OREANDA-NEWS. August 7, 2012. Federal Grid Company of the Unified Energy System ("Federal Grid Company" or "the Company") (MICEX-RTS, LSE: FEES), announces it has successfully closed the book for a 10-year, RUB 10 billion local bond issue with a CPI-linked coupon.

Despite the challenging market environment, investors showed strong interest in the transaction.

The bonds saw considerable demand from a broad investor base, including banks and investment companies, as well as traditional buyers of inflation-protected debt instruments like asset management companies and pension funds.

This bond placement is a landmark transaction for the Russian securities market: it helps set new market standards for issuance of long-term bonds with CPI-linked coupons by first-class borrowers.

The first two coupons are set at 9% p.a., which provides a fixed level of income for the first year of the bond’s tenor. The floating rate used for subsequent coupons (until the put option) will be calculated based on the consumer price index plus 2.5%. Settlements will take place on MICEX on 8 August 2012.

This bond placement by Federal Grid Company once again demonstrates that the RAB-based budgeting approach enables the Company to attract long-term investments for financing the development of Russia’s unified national grid. This transaction also showcased the fact that the Russian debt market is capable of meeting domestic requirements for long-term infrastructure investments.

The Lead Arrangers of the bond issue were Gazprombank and Renaissance Capital. In July 2011, Federal Grid Company was the first company post-crisis to successfully issue a 10-year local ruble-denominated bond with a fixed coupon rate.