled by his co-conspirators and used shell companies to launder and conceal the payments, the government said.

"The jury has found what this office alleged from the outset: these defendants were at the heart of a conspiracy to steal from New York City and its taxpayers," Manhattan U.S. Attorney Preet Bharara said in a statement. "Awarded a lucrative contract to design a streamlined payroll system for the city, instead they built a money-making machine for themselves."

The government recovered most of that money after SAIC, the project's primary contractor, agreed in March 2012 to forfeit more than $500 million to avoid prosecution.

Defense lawyers had argued that the three men never took any steps to deceive the city while managing the project.

"The size and the enormity of the dollars is not a substitute for evidence," Gerald Shargel, Mazer's attorney, said during closing arguments. "It's not a substitute for proof."

The jury convicted Aronshtein, who owned subcontractor D.A. Solutions, Inc., on four counts including a charge that he paid bribes and illegal kickbacks to Mazer, a CityTime consultant who served as the principal agent on the project.

The jury meanwhile found Denault, a project manager at SAC, guilty on all but one of the seven counts against him, conspiracy to commit bribery.

Shargel said on Friday he was "obviously disappointed." He and lawyers for the other defendants said they planned to appeal.

U.S. District Judge George Daniels scheduled sentencing for March 12 and ordered the defendants to home confinement in the meanwhile.

The case is U.S. v. Mazer et al., U.S. District Court for the Southern District of New York, No. 11-121.

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Germany's Schaeuble says no more risks of contagion in euro zone

BERLIN Sat Nov 23, 2013 4:16am EST

BERLIN Nov 23 (Reuters) - German Finance Minister Wolfgang Schaeuble said on Saturday that there were no longer any risks of contagion in the euro zone.

Schaeuble said government crises and coalition negotiations no longer posed such risks for the single currency bloc as a whole, without specifying which country or countries he was referring to.

"The euro is stable, financial markets are no longer concerned about the future of the euro zone and there are no risks of contagion anymore," he said at an event hosted by the Sueddeutsche Zeitung newspaper in Berlin.

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Italian bonds inch up on ECB, reduced supply outlook

By Emelia Sithole-Matarise

LONDON Fri Nov 22, 2013 3:44am EST

LONDON Nov 22 (Reuters) - Italian bonds edged higher on Friday helped by the prospect of reduced sales of new debt by the government in the remainder of this year and comments from European Central Bank officials affirming the bank's ultra-easy monetary policy.

Demand for lower-rated euro zone bonds was helped by U.S. Federal Reserve official James Bullard, who judged Thursday's inflation data gave the central bank some leeway to stick with its accommodative policy.

Italian bonds, however, outperformed safe-haven German Bunds where gains were held back by wariness before German IFO business morale index due at 0900 GMT.

Reduced funding needs for the rest of the year prompted the Italian Treasury on Thursday to cancel two scheduled bond auctions in the next few weeks.

Italian 10-year yields were last down 1.4 basis points at 4.08 percent with Spanish equivalents 1 basis point lower at 4.11 percent.

"We continue to like periphery and semi-core given the amount of auctions getting canceled. That supports the grind lower in yields and bigger picture the ECB tone is pretty supportive," a trader said.

Although President Mario Draghi sought on Thursday to play down a media report that the central bank was actively considering cutting its deposit rate below zero, some officials in the ECB consider such a move the logical next step if deflation threatens the euro zone.

Vice-President Vitor Constancio said earlier this week the bank was open to fresh measures to support the economy after it cut its main refinancing rate two weeks ago,

German Bund futures were last 10 ticks lower at 140.88 with German 10-year yields 1 bps higher at 1.76 percent ahead of sentiment data expected to reinforce the picture of a recovery in the euro zone's biggest economy. The Ifo is expected to rise to 107.7 points after a fall in the previous month.

"There's a risk towards a stronger IFO outcome which is negative for Bunds but given the current constellation of a supportive ECB don't think it will be a significant move," said Mathias van der Jeugt, a strategist at KBC in Brussels.

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Euro rises, Bunds extend falls on above-forecast German Ifo

LONDON Fri Nov 22, 2013 4:09am EST

LONDON Nov 22 (Reuters) - The euro rose on Friday while German Bund futures extended losses after the Ifo index of German business sentiment rose much more than forecast.

The euro rose to a session high against the dollar of $1.3528, up from around $1.3495 beforehand. It also hit a four-year high against the yen of 136.68 yen.

German Bund futures fell as much as 29 ticks on the day to 140.69, having traded around 140.88 just before the data.

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China president to promote allies in sweeping reshuffle-sources

By Benjamin Kang Lim

BEIJING Fri Nov 22, 2013 5:20am EST

BEIJING Nov 22 (Reuters) - Chinese President Xi Jinping plans to promote a string of allies in coming months as part of a sweeping reshuffle of the Communist Party, the government and the military, three separate sources with ties to the leadership said.

The reshuffle would allow Xi, who is also party and military chief, to deepen his power base and counter opposition to the bold reforms unveiled this month at the third plenum of the party's leaders, said the sources.

The reforms, which included a relaxation of the one-child policy and letting financial markets play a greater role in the economy, were seen as an indication of how effectively Xi had been able to consolidate his power just a year after taking over as party chief.

"With the third plenum over, Xi will promote his men to work with him and implement his policies and the reforms," one of the sources said.

The changes will happen in the run-up, during or just after the annual full session of parliament next March, the sources said.

Li Zhanshu, 63, one of Xi's closest allies, is the front-runner to replace Han Zheng, 59, as Shanghai's party boss, the sources said. The party boss outranks the city mayor.

"Han Zheng will definitely step down and go to Beijing," a second source told Reuters, who like the others requested not to be identified to avoid repercussions for discussing secretive elite politics.

The sources said Han is tipped to be named to a senior role in the reform committee that Xi is setting up to oversee the reform process. However, Li's and Han's appointments are not set in stone, they said.

Both Li and Han sit on the party's decision-making 25-member Politburo and stand a good chance of promotion to the pinnacle of power - the seven-member Politburo Standing Committee - during the next five-yearly party congress in 2017, the sources said.

A spokeswoman for the Shanghai city government declined to comment when reached by telephone. The Communist Party spokesman's office, also declined to comment.

LAST-MINUTE VETO?

Barring any last-minute veto by Jiang Zemin, a former president who still wields political clout, Li would take over the top job in Shanghai with the priority of overseeing the development of the city's free trade zone.

"Jiang is hoping that Han Zheng can stay on to look after the interests of his family and allies," a third source said, also speaking on condition of anonymity.

Han was only named as the Shanghai party boss last November. He served as the city's mayor from 2003 to 2012, overlapping with when Xi was party boss there. Han is acceptable to all camps - Xi, Jiang and Xi's immediate predecessor, Hu Jintao.

Han and Li cut their teeth in Hu's power base, the Communist Youth League, but both men have worked for Xi previously.

Li was appointed head of the party's powerful General Office of the Central Committee only last July. The post is similar to cabinet secretary in Westminster-style governments.

Han and Li have only been in their current positions for a relatively short period of time, so some were sceptical they would move on so quickly.

"It makes sense in terms of the relationships of trust," one Western diplomat said. "But it would be unusual timing."

STEPPING STONE

The Shanghai Free Trade Zone, covering an area of nearly 29 sq km (11 sq miles) in the eastern outskirts of the commercial hub, opened in September. It has been hailed as potentially the boldest economic reform in decades. [ID: nL4N0HP0A0]

The State Council, or cabinet, has said it would open up the country's largely sheltered services sector to foreign competition in the zone and use it as a test bed for bold financial reforms, including a convertible yuan and liberalised interest rates.

Shanghai has traditionally been a breeding ground for top leaders.

