UPDATE4: Russia to prioritize local investors in privatization

(Adds details in last paragraph)

MOSCOW, Apr 12 (PRIME) -- Russia will prioritize local investors during privatization, Deputy Economic Minister Nikolai Podguzov said Tuesday at a forum.

The economic ministry is working on preparation of privatization, its conditions are being worked out taking into account market circumstances. The government has not yet chosen privatization agents. “We will continue this work. We will try to adhere to the priority of participation of national investors in privatization,” he said.

Still, the ministry will not restrain participation of foreign investors in privatization. “Priority in privatization is based on national infrastructure. Russian investors in the form of pension funds will be targeted in the first place. But there will also be an absolute freedom from the point of foreign investor investments in the assets on offer,” he told reporters.

The ministry has held meetings with largest Russian private pension funds and discussed options of their participation in privatization.

“We have found a feedback from the point that the funds are interested in purchases of shares and have resources to do that,” he said.

“It is difficult to provide any detailed information about how actively pension funds will take part in privatization, as non-government pension funds demand stricter conditions, which are now only being worked out taking into account all circumstances and the beginning of work of an agent that the government is to choose.”

Privatization of oil company Bashneft, uncut diamond mining giant ALROSA and the country’s second largest bank VTB may take place in 2016, “but it depends on circumstances, on the speed of preparation of documents,” Podguzov added.

“We hope that it will happen this year,” he said.

Previously, the ministry chose VTB Capital to organize of Bashneft’s privatization, Sberbank CIB to organize privatization of ALROSA, and Renaissance Broker to organize privatization of VTB. Several foreign banks also bid for organization of privatization, and these banks may take part in the deals as consultants, he said.

“There were American, there were European banks. About five or so of foreign banks,” he said.

He said that if the banks still want to participate and an agent bank thinks it is necessary, foreign banks may act as consultants.

Alexander Korsik, CEO of Bashneft, said that it is reasonable to work out the company’s secondary public offering (SPO) and to negotiate with strategic investors while preparing for privatization.

“I think it would be right to walk two parallel ways – to prepare the company for an SPO just like in 2014, to test the market…which will create competition for any strategic investors. And at the same time negotiate with strategic investors and organize transparent and understandable process. And we will be able to make a choice at the final point, I don’t know when,” he said.

There has been no worthy strategic investor for the stake in Bashneft other than oil major Lukoil so far, he said.

Multi-industry holding AFK Sistema, which owned a 73.94% stake in Bashneft before it was nationalized, will not take part in privatization of the oil company, Sistema’s President Mikhail Shamolin said.

Sistema is also not interested in purchases of minority stakes in privatized assets and will take part in privatization only if controlling stakes in the companies are sold, Shamolin added.

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