UPDATE 5: Russia keeps 2016 privatization plan to raise 1 tln rbl

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MOSCOW, Jul 11 (PRIME) – The Russian government has retained a full-scale privatization plan for 2016, including the sale of stakes in oil majors Rosneft and Bashneft, and shipping company Sovcomflot to raise 1 trillion rubles, Economic Development Minister Alexei Ulyukayev told reporters on Monday after a sale of a 10.9% stake in diamond giant ALROSA.

“We retain our plans to sell stakes in large companies owned by the federal government, Bashneft, Rosneft, Sovcomflot and VTB,” Ulyukayev said. “In case of a successful privatization of large state assets, the federal budget will receive up to 1 trillion rubles.”

But First Deputy Prime Minister Igor Shuvalov said the government has rejected the idea of selling VTB. “We used to think that a VTB deal could be possible in 2016 but then we discussed it and decided that this is not the best time. We will not offer VTB shares this year.”

The government sold the ALROSA stake at 65 rubles per share and Director of the Federal State Property Management Agency Dmitry Pristanskov that it raised 52.2 billion rubles from the sale.

Ulyukayev said that the bidding book was opened on July 6 and closed on July 8 with demand exceeding the placement limit by about two times. “The asset offered for privatization, ALROSA, is well known to investors and saw a significant market demand. The bidding book was filled by foreign investors by about 60%, including companies from Europe, the U.S., the UAE,” Ulyukayev said.

ALROSA soared 2.04% to 68.93 rubles on the Moscow Exchange at 11:27 a.m., Moscow time.

The Russian Direct Investment Fund (RDIF) and Asian co-investors accounted for about a quarter of demand. Non-government pension funds participated as well, he said.

The RDIF bought a small stake and attracted 10 rubles of foreign investments for every 1 ruble it spent itself, the fund said in a statement.

“ALROSA was the first deal for us of the so-called Big Privatization,” Shuvalov said.

Demand from America was insignificant due to a “wide array of reasons,” he said. Igor Buslantsev, interim CEO of Sberbank CIB, the placement organizer, said that long-term American investors bought about 5% of the offer.

The government will not make any decisions on additional sales of shares in ALROSA within 180 days after the price announcement, according to Ulyukayev.

Pristanskov said that the new stakeholders will be able to participate in ALROSA’s dividend distribution after July 19. Dividends for 2016 will make 50% of the net profit under International Financial Reporting Standards (IFRS), he said.

Before the secondary public offering (SPO), the Federal State Property Management Agency held 43.93% in ALROSA. The government of the republic of Yakutia holds 25% plus one share, 8% is distributed among eight Yakutia’s regions, and 23.07% is in free-float.

BASHNEFT, SOVCOMFLOT TO FOLLOW

Shuvalov said that the Bashneft and Sovcomflot deals are about to follow ALROSA.

The government is in negotiations with potential investors about Rosneft, but has abandoned an idea to sell shares of Rosneft on the market, he told channel Rossiya 24. Rosneft will be probably sold in September–November, either the entire stake or split in parts, Shuvalov said.

Pristanskov said that the government expects recommendations from investment consultants of Bashneft by September. Shuvalov said that a sale to a strategic investor is preferable but a market offering is not ruled out. He told radio BFM that he sees sale of Bashneft to Rosneft as a dubious choice, but Lukoil as a potential investor would be fine.

(64.2488 rubles – U.S. $1)

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