Former Shanghai party bosses who went on to sit on the Standing Committee include Xi, Jiang, former premier Zhu Rongji, former parliament chief Wu Bangguo, the late vice premier Huang Ju and Yu Zhengsheng, currently the top adviser to parliament.

"The move is to set up Li Zhanshu for eventual promotion to the Standing Committee," political commentator Zhang Lifan said.

The reshuffle kicked off this week with state media reporting that Hu Heping, party secretary of the prestigious Tsinghua University in Beijing, was appointed as head of the organisation department of eastern Zhejiang province.

Hu Heping, who is not related to Hu Jintao, is close to Xi's camp.

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Germany ready to work on EU treaties for banking union - Merkel

BERLIN Thu Nov 21, 2013 5:29am EST

BERLIN Nov 21 (Reuters) - Chancellor Angela Merkel said on Thursday that Germany is ready to work on European Union treaties in order to introduce a European banking union that would both police banks and find joint solutions to their problems.

Speaking in Berlin, Merkel also said it would be "absurd" to weaken Germany's competitiveness with artificial means, countering criticism from abroad that Germany needs to do more to tackle its perennial trade surplus.

Banking union would put the European Central Bank in charge of policing lenders from late next year and ultimately form a united front across the euro zone to back ailing banks or close them down.

Germany is attempting to weaken a central plank of banking union, namely that the euro zone clubs together to tackle frail banks. Instead, Berlin wants losses imposed on bank creditors, including bondholders, once stress tests name the weaklings.

The debate about who pays for the clean up of Europe's banks is set to continue to hamper Europe's most ambitious reform since the inception of the euro currency in 1999.

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Italian, Spanish jobseekers lift German immigration figures

BERLIN Thu Nov 21, 2013 5:39am EST

BERLIN Nov 21 (Reuters) - Italian and Spanish jobseekers drove an 11-percent increase in German immigration numbers in the first half of the year, data showed on Thursday, as Europe's biggest economy draws in more and more workers from crisis-hit countries in the region.

The Federal Statistics Office said 555,000 more people came to Germany in the first six months of the year than in the same period in 2012, as the trend of double digit increases in immigration persists for a third consecutive year.

German unemployment is lower and economic growth more robust than in most other EU member states, making it an attractive destination despite regulatory hurdles involved in moving and the language barrier.

"As in the first half of 2012, immigration rose from EU countries hit especially hard by the financial and debt crisis," the Office said in a statement.

Numbers of immigrants from Italy and Spain were up 39 percent and 30 percent respectively, although in absolute terms, new arrivals from Poland and Romania were largest.

A total of 93,000 Poles and 67,000 Romanians came to Germany in the first half compared with 26,000 Italians and 15,000 Spaniards. The number of Greeks fell 4.5 percent to 15,000.

Overall, Germany saw a net inflow, the difference between the number of people coming into the country and those leaving, of 206,000, a 13-percent rise from the first half of last year.

With one of the lowest birth rates in Europe and an ageing population, Germany faces a long-term demographic problem with expected strains on its welfare system.

But experts say to tackle this, the country needs policies to encourage immigrants from outside Europe.

The Statistics Office said the data gives no indication about how long immigrants would stay.

Germany's population in its 2011 census was 80.2 million, a figure that has held steady for decades. The 2011 census also showed there were 6.2 million foreigners living in Germany.

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Update-Moody's Interfax downgrades StarBank to Caa3.ru

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RPT-Fitch affirms Sony at 'BB-' with negative outlook

Wed Nov 20, 2013 5:18am EST

Nov 20 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has affirmed Sony Corporation's (Sony) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'BB-' and maintained the Outlooks at Negative. A full list of rating actions is at the end of this release.

KEY RATING DRIVERS

Slow Recovery Expected: Sony's credit ratings are constrained by its low profitability and vulnerability to competition and technology shifts. The ratings reflect Fitch's belief that meaningful recovery in Sony's profitability and cash generation will be slow, given the company's loss of technology leadership and high competition in its key products. In addition, unless there is further depreciation of the yen, we do not expect currency effects to deliver much further growth. Fitch believes that more aggressive reform to revamp the company's product portfolio and to cut fixed costs may be required.

Continued TV Operating Losses: Sony's operating losses in the TV segment are likely to continue, as happened during 2QFYE14 due to intense competition, market saturation of flat-panel TVs in developed countries, and weakened demand in emerging markets as a result of depreciation in their currencies. Further profitability improvement in the TV segment has been slow after the disposal of S-LCD and restructuring in FYE12 and FYE13. The operating loss of the TV segment totalled JPY9bn in 2QFYE14, compared with operating loss of JPY10bn a year earlier.

Slowly Improving Smartphone Margins: Fitch forecasts that improvement in Sony's smartphone margins will be slow but steady, despite improvement in quality and brand recognition. This is because competition is becoming increasingly fierce among second-tier manufacturers as they attempt to close the technological gap with first-tier manufacturers. Fitch expects the industry will remain dominated by Samsung Electronics Co., Ltd. (A+/Stable) and Apple Inc. at least in the short to medium term, making it difficult for Sony to improve its market share significantly.

Heightened Smartphone Substitution: Fitch expects the impact of smartphone substitution on Sony's PCs, digital cameras and camcorders to continue to be a drag on the company's profitability. Higher smartphone profit in 2QFYE13 was unable to offset losses in the PC and digital camera segments. Total shipments of digital cameras produced by Japanese companies contracted 39% yoy in the first nine months of 2013, according to the Camera & Imaging Products Association. During the same period, worldwide PC shipments fell 11% yoy, according to IDC.

High Debt, Slow Deleveraging: Fitch expects that Sony's funds flow from operations (FFO)-adjusted leverage is to likely remain above 5x in the short term. Fitch believes that its bid to achieve a turnaround in its electronics business in FYE14 will be a challenge and the FYE15 outlook remains tough. Deleveraging relying on profitability improvement will be slow. Sony's total debt of JPY1.33bn, excluding Sony Financial Holdings (SFH), was little changed at end-September 2013 from the same period last year.

Liquidity Weakened, Still Adequate: Fitch expects Sony's liquidity to remain adequate, though it has weakened due to continued losses in the electronics business and increased investment in working capital. Sony had a cash balance of JPY528bn at end-September 2013, compared with its debt due within one year of JPY446bn. The company also had unused credit facilities of JPY819bn at end-September 2013.

RATING SENSITIVITIES

Negative: Future developments that may, individually or collectively, lead to negative rating action include (for Sony excluding SFH):

- sustained negative EBIT margins

- FFO-adjusted leverage sustained above 5.0x.

Positive: Future developments that may, individually or collectively, lead to Fitch revising the Outlook to Stable include (for Sony excluding SFH):

- sustained positive EBIT margins

- FFO-adjusted leverage is sustained below 5.0x

LIST OF RATING ACTIONS:

Long-Term Foreign- and Local-Currency IDRs affirmed at 'BB-' with Negative Outlook

Local-currency senior unsecured rating affirmed at 'BB-'

Short-Term Foreign- and Local-Currency IDRs affirmed at 'B'

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UPDATE 1-Poland names bank economist as new finance minister

Wed Nov 20, 2013 5:40am EST

* New Finance Minister is ING economist Mateusz Szczurek

* Change was part of wider cabinet reshuffle

* PM trying to reverse government's slide in polls

* Ministers for environment, education also changed

By Christian Lowe and Karolina Slowikowska

WARSAW, Nov 20 (Reuters) - Polish Prime Minister Donald Tusk named a bank economist as his new finance minister on Wednesday, an appointment designed to re-invigorate a government that many voters feel has lost its way after six years in power.

Mateusz Szczurek, who is chief economist for central Europe with ING bank in Warsaw, replaces Jacek Rostowski, who held the post for the past six years.

