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By John Helmer in Moscow

Far Eastern Shipping Company (Fesco), Russia’s fleet leader for dry cargo and containers, is headed for an even bigger year-end loss than industry analysts or the company have acknowledged before.

A new report, issued on August 7 by Moscow investment bank Renaissance Capital, predicts that group revenues will fall 41% to $1.2 billion; earnings down by 61% to $128 million; and the net income line will turn to a loss of $72 million. This is double the loss estimated by Troika Dialog bank in June.

Owned and managed by Sergei Generalov, Fesco’s struggle with fleet writedowns and net debt of $934 million has postponed a new loan approval by the European Bank for Reconstruction and Development; and triggered, according to Rencap analyst Kirill Kazanli, “a breach of some [loan] covenants…While we believe FESCO is likely to successfully renegotiate those, it has essentially cut capex [capital expenditure] to zero, not making any acquisitions, selling some of its assets (mostly ships) and trying to hoard cash.”

The crunch has already caused public recriminations over Fesco’s decision not to spend more money this year on its new container terminal at Ust-Luga, on the Gulf of Finland. Fesco says that $160 million has spent so far on the new Ust-Luga terminal, and in time it will resume construction. Already half-built by Fesco and First Quantum — shareholding partners in the National Container Company — the terminal was to have been opened this year. Not only is Fesco unwilling to put up the cash. It is also afraid that there is insufficient container throughput at present to sustain NCC’s bigger container facility, First Container Terminal, along the coast at St. Petersburg.

Rencap’s buy rating for Fesco shares has been changed from Buy to Hold. In thin trading, the share price is up 16% in the year to date, but down 65% from its level twelve months ago.

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