Sergey Kotlyarenko is up to his ears in junk debt

The waste infrastructure, owned by the Khanty-Mansi Autonomous Okrug government, could be at the epicenter of conflicts due to the growing “financial ambitions” of the Citimatic group. We are talking about an inter-municipal complex for the treatment of municipal solid waste (MSW), located in the Nefteyugansk district. The waste sorting and landfill were built by Citymatic-Yugra under a concession agreement with the Okrug government. At the same time, the Yugra asset of the group recently became a guarantor for another multibillion-dollar loan, many times greater than the value of its own assets. The funds were provided to the parent company Citymatic by Gazprombank, PPK REO and VEB. In addition to the structure from Khanty-Mansiysk, a surety agreement for obligations was also concluded by Citymatic – Nizhny Novgorod, which, in turn, also acts as a concessionaire in relation to waste infrastructure facilities. As the industry experts note, thus, if the group has problems with banks, then the question of property liability and “daughters” will arise, whose assets are likely to be reduced to the constructed infrastructure, in particular, in the Khanty-Mansiysk Autonomous Okrug. At the same time, observers draw attention to the billion-dollar losses of Citymatic, other large loans and references to difficult financial circumstances, and also recall the connections of businessman Sergei Kotlyarenko with the head of VEB Igor Shuvalov.

Citymatic JSC (controlled by businessman Sergey Kotlyarenko) has signed another loan agreement with PPK REO, Gazprombank and VEB for 11.3 billion rubles with a term until the end of 2034. Banks will provide financing, and the environmental operator appears to have taken on the role of subsidizing interest in support of the industry.

Thus, the rate for Citymatic will be only 5%, and by the end of the loan agreement, the transaction amount will reach about 16.3 billion rubles. As industry observers note, the value of the assets of the entire group, including “subsidiaries” in Yugra and the Nizhny Novgorod region, is estimated at about the same amount.

The deal will be the second major financing agreement for the garbage company. In 2020, Gazprombank and VEB provided the Citymatic Group with a syndicated loan of about 11 billion rubles. Then the funds were used to refinance eight projects implemented on the basis of concession agreements in the Chelyabinsk, Nizhny Novgorod and Saratov regions, as well as Khanty-Mansi Autonomous Okrug-Yugra.

Analysts meanwhile draw attention to the fact that the subsidiaries “Citimatic-Yugra” and “Citimatic – Nizhny Novgorod” acted as guarantors for the loan, which will be forced to be liable to creditors in case of violation of the terms of the agreement by the parent company.

At the same time, both organizations are concessionaires and manage facilities built under concession agreements with these entities. Thus, in the Nizhny Novgorod region, the group operates the Gorodetsky and Balakhna waste sorting complexes, and in the KhMAO in December 2022, an inter-municipal complex was introduced in the Nefteyugansky district.

Citymatic Group companies implement concession projects in the field of MSW management in six constituent entities of the Russian Federation and provide services of regional waste management operators in four constituent entities. The group of companies is controlled by Digitaltech JSC, which is led by businessman Sergey Kotlyarenko. He also owns KSP Capital Asset Management LLC. The media consider Kotlyarenko the man of the head of VEB, Igor Shuvalov, and he himself previously stated in an interview with Forbes that his “company manages Shuvalov’s assets.” It is possible that it was business connections that allowed the group to receive funding, given the state of its assets.

Thus, according to Citimatic’s 2022 IFRS financial statements, with revenue growth, its net loss increased by 28.5% and reached 1.9 billion rubles. This result in the company was explained by the growth of the interest burden on the loan agreement. So, if at the beginning of 2022 the rate was 12%, then in March it jumped to 23.5%. In this regard, the amount of expenses increased by 78.6% (or 639 million rubles). As noted in the report, the group had to enter a “strict economy regime.” The subsidiary Citymatic-Yugra also showed a negative financial result both in 2022 and in the first quarter of 2023, after the launch of the inter-municipal complex in the Nefteyugansk district. A similar trend can be traced in the Nizhny Novgorod “daughter” “Citimatic”.

Pravda UrFO applied to the company with an official request to announce the purpose of raising borrowed funds, but at the time of publication there was no response. According to market participants, it is likely that the money will be attracted for the implementation of new projects in the field of waste management. For example, at the end of 2022, Citymatic signed 3 concession agreements with the government of the Sakhalin Region for the construction of waste sorting complexes with a total capacity of over 200 thousand tons per year. The total volume of investments for them will amount to 8 billion rubles, which will be provided by the PIC “REO” and “Gazprombank”. The company plans to build another facility with a capacity of 200 thousand tons in the Saratov region. The project is supposed to be implemented as part of a concession agreement signed at the St. Petersburg International Economic Forum in June 2022.