The change was part of a cabinet reshuffle in which Tusk also named new ministers for the environment, sports, science and higher education and administration. He also promoted regional development minister Elzbieta Bienkowska to the rank of deputy prime minister.

"For the next leap in our development, we need new energy," Tusk told a news conference at which he announced the changes.

Reuters had reported exclusively in August that Tusk was preparing to replace his finance minister within months.

The reshuffle was an attempt by Tusk to reverse the slide in his government's popularity and win back voters before a parliamentary election in 2015.

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RPT-Fitch Places Hong Kong's CLP Holdings and CLP Power HK on RWN

Wed Nov 20, 2013 5:52am EST

Nov 20 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has placed Hong Kong-based CLP Holdings Limited's (CLPH) and CLP Power Hong Kong Limited's (CLP Power HK) Long-Term Foreign- and Local-Currency Issuer Default Rating (IDRs) of 'A' and their 'F1' Short-Term IDRs on Rating Watch Negative (RWN).

The rating action follows the announcement that CLP Power HK has reached agreement to acquire a further 30% stake in Castle Peak Power Company Limited (CAPCO) for HKD12bn and the remaining 51% stake in Hong Kong Pumped Storage Development Company Limited (PSDC) for HKD2bn from Exxon Mobil Corporation's wholly owned subsidiary, ExxonMobil Energy Limited (EMEL). The acquisitions will increase CLP Power HK's stake in CAPCO to 70% from 40% and in PSDC to 100% from 49%. The acquisitions will be immediately funded by CLP Group's existing cash, existing available banking facilities and HKD10bn bridge facilities. Half of the bridge facilities will mature in one year and the remainder in two years from completion.

KEY RATING DRIVERS

The RWN on the ratings reflects a potential deterioration in CLPH's financial profile, should the acquisitions be entirely debt-funded, as credit and coverage ratios could worsen to levels that are not in line with their current 'A' ratings. Under this scenario, Fitch projects FFO-adjusted net leverage in 2014 and 2015 near our threshold level of 3.5x for the current ratings. These expectations also include our view that CLPH's 100% subsidiary, EnergyAustralia, will post weaker earnings and cash flow in 2014 from a combination of continued weak electricity demand and wholesale prices, a highly competitive retail segment, and regulatory uncertainty around price-setting in New South Wales and Queensland.

We expect CLPH's business profile to remain unchanged through the proposed acquisition, as the generation assets are already part of its regulated Hong Kong electricity business, CLP Power HK and part of the Scheme of Control (SoC) arrangement that will be in place till 2018. CLP Power HK operates under the favourable and transparent regulatory framework (the SoC), which allows a permitted return and full operating-cost pass through. The increased investment in CAPCO is likely to increase regulated cash flows to CLPH from CLP Power HK, although the transaction will increase debt at CLPH, which is currently very low (HKD1.5bn as at 30 June 2013).

Fitch expects to resolve the RWN once the transaction completes and there is greater certainty of the long-term funding structure. The acquisition of shares will likely be completed within the next six months. However, it may take longer for CLPH to provide details of how the bridge loan will be refinanced. In accordance with Fitch's parent-subsidiary rating linkage methodology, Fitch analyses CLPH and CLP Power HK as a consolidated entity due to the strong linkages between the two and reflecting the full integration of CLP Power HK within the group, which constrains the latter's ratings. Hence, the RWN applies to both entities.

The acquisitions are subject to various approvals, including from CLPH's shareholders. Additionally, the CAPCO acquisition is contingent on China Southern Grid (CSG) - who is purchasing EMEL's remaining 30% stake in CAPCO - obtaining relevant approval from authorities in mainland China.

RATING SENSITIVITIES

Negative: Future developments that may collectively or individually lead to negative rating actions:

-Substantial increase in business risk, including significant adverse regulatory changes

-FFO net leverage above 3.5x on a sustained basis (2012: 2.8x)

-FFO interest coverage below 5x on a sustained basis (2012: 5.7x)

The resolution of the RWN:

-Completion of the transaction and confirmation of the final financing structure;

-The ratings would be affirmed if FFO interest cover remains at or above 5.0x on a sustained basis; and FFO net leverage below 3.5x on a sustained basis.

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Greek current account surplus widens in September

Tue Nov 19, 2013 4:14am EST

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  ATHENS, Nov 19 (Reuters) - Greece's current account surplus  widened in September, the Bank of Greece said on Tuesday, helped  by a rise in tourism receipts.       The current account balance, a key measure of economic     competitiveness, showed a surplus of 964 million euros ($1.30  billion) from 895 million euros in the same month last year.      Tourism receipts, the country's biggest money earner, rose    17.3 percent year-on-year to 2.07 billion euros in September,    bringing total revenue in the first nine months of the year to    10.7 billion euros, up 14.3 percent year-on-year.  **************************************************************      KEY FIGURES (bln euros)       2013    2012      September                    0.964   0.895                August                       1.221   1.663       July                         2.727   0.508       June                         0.663   0.073       May                          0.036  -1.228       April                       -1.187  -0.945       March                       -1.285  -2.237       February                    -0.716  -1.126       January                     -0.222  -1.447       Jan-September               10.704   9.360      ------------------------------------------      source: Bank of Greece  

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GLOBAL MARKETS-Investor caution halts share rally, dollar softens

Tue Nov 19, 2013 4:32am EST

* World share gains pause after sharp rally

* Worries over timing of Fed taper resurface

* European markets eye ZEW index for direction

* Copper, silver at 3-mth lows, oil eases

By Richard Hubbard

LONDON, Nov 19 (Reuters) - World shares edged back from near six-year highs on Tuesday amid investor concerns that the latest rally may have been overdone, while optimistic comments about the U.S. economy helped limit the dollar's losses.

Caution swept the equity markets after U.S. billionaire investor Carl Icahn voiced the fears of many investors when he warned that share price gains had outpaced the underlying improvement in the global economy and could be set for a fall.

"It has been one the most hated rallies in equities in history, I would say, and Carl Ichan's words have pushed things a little to the downside," said Brenda Kelly, IG Markets analyst.

But despite the fears of a big downward correction in prices, investor sentiment remains well supported by the loose monetary policies of global central banks and expectations that the Fed will keep printing money well in to next year.

In Europe, where the broad FTSEurofirst 300 index fell 0.4 percent in early deals, investors were looking ahead to the latest reading of German economic sentiment and updated global economic forecasts from the OECD, for a guide to trading.

Germany's ZEW sentiment index is expected to climb further in November despite lacklustre growth data from around the euro zone last week, though a strong number may not be enough to shake market worries about the current high share values.

"Pan-European multiples are close to multi-year highs. That means markets are no longer cheap and we need to see some earnings improvement to warrant higher equity prices," said Gerhard Schwarz, head of equity strategy at Baader Bank.

Earlier, optimism sparked by China's bold economic reform plans had continued to bolster Asian markets, lifting MSCI's index of Asia-Pacific shares outside Japan by 0.1 percent to add to Monday's 1.4 percent rally.

DOLLAR FINDS FED FRIENDS

The dollar remained softer on Tuesday on talk that the U.S. central bank could keep its easy policy stance until March next year, though some optimistic comments on the economy by two top Fed officials curbed its losses.

William Dudley, president of the Federal Reserve Bank of New York and one of the staunchest supporters of the Fed's easy-money policies, cited labour market improvements and stronger-than-expected growth in the third quarter as positive signs for the U.S. economic recovery.

Despite those comments, the dollar index, a measure of the greenback against six other currencies, was down 0.15 percent at 80.69, and not far from Monday's low of 80.565. Against the yen, the dollar fell 0.3 percent to 99.70 yen.

