YAKUTSK, December 23. / TASS /. The Yakutia administration will require Mechel to return tax benefits in case of unfulfilled development of Elga deposit development to 20 million tonnes of coal in 2020. On Monday, the head of Yakutia, Aisen Nikolaev, reported on fears of a delay in the development of the largest coal deposit in Russia, answering a question from TASS at a meeting in the government with the editors-in-chief of the Yakut mass media.
"Mechel should, based on the results of these investments, bring coal production to 20 million tonnes per year. Now, unfortunately, it is less than 5 million tonnes. For the year, adding 15 mln tonnes is simply physically impossible. Accordingly, the project will not be implemented, and then the question arises of returning the corresponding amounts of tax benefits, including from the regional budget," Nikolaev said, without specifying the amount of benefits provided.
Along with the positive successes that Mechel has had in developing the Elga field in recent years, Nikolaev noted serious concern that the conditions for providing Mechel with tax incentives for implementing a regional infrastructure project at the field, unfortunately, are not being met. "And there was only one year left for which Mechel’s company needed to make investments in volume of several billion rubles," he added.
Elga Project
The Elga coal deposit, one of the largest in the world, is located in the south of Yakutia, with JORC reserves of 2.2 bln tonnes. Mechel owns 51% in three assets of the Elga project - Elgaugle, Elga road and Mecheltrans Vostok, with Gazprombank at 49% each.
In 2013, VEB approved Mechel project financing for the development of the Elginsky field for $ 2.5 billion for a period of 13.5 years on the security of 49% of Elgaugol. However, the company was granted only a bridge loan of $ 150 million. Since 2015, the loan has expired.
In 2017, Mechel’s general director Oleg Korzhov stated that the issue of financing the VEB project was "frozen".
The net debt of Mechel Group without interest, fines and other long-term financial obligations at the end of June 2019 amounted to 411 billion rubles, decreasing by 12 billion rubles to the level at the end of 2018. As of May 2019, Mechel’s debt to state banks holding 88% of the debt amounted to 347.5 billion rubles.
At the end of July, Sberbank reported that Mechel sent the bank an updated financial model and asked to postpone the repayment of its principal debt from 2020-2022, for 2024-2026 At the same time, Sberbank will consider the issue of restructuring after analyzing the financial model of the company and receiving confirmation from VTB and Gazprombank on the provision of similar restructuring conditions.