The euro was firmer at $1.3515, having hit a 12-day high of $1.3542 on Monday, extending its recovery after a sharp drop to two-month low of $1.3295 on Nov. 7 in the wake of the European Central Bank's surprise rate cut earlier this month.

Ahead of the ZEW report, euro zone government bonds were broadly steady with 10-year German yields flat at 1.69 percent, while lower-rated Spanish and Italian yields were also little changed.

In commodity markets, prices were under pressure from the renewed concerns over when the U.S. Federal Reserve would begin to taper its monetary stimulus, with copper sliding to a new three-month low, down 0.66 percent at $6,929 a tonne.

Gold was mostly flat at around $1,275 an ounce after dropping 1.2 percent on Monday, though silver had edged to a fresh three-month low of $20.30 an ounce.

Brent oil had slipped to near $108 a barrel amid the Fed worries but its was gaining support from continuing oil supply disruption in Libya.

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Nigerian president postpones budget speech - government source

ABUJA Tue Nov 19, 2013 5:21am EST

ABUJA Nov 19 (Reuters) - Nigerian President Goodluck Jonathan will not present the 2014 budget to the national assembly as planned on Tuesday because of a disagreement between his team and lawmakers over spending plans, a senior government source told Reuters.

Lawmakers indicated last month they wanted to increase spending in the budget that Jonathan was due to present on Tuesday.

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Spain opens offer period for NCG Banco - de Guindos

MADRID Mon Nov 18, 2013 4:06am EST

MADRID Nov 18 (Reuters) - Spain will take formal offers this week from potential buyers for nationalised bank NCG Banco, Economy Minister Luis de Guindos said in an interview on Spanish television TVE on Monday. He said there was plenty of interest from buyers.

De Guindos said the sale of Catalunya Banc, another nationalised lender, had been delayed and that there was no timeline for the government to sell off the largest bank it took over, Bankia.

Asked how much money the government will end up losing after pumping European rescue funds into Bankia, de Guindos said he expected "positive surprises" from the lender in the future.

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GLOBAL MARKETS-China reform plans lift world shares to 6-year high

Mon Nov 18, 2013 4:36am EST

* Hong Kong-listed Chinese shares up 5.7 percent

* Focus again on Fed policy ahead of October minutes

* BOJ meets Nov 20/21, to reaffirm aggressive stimulus

* European open modestly lower after 5 weeks of gains

By Marc Jones

LONDON, Nov 18 (Reuters) - World shares hit a near six-year high on Monday, boosted by signs of ambitious economic reform in China and the prospect of extended stimulus in the United States.

China's offshore share market put on 5.7 percent in its best day in two years after the Communist Party in Beijing late last week unveiled surprisingly bold economic reforms in which it said the market would play a decisive role.

UBS upgraded H-shares - Chinese stocks listed in Hong Kong - to "overweight" on a view the string of growth-friendly reforms announced after a party plenum should help them outperform Asia excluding Japan for the next few months.

After five weeks of steady gains, European shares saw a subdued start to the week. Britain's FTSE 100, Germany's DAX and France's CAC 40 opened between 0.1 and 0.3 percent lower.

The focus, however, remained on Asia and the hopes that China's planned changes could make its - and therefore the global - economy healthier in the coming years.

Domestic Chinese shares in Shanghai rose 2.9 percent and Asia-Pacific shares outside Japan added 1.4 percent to lift MSCI's world share index to its highest level since the start of 2008.

"China is obviously important long term for the market so it is going to welcome that they have a ten-year plan, that it is sensible, that it is not too radical and that it is a move towards reform," said Joe Rundle head of trading at ETX.

Analysts at ANZ said the planned changes represented "the biggest freeing up of China's economic policy since the 1990s" and, if implemented successfully, would "substantially reduce the downside risks to China's economy."

MORE FROM THE FED

In the currency market, the dollar was back below 100 yen , but at 99.94 was not far from its two-month high of 100.43. It was steady against the euro, with the common currency worth $1.350, having edged slowly higher for the past week or so as tapering talk has weighed on the dollar.

Last week, the woman expected to be the next Federal Reserve chief, Janet Yellen, sounded in no rush to scale back stimulus, reinforcing market speculation that any move was more likely in March than December.

This is another important week for U.S. monetary policy with several central bankers due to speak, including outgoing Fed chairman Ben Bernanke on "Communication and Monetary Policy" on Tuesday.

On Wednesday, the Fed releases minutes from its October policy meeting, which will get trawled for hints on when it might start winding back its asset-buying programme.

"If Fed officials think a December tapering is a realistic possibility, some hints to that effect would presumably make their way into the minutes this week," said Michelle Girard, chief US economist at RBS.

"Just making clear that policymakers were open to taking action in December if the economic data showed the impact of the government shutdown was limited would likely suffice to shift expectations."

Girard still believes March is the more likely window for a move, if only because bond markets are typically very thin in December so a taper then could risk major dislocation.

ITALIAN DEBT EXCHANGE

The Bank of Japan holds a policy meeting on Wednesday and Thursday and is expected to maintain its ultra-loose policy. The BOJ has been the most aggressive of any major central bank in its asset buying, putting downward pressure on the yen in the process.

Tokyo's Nikkei was little changed after touching a six-month peak earlier on Monday. Last week, the index amassed its biggest weekly rise in four years.

In the European debt market, Italian bonds edged higher before a debt exchange aimed at easing its 2015 and 2017 repayment burden with prospects of ultra-easy ECB monetary policy countering worries about budget slippage.

The European Commission warned Italy on Friday its draft budget for next year risked breaking EU rules. Keeping the budget gap under control is crucial for Rome as it tries to manage a 2 trillion euro debt pile.

In commodity markets, spot gold was a touch lower at $1,284.50 an ounce, having crawled away from last week's trough of $1,260.89.

Brent crude for January delivery eased 47 cents to $108.03 a barrel. U.S. crude for January shed 32 cents to $93.52, having suffered a sixth weekly drop last week due to a larger-than-expected rise in inventories.

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UPDATE 2-Prokhorov buys into Uralkali as Russia seeks to end potash row

Mon Nov 18, 2013 5:30am EST

* Uralkali had pulled out of Russo-Belarus sales cartel

* Deal seeks to calm relations with Belarus

* Analysts doubt sales alliance can revive depressed prices

By Polina Devitt

MOSCOW, Nov 18 (Reuters) - Russian tycoon Mikhail Prokhorov agreed on Monday to buy Suleiman Kerimov's 21.75 percent stake in Uralkali, the world's largest potash miner, in a deal that seeks to calm tensions over the collapse of a sales cartel.

Sources familiar with the deal said it had been blessed by President Vladimir Putin as a way of repairing ties with ally President Alexander Lukashenko of Belarus - which arrested and prosecuted Uralkali's boss after the Russian firm quit the marketing pact in July.

Uralkali's shares rallied 2.6 percent on the news, extending gains made towards the end of last week on speculation that a deal was imminent. Talks continue on the sale of stakes held by Kerimov's partners, the sources said.

Analysts doubt, however, that Uralkali's sales partnership with state-owned Belaruskali, which had controlled 40 percent of the $20 billion global market for the soil nutrient, can be put back together.

Prokhorov's investment firm, Onexim, said it would complete the transaction shortly but did not disclose terms of the deal, which it said does not require regulatory approval.

"The purchase of the stake in Uralkali is a long-term investment in a company that is unique from the standpoint of its position in its industry and its role in the world economy," Onexim CEO Dmitry Razumov said in a statement.

Prokhorov is a long-time former business partner of Kerimov, who has launched a political career. He ran against Putin in last year's presidential election, placing a distant second, but remains a leading figure in the business establishment.

Sources on both sides of the talks said Kerimov's asking price was based on a $20 billion equity valuation but the final price was flexible and would probably be slightly lower.

"Valuations are still being pushed backwards and forwards," one financial source said. "There is still quite a lot of wood to chop in terms of negotiating it and funding."

Prokhorov, who owns the U.S. professional basketball team Brooklyn Nets and who is worth $13 billion, according to Forbes magazine, is flush with cash after selling his stake in gold miner Polyus a year ago to Kerimov and partners for $3.6 billion.

State-controlled banks Sberbank and VTB, and possibly a European bank, may back the deal, sources said.

The rally in Uralkali shares extended gains made into Friday's close, when the business had a market value of $15.8 billion.

TALKS CONTINUE

Sources familiar with the talks have said that Kerimov, the Dagestani-born owner of top-flight Russian soccer club Anzhi Makhachkala, was a reluctant seller.

But, they add, a deal was a precondition to secure the extradition of Uralkali CEO Vladislav Baumgertner, who was arrested in Minsk and has been charged with exceeding his powers and embezzlement. He faces up to 12 years in jail if convicted.

Talks continue on the possible sale of the stakes in Uralkali held by Kerimov's partners. Filaret Galtchev owns 7 percent of Uralkali and Anatoly Skurov 4.8 percent, bringing their combined interest to just over a third.

Along with Prokhorov, businessman Dmitry Mazepin, co-owner of fertilizers producer Uralchem, and Russian state arms-to-technology group Rostec are interested in buying into Uralkali, several sources said.

Asked whether the deal was good politics or good business, one source familiar with all parties involved said: "It's business, as Kerimov is selling with a premium to the market."

Prokhorov was keen to bring in Belarussian-born Mazepin to help manage Uralkali and its relations with Minsk. "This asset is difficult," the source said.

Rostec, run by Putin's colleague at his KGB posting in 1980s East Germany, Sergei Chemezov, would serve as a "minder" for the state if it was brought into the deal, the source added.

Asked whether the Kremlin had given the deal a green light, Putin's spokesman Dmitry Peskov said: "This is totally a business issue and one doesn't need approval from the Kremlin."

Russian state company Rostec does not plan to buy Uralkali, a Rostec representative said.

Uralkali holds around 12 percent of its shares in treasury and these are expected to be cancelled within six months. Should Kerimov's partners also sell, the buyers' combined stake would rise to 38 percent, ensuring de facto control over the business.

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RPT-UPDATE 1-State insurance regulators hesitate to embrace Obamacare fix

Sat Nov 16, 2013 7:00am EST

By Caroline Humer and Curtis Skinner

Nov 15 (Reuters) - Many U.S. states are hesitant to embrace President Barack Obama's fix to keep Americans from losing health insurance plans that do not comply with his healthcare reform, saying they need to figure out how to resurrect canceled policies and whether to allow insurers to raise prices.

California, Colorado, Florida, South Carolina, Ohio and Oregon said they would act on Obama's offer, announced on Thursday, to give a one-year extension to existing policies. Washington, Vermont and Rhode Island - all of which are running their own state-based insurance exchanges - said they would not.

But at least 16 insurance departments queried by Reuters from states as diverse as Alabama, Virginia, Minnesota, Maryland and Michigan said they did not have enough information and were still trying to decide how to proceed.

The responses highlight the complexity of efforts to modify unpopular, or unworkable elements of Obama's Patient Protection and Affordable Care Act. Several million Americans stand to have their individual health insurance canceled at some point in 2014 despite a pledge by Obama that people who liked their benefits would be able to keep them under his law.

That pledge became a focus of Republican efforts to change or delay Obamacare, culminating in a vote in the House of Representatives on Friday on a Republican bill to keep the existing policies. It was supported by 39 members of Obama's Democratic party.

But Obama's decision to allow an extension requires each state to examine whether it can do so under existing laws.

Some regulators are waiting for answers from the federal government on the guidelines for allowing insurers to increase the prices on these plans in 2014.

At stake, they say, is the financial viability of the health plans and the insurers. Unexpected changes in the mix of healthy and sick, young and old people who choose the existing plans over new Obamacare-compliant policies could mean that some insurers lose money and policyholders end up empty-handed.

"There are so many moving parts to this process. When you tamper with one, no matter how good your intention is, you have intended consequences and unintended consequences," Ben Nelson, chief executive of the National Association of Insurance Commissioners, said in an interview.

NO INPUT

Nelson and regulators who are undecided said they were not asked for input on Obama's proposal and first heard of it on Thursday.

"From a regulator's perspective, it was a little disappointing to come up with this idea and not check with the regulators to see if functionally it was going to work," said Wisconsin Deputy Insurance Commissioner Dan Schwartzer.

Insurers also were unaware of the plan until it was announced, according to two industry sources. On Friday, they met with the President at the White House to "brainstorm" how to make the fix work.

Schwartzer said he was looking to hear back from administration officials as soon as possible with more information that would help Wisconsin decide how to proceed, though he said that like some other states the department had already encouraged insurers to issue early renewals on expiring policies through most of 2014.

In addition to Obama's Thursday speech outlining the fix, commissioners have a 2-1/2 page letter from the Centers for Medicaid and Medicare Services that contains guidelines for carrying it out. Regulators have had several conference calls in the last two days, including at least one that included officials from CMS, several state insurance department sources said.

The pressure is on insurers to implement this change by the end of December before plans start to be canceled on Jan. 1.

"The president is essentially asking them to do in the next six weeks what normally takes a year to do, which is offer a policy and certify it for sale ... I think they can do something but I don't think they are going to get a radical impact on the number of people with dropped policies," said Douglas Holtz-Eakin, President of the American Action Forum and a health economist.

Among states that have decided how to proceed, some that plan to allow the fix do so out of opposition to Obamacare.

"Of course we will let South Carolinians keep their insurance plans. They never should have lost them in the first place, and should be able to keep them far beyond this one-year 'fix' that President Obama is proposing. Obamacare is a complete disaster, and we don't want any part of it," said Doug Mayer, spokesman for Republican Governor Nikki Haley.

The few that have rejected the fix were states that early on embraced the new health marketplaces under Obamacare and say it will create an imbalance in their fledgling market. Vermont had already worked with local insurers to allow state residents and small business to extend their current policies until March 31, and won't go further than that.

"We remain confident in that timeframe and believe it will provide Vermonters the security and options they need," Governor Peter Shumlin said in a statement.

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Tens of thousands rally for and against Bulgarian government

SOFIA Sat Nov 16, 2013 8:20am EST

SOFIA Nov 16 (Reuters) - Tens of thousands of opponents and supporters of Socialist-led government rallied on Saturday, underscoring the widening political divide and uncertainty in the European Union's poorest country.

Prime Minister Plamen Oresharski pledged to stay in power and push with reforms to help the most disadvantaged and raise incomes at a rally organised by the Socialists and their junior coalition partners, the ethnic Turkish MRF party in Sofia.

In a separate rally in Bulgaria's second largest city, Plovdiv, thousands of supporters of the main opposition GERB party demanded government's resignation and early election, accusing the government of incompetence and graft.

The Socialist-led cabinet took office in May after a GERB centre-right government resigned following mass protests over high utility bills and corruption. GERB won most votes at the May poll, but failed to form a government.

The cabinet enjoys a shaky majority with the unofficial support of nationalist Attack party. Most analysts say it will not carry out its full four-year term.

Many Bulgarians had hoped that joining the EU six years ago would bring prosperity to the former communist state and put an end to rampant corruption and organised crime. They are disillusioned with the entrenched political elites, which they believe work only for their own benefit.

The country is yet to put a senior government official behind bars for graft, while the average salary of 400 euros ($540) per month is the lowest in the 28-member bloc.

Five months after the early election, Bulgarians remain divided on whether the government should stay in power or resign, opinion polls show. Political analysts said Saturday's rallies can deepen the divisions.

"These demonstrations underscore the deepening confrontation between the political rivals. There is a possibility of intensification of the divisions in society," Parvan Simeonov, a political analyst with Gallup told private television Nova TV.

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AIRSHOW-Emirates to rely more on bond sales to fund aircraft buys

DUBAI Sun Nov 17, 2013 4:30am EST

DUBAI Nov 17 (Reuters) - Dubai's flagship carrier Emirates will rely on bond issuance, including the sale of Islamic bonds, to fund a larger portion of aircraft purchases in future, the airline's president told reporters on Sunday.

"We have all sorts of financing tools in our treasury that include bank financing, bonds, trade financing, but bonds will have a bigger chunk going forward," Tim Clark told reporters on the sidelines of the Dubai Airshow.

The airline led an aircraft buying spree on Sunday with an order for 150 of Boeing's new 777 mini-jumbo, in a deal worth $76 billion at list prices. It also ordered 50 Airbus A380s, the world's biggest passenger plane, worth $23 billion.

It may issue bonds next year to help raise $4.5 billion for 21 new plane deliveries in the financial year that starts in April 2014, a senior company official said in September.

Emirates has sold two bonds this year - a $1 billion sukuk in March and a $750 million bond in January.

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Fed taper talk sends emerging stocks to 2-month lows, hits vulnerable currencies

By Carolyn Cohn

LONDON Wed Nov 13, 2013 5:25am EST

LONDON Nov 13 (Reuters) - Emerging stocks dropped more than 1 percent to two-month lows and currencies fell on Wednesday on renewed speculation of a withdrawal of risk-supporting U.S. monetary stimulus.

The Indian rupee hit two-month lows before suspected central bank intervention, and the Indonesian rupiah hit 4-1/2 year lows.

Risk aversion grew after Atlanta Federal Reserve President Dennis Lockhart said a reduction of the full Fed's bond-buying programme remained a possibility at the next policy meeting in mid-December, although he did say policy should remain very easy.

Minneapolis Fed President Narayana Kocherlakota said, however, there was a need for aggressive action to foster growth.

Emerging markets have been buffeted by the on-off expectations of Fed tapering over the past six months, and are down 7 percent on the year, underperforming developed markets.

The Fed's stimulus has generally pumped world markets with cheap cash, particularly driving emerging markets.

The MSCI emerging stock index was down 1.25 percent on Wednesday at its lowest since early September.

Chinese stocks fell nearly 2 percent to two-month lows, suffering their worst one-day loss in four months, after a perceived lack of details on highly-awaited reforms from a key Communist Party policy meeting.

"The announcement may have been a small disappointment for markets since so much attention was placed on the release," said analysts at SEB in a client note.

Emerging sovereign debt spreads widened by 1 basis point to 359 basis points over U.S. Treasuries.

In currency trading, India and Indonesia are two of the "fragile five" economies seen most vulnerable to higher U.S. Treasury yields, along with Brazil, South Africa and Turkey.

"Investor concern about macro-fundamental deterioration ... and pressure on emerging market external accounts in the midst of U.S. removal of policy accommodation continue to provide headwinds," said Morgan Stanley analysts in a client note.

The Turkish lira also hit two-month lows after Turkey's current account deficit came in at a wider than expected $3.28 billion in October.

The Romanian leu hit one-month lows and the Hungarian forint hit six-week lows against the euro, and the rouble hit two-month lows against its euro-dollar basket.

The Czech crown hovered at 27 per euro, the target set by the central bank following crown-selling intervention last week. The central bank will likely hold the crown at that rate for at least the next 18 months, governor Miroslav Singer was quoted as saying on Wednesday.

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see )

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RPT-Fitch Rates Upcoming Gazprom Neft's LPNs 'BBB(EXP)'

Wed Nov 13, 2013 5:41am EST

Nov 13 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has assigned GPN Capital S.A.'s upcoming USD-denominated Series 3 loan participation notes (LPNs) an expected foreign currency senior unsecured 'BBB(EXP)' rating. The final rating is contingent upon final documents conforming to information already received. A full list of JSC Gazprom Neft's (GPN; BBB/Stable) and GPN Capital S.A.'s ratings is below.

The LPNs will be issued on a limited recourse basis for the sole purpose of funding a loan by GPN Capital S.A. to GPN. The notes will be issued under GPN's USD10bn LPN programme. GPN Capital S.A. is a special purpose financing vehicle of GPN, but is not directly or indirectly a subsidiary. Fitch expects that GPN will mainly use the issue to refinance its debt portfolio and finance its upstream capex.

GPN is Russia's fourth-largest oil producer owned by state-controlled OAO Gazprom (BBB/Stable). In 2012 the company's hydrocarbon production (excluding joint ventures) amounted to 810,000 barrels of oil equivalent per day (mboe/d), of which 82% was liquids.

KEY RATING DRIVERS

Standalone 'BBB' Profile

We rate GPN on a standalone basis. Its 'BBB' rating takes into account the company's internal strengths and a two-notch discount for higher corporate governance and country risks typical for Russian corporates. We assess the ties between GPN and Gazprom, its immediate parent, as strong, mainly because GPN is subject to cross-default provisions in Gazprom's eurobond documentation. This could support GPN's rating, should its standalone profile deteriorate.

Medium Scale Upstream

In 2012 GPN's hydrocarbon production amounted to 810mboe/d (excluding JVs), which Fitch classifies as 'medium' in scale and which places the company between Russia's largest oil producers, such as OJSC OC Rosneft (BBB-/Stable) and OAO LUKOIL (BBB/Stable), on the one hand, and regional smaller producers, such as OAO Tatneft (BB+/Stable) and Joint Stock Oil Company Bashneft (BB/Positive), on the other. Globally, GPN's production level is close to that of peers such as Occidental Petroleum Corp. (A/Stable) and Apache Corporation (BBB+/Stable). The company also has stakes in a number of JVs, including most notably Slavneft and Tomskneft, which added 389mboe/d, or 50%, to its 2012 output, taking total hydrocarbon production to 1,199mboe/d.

Focus on Russian Oil

GPN's operations are concentrated on Russia, where the company now accounts for 6% of crude production (excluding JVs) - mainly in the Yamalo-Nenets and Khanti-Mansiysk regions in Western Siberia. In 2012 its operational metrics remained favourable. The company's reserve life was comfortable at 18 years and the share of proved developed reserves stayed at 54%, close to the 60%-80% range assessed by Fitch as appropriate for higher-rated oil and gas companies.

GPN's production costs of USD5.7/bbl are competitive and close to those of LUKOIL. The reserve base is moderately diversified, with falling production at highly depleted fields in Yamalo-Nenets (42% of total production without JVs) offset by rising output in Khanti-Mansiysk (44%) and Orenburg (3%). We believe this trend will continue in the medium term and hence assume GPN's production will remain flat. This assumption received initial confirmation in 9M13, when GPN's crude production edged up by 1% yoy (excluding JVs).

Ambitious Upstream Target

GPN has an ambitious target of increasing its total hydrocarbon production (including JVs) to 2,000mboe/d by 2020, or by 67% compared with 2012 output. In order to achieve this GPN will need to intensify its greenfield capex programme, which will have a moderately negative impact on its medium-term leverage. The largest projects currently developed by GPN include the Novoport field in Yamal (commercial production scheduled for 2016-2019; peak at 265mbbl/d), the Orenburg assets (peak annual production planned to reach 160mbbl/d compared with 22mbbl/d in 2012) and the Prirazlomnoye offshore field, the license for which the company expects will be transferred from Gazprom in 2013 (peak at above 100mbbl/d by 2020).

The company is also involved in several JV projects (the largest of which are the Messoyakha field developed together with Rosneft and SeverEnergiya). The immediate upside from these projects with respect to the company's debt service ability may be limited, as GPN will have to coordinate the dividend policy of the JVs with its partners.

Solid Downstream Business

GPN's downstream business is well balanced with its upstream segment. The company owns two refineries in Russia, in Omsk and Moscow, with 2012 throughput of 632 thousand barrels of oil per day (mbbl/d), two small refineries in Serbia, and also holds a 50% stake in Russia's Yaroslavl refinery and a minority stake in the Mozyr refinery in Belorus. GPN also operates around 1,650 retail filling stations and is involved in aviation fuelling and bunkering business. In 2012 the downstream segment accounted for around 45% of the company's EBITDA, and we expect it to remain profitable as oil refining in Russia is favoured in the existing tax regime.

Strong Ties With Gazprom

GPN's ties with Gazprom remain strong. The company enjoys operational autonomy and management overlap is limited. However, from strategic and legal perspectives, the companies are closely related. According to the parent's oil strategy, all Gazprom's oil assets are to be consolidated under GPN's umbrella and this process is almost complete. GPN is classified as Gazprom's principal subsidiary under the latter's eurobond terms and conditions. However, Fitch does not currently factor this in GPN's rating, and instead rates the company based on its standalone profile.

Leverage to Edge Up

We expect GPN's on-balance sheet debt to increase in the next one to three years as it pursues its ambitious upstream development strategy but to remain moderate in the medium term. At end-2012 the company's net funds from operations (FFO) adjusted leverage was 0.6x, and based on Fitch's Brent price deck assumptions of USD103/bbl in 2013, USD96/bbl in 2014, USD88.5/bbl in 2015 and USD80/bbl in the long term, we expect it to average 1.5x in 2013-2017. FFO interest coverage amounted to 22x in 2012 and we expect it to average 13x over the same period.

RATING SENSITIVITIES

Positive: Future developments that may, individually or collectively, lead to positive rating action include:

- A positive rating action on Russia and Gazprom even if GPN's standalone profile remains unchanged. This is due to strong ties between GPN and its parent, but the upgrade would not be automatic.

Negative: Future developments that may, individually or collectively, lead to negative rating action include:

- A negative rating action on Russia, as the ratings of Russian oil and gas corporates are capped by that of Russia.

- GPN's aggressive investment programme, acquisitions or dividends, resulting in FFO net adjusted leverage exceeding 2.5x and FFO interest coverage falling below 10x on a sustained basis, which would lead to a reassessment of GPN's standalone credit profile.

- Falling crude production which could also result in a reassessment of GPN's standalone credit profile.

- Material change in parent-subsidiary linkages and a weaker standalone profile.

LIQUIDITY AND DEBT STRUCTURE

At 30 September 2013 GPN's short term debt amounted to RUB47bn and was fully covered by a cash balance of RUB70bn.

GPN's debt portfolio is well balanced by instruments and currencies. The company has ready access to domestic and international debt markets, mitigating any refinancing risk that may result from around half of GPN's debt being due within three years. At 30 September 2013 two-thirds of its debt was denominated in US dollars and euros, and one-third in roubles. The debt was predominantly raised at the level of GPN, and the share of secured debt was only around 15% - hence there are no subordination issues.

LIST OF RATINGS

JSC Gazprom Neft

Long-term foreign and local currency IDRs: 'BBB'; Outlook Stable

National Long-term rating: 'AA+(rus)'; Outlook Stable

Short-term foreign currency IDR: 'F3'

Senior unsecured rating: 'BBB'

GPN Capital S.A.

Senior unsecured rating: 'BBB'

Upcoming Series 3 LPNs: 'BBB(EXP)'

A Full Rating Report on Gazprom Neft dated November 2013 is available at www.fitchratings.com.

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HIGHLIGHTS-BoE Governor Mark Carney on inflation report

LONDON Wed Nov 13, 2013 5:46am EST

LONDON Nov 13 (Reuters) - Bank of England Governor Mark Carney released the central bank's latest quarterly inflation report on Wednesday.

Highlights of his comments are below.

- "For the first time in a long time you don't have to be an optimist to see the glass is half full. The recovery has finally taken hold."

- "The MPC is very comfortable with the guidance we put in place. This is the right policy for a recovery and the type of recovery we are experiencing right now."

- "We're providing the confidence to businesses and households that we will not even begin to think about moving interest rates until that threshold is achieved. And secondly when it is achieved will be a question of how much momentum the economy has and its ability to withstand an adjustment in monetary policy."

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UPDATE 1-For many Fukushima evacuees, the truth is they won't be going home

Mon Nov 11, 2013 4:08am EST

By Sophie Knight and Antoni Slodkowski

IWAKI, Japan Nov 11 (Reuters) - For many of Japan's oldest nuclear refugees, all they want is to be allowed back to the homes they were forced to abandon. Others are ready to move away, severing ties to the ghost towns that remain in the shadow of the wrecked Fukushima nuclear plant.

But among the thousands of evacuees stuck in temporary housing more than two and a half years after the worst nuclear accident since Chernobyl, there is a shared understanding on one point - Japan's government is unable to deliver on its ambitious initial goals for cleaning up the areas that had to be evacuated after the March 2011 earthquake and tsunami disaster.

"You can't have a temporary life forever," said Ichiro Kazawa, 61, whose home was destroyed by the tsunami that also knocked out power to the Fukushima plant.

Kazawa escaped four minutes before the first wave. Next year, he hopes to return to a home within sight of the Fukushima plant and take his 88-year-old mother back. But he wants the government to admit what many evacuees have already accepted - for many there will be no going home as planned.

"I think it will be easier for people who can't go back anyway to be told that so they can plan their future," said Kazawa, who remains unemployed.

Lawmakers from Prime Minister Shinzo Abe's coalition parties on Monday recommended the government step back from the most ambitious Fukushima clean-up goals, and begin telling evacuees that a $30 billion clean-up will not achieve the long-term radiation reduction goal set by the previous administration. "The government and ruling party will act as one and deal with this firmly," said Chief Cabinet Secretary Yoshihide Suga, adding that Abe would consider the proposal seriously.

The government is also considering a proposal floated earlier this month to offer new compensation to residents in the areas of highest radiation who have no prospect of returning home, officials involved have said.

"There will come a time when someone has to say, 'You won't be able to live here any more, but we will make up for it'," the secretary general of the LDP, Shigeru Ishiba, said in a speech earlier this month.

FRUSTRATION, RESIGNATION

Around a third of the 160,000 people forced to flee when the earthquake and tsunami triggered a triple meltdown at the Fukushima plant remain in flimsy temporary housing units that are nearing the 3-year limit initially promised.

Social workers report an increase in domestic strife, alcoholism and illnesses such as deep vein thrombosis from lack of exercise. In August, the number of people in Fukushima who have died since the accident from illnesses related to prolonged evacuation rose to 1,539, nearing the prefecture's tsunami death toll of 1,599.

Among those who remain, there is frustration, resignation and a sense that the hardest decisions remain ahead.

"Politicians preferred to make people believe in something and put off making really difficult decisions until as late as possible," said Hideo Hasegawa, who runs a non-profit group in Fukushima helping evacuees.

The evacuation area - a little bigger than Hong Kong - was carved into three zones in late 2011 based on radiation readings. The most contaminated area was predicted to remain uninhabited for at least five years and remains off limits.

The Ministry of Environment has contracted work to clean up the 11 most heavily contaminated townships, with the aim of bringing the average annual radiation dose to 20 millisieverts per year based on a range suggested by the International Centre for Radiological Protection.

Current policy dictates that evacuation orders be lifted and compensation payments stopped when that level is reached. However, the government also set a lower, long-term target of 1 millisievert - twice the background radiation in Denver.

Some had hoped the decontamination project employing thousands of temporary workers to strip trees, spray roads and remove topsoil would be enough to hit that ambitious target.

Officials had cautioned from the start against those hopes, since 90 percent of the projected reduction in radiation comes from natural decay of radioactive particles over time.

DELAYS, DUMPING

Meanwhile, decontamination work has been marred by delays and reports that workers have sometimes simply dumped waste rather than collect it for later storage. The environment ministry has pushed back the deadline for completion for seven of 11 townships and has yet to announce new target dates.

Some evacuees remain concerned that 20 millisieverts per year poses health risks, especially for children. That dose over five years is the limit for nuclear workers. Many have stuck with the target of 1 millisievert as a yardstick for safety.

"No matter how hard they try to decontaminate, radiation isn't going down. So even though we have decided to go back, we can't," said Keiko Shioi, a 59-year-old housewife from Naraha, near the nuclear plant. Radiation near her house is running at two to three times the long-term target, she said.

Just 12 percent of evacuees from Tomioka, one of the most heavily contaminated villages, say they want to return home, according to a survey published in September.

"No matter how much they decontaminate I'm not going back because I have children and it is my responsibility to protect them," said Yumi Ide, a mother of two teenage boys from Tomioka.

Evacuees are equally worried about a lack of jobs, schools, medical care or even groceries in towns that have been abandoned since 2011.

"It doesn't make any sense to return people to towns with no infrastructure," said Norio Horiuchi, 71, a retired engineer from Tomioka.

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UPDATE 2-Novartis sells blood transfusion test unit to Grifols for $1.7 bln

Mon Nov 11, 2013 4:07am EST

* Divestment comes as Novartis reviews sub-scale operations

* Acquisition to make diagnostics 20 pct of Grifols business

* Deal expected to close in first half of 2014

* Grifols shares up 2.3 percent, Novartis adds 0.5 percent

By Silke Koltrowitz and Sarah White

ZURICH/MADRID, Nov 11 (Reuters) - Switzerland's Novartis has agreed to sell its blood transfusion testing unit to Spain's Grifols for $1.68 billion, in an increasingly buoyant market for healthcare deals.

The sale comes as Novartis carries out a wider review of operations under new chairman Joerg Reinhardt, who has defended the firm's diversified nature but stressed he would only hang on to businesses that are among world leaders.

Novartis Chief Executive Joe Jimenez said on Monday he had started the strategic review of Novartis's businesses - including the blood unit which carries out tests to ensure blood transfusions do not contain infections - in the spring and the matter had gone to the board over the summer.

He said other potential sell-offs were possible as Novartis examines whether three sub-scale businesses - vaccines and diagnostics, over-the-counter (OTC) products and animal health - have a long-term future in the group.

"We need to have global scale in these businesses and right now we're in that process of gaining scale or considering other options for these businesses," he said in an interview.

Asked whether Novartis might sell the animal health and OTC businesses, he said: "I wouldn't want to speculate on the outcome. Our objective is to determine what it would take to gain global scale. If that is not possible, (selling) would be a potential outcome."

Novartis has three core businesses where it is either market leader or number two in various segments - pharmaceuticals, eyecare and generic medicines.

Investors are hoping the company will give more detail on how it plans to allocate capital between its different businesses at an investor day on Nov. 22.

Global drugmakers have stepped up the pace of restructuring amid investor demands for management to return more capital to shareholders and unlock value trapped inside large firms.

THREE TIMES SALES MULTIPLE

The deal with Grifols gives Novartis a good price for the blood transfusion diagnostics unit, which was acquired in 2006 as part of Chiron and which had net sales in 2012 of around $565 million.

Novartis is keeping other diagnostics that are closely linked to its pharmaceuticals pipeline.

Vontobel analyst Andrew Weiss said the transfusion diagnostics business was one with no synergies to the remainder of the Novartis group and the price of three times sales seemed "fair" and in line with valuations in the sector.

For Grifols, the world's third-largest blood products maker, the acquisition means diagnostics will now make up 20 percent of its revenue, up from 4 percent now, and that annual turnover in the business will grow to around $1 billion.

"The acquisition of Novartis' diagnostic business is a step further into our vision to become a world leader also in the diagnostics field. To achieve this we knew we needed a significant presence in United States," said Victor Grifols, chairman of the Spanish company.

Grifols shares rose 2.3 percent by 0835 GMT while Novartis added 0.5 percent as the European healthcare sector rose 0.4 percent.

Pharmaceutical deals have been among the brightest spots in a small merger and acquisition revival in recent months, with Amgen's $10.4 billion purchase of Onyx Pharmaceuticals in the United States among bigger transactions.

Also on Monday, London-listed Shire said it had agreed to buy ViroPharma for about $4.2 billion to create a leading force in treatments for rare diseases.

Grifols said it would finance its purchase with a $1.5 billion loan, pushing up its debt to 3.2 times earnings before interest, tax, depreciation and amortisation (EBITDA), according to a spokeswoman for the company.

The adjusted debt to EBITDA ratio was 2.6 times at the end of September.

The transaction requires regulatory approvals and is expected to be completed in the first half of 2014, the companies said.

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Euro zone bonds rebound in quiet trade after payrolls sell-off

Mon Nov 11, 2013 4:50am EST

* Bunds rise after biggest one-day fall since Sept on Friday

* Move part of broader euro zone bond rebound

* Euro zone outlook "fairly constructive" despite payrolls

By Ana Nicolaci da Costa

LONDON, Nov 11 (Reuters) - German Bund futures edged higher on Monday, after seeing their biggest one-day fall since September in the previous trading session, with the market poised for a quiet day due to a U.S. public holiday.

The move was part of a broader rebound in euro zone bonds, after a sell-off on Friday, when higher-than-expected U.S. jobs numbers brought forward bets of a cut in U.S. monetary stimulus.

"The sell-off on Friday was too aggressive and only in correlation with U.S. Treasuries. The signal from the ECB was very strong and that's going to be supportive for Germany and the other markets," Alessandro Giansanti, senior rates strategy at ING said.

Last week the European Cerntral Bank unexpectedly cut its benchmark interest rate by 0.25 points, reacting to what it said was evidence of protracted low inflation, pushing short-dated German yields to multi-month lows.

German Bund futures were up 13 ticks on Monday to 141.15 by 0942 GMT.

U.S. job growth unexpectedly accelerated in October as employers shrugged off a partial government shutdown and added 204,000 jobs to their payrolls - far above the 125,000 forecast in a Reuters survey.

After those numbers, more U.S. primary dealers now expect the Fed to scale back its economic stimulus programme before March, according to a Reuters poll on Friday.

The divergence in monetary policies on the two sides of the Atlantic was contributing to a widening in the yield gap between 10- and 2- year German yields, which traded near a two-week high.

"What we have seen historically is that the correlation at the long end of the curve has been pretty high between U.S. and German rates, so I think the influence of the ECB on the long end of the Bund curve is to a certain degree limited," said Christian Lenk, strategist at DZ Bank.

The rise was part of a broader rebound in euro zone bonds which was likely to continue, given the accommodative backdrop, traders said.

Ten-year Spanish yields fell 2.6 basis points to 4.094 percent, while equivalent Italian yields were 3 basis points lower at 4.12 percent.

Yields on bonds issued by the Netherlands, Belgium, Austria and France were all down about 2 basis points.

"At the end of the day, I suppose Europe is very well supported. Fine, we sold off along with Treasuries on Friday but the outlook for Europe is fairly constructive, so I don't see why we should sell off too far," one trader said. "I think we are in a 'buy dips' mentality in Europe."

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