The government has issued a Directive on the beginning of privatization of “Rosneft”

On 20 February the first Vice-Premier Igor Shuvalov has signed the instruction on the preparations for the privatization of Rosneft, told two officials of the government. The document contains instructions to state representatives in the Board of Directors of Rosneftegaz to attract investment Advisor for the study of the structure and material terms of the transaction on sale of actions “Rosneft” with participation of the Ministry of economic development. The representatives of Shuvalov and the Ministry did not comment on the signing of the Directive.

The government through Rosneftegaz now owned or 69.5% of Rosneft shares (one share is owned directly by the government), 19,75% — the British BP, less than 1% belongs to individuals, including managers of “Rosneft”, the rest of the package is traded on the Moscow and London stock exchanges.

The size of the stake in Rosneft, which is expected to sell during privatization, the Directive does not specify, say interlocutors . But, according to them, the Ministry of economic development and the state monopoly came to an agreement that investors must be offered a 19.5% stake. The sale of such shares has been included in the forecast plan of privatization for 2014-2016. The share, specified in the plan remains valid, said last week the representative of the Ministry of economic development Elena laskina. She also recalled that earlier the Minister of economy Alexei Ulyukayev said that a decision in principle on the privatization of the company in 2016 is accepted.

The representative of the Secretariat Shuvalov said only that the size of package, method of sale of shares of “Rosneft” and other details of the deal will be known after the consultants start to work.

The only way privatization of “Rosneft” — the sale of a stake to a strategic investor with the maximum premium to the market, a work in progress, said on Thursday to journalists by the assistant to the President of the Russian Federation and Chairman of the Board of Directors of “Rosneft” Andrei Belousov. “You need to sell the strategy, because on the open market this amount is simply impossible to put in force a large scale”, he said (quoted by “Interfax”). Assessment Belousova, in the market sense to put no more than 4-5% of the shares. Sell more than 19% of the shares of the strategist “is the only reasonable solution”, said on Thursday the press-Secretary of Rosneft Mikhail Leontyev. The signing of the Directive and preparing for the transaction, he refused to comment.

“Now is not the time”. What they say about the privatization of “Rosneft”

Olga Dergunova, head of Federal property management Agency

“The meeting [with first Deputy Prime Minister Igor Shuvalov] we were recommended to consider the possibility of accelerating sales of major assets, regardless of what the prices will be in international markets. Because before that, we all proceeded from the hypothesis, and the President has expressed the position that we should not sell large assets at any price”

5 November 2015

Anton Siluanov, Minister of Finance

“[Referring to the privatization of state companies], we first talk about the package that was to be sold a few years ago. This is a package of “Rosneft” — 19,5%”

16 January 2016

Vladimir Putin, the Russian President

“There should be no sales of shares for a pittance, at bargain prices. For the budget it will not bring much benefit, besides such a practice is fraught with hostile takeovers of rival companies. And this is ultimately not the best for the market. This, of course, need to avoid”

1 February 2016

Igor Sechin, President of Rosneft

“How to raise the efficiency of sales of state-owned Rosneft? It is necessary to wait, when the price of oil will be $100, but I think that it is necessary to take into consideration other circumstances, in particular the state budget”

10 February 2016

Robert Dudley, CEO of BP

“I don’t think that within some time we will see oil prices at $100 a barrel, and then I would agree with Igor Ivanovich [Sechin] is that now may not the time to privatize “Rosneft” with this price level”

10 February 2016

Alexey Ulyukaev, Minister of economic development

“Technically, the sale of “Rosneft” will hold Rosneftegaz, so this income will be raised to the budget as dividends of Rosneftegaz, which is in direct revenues. This is a formality. I believe that this decision is”

February 19, 2016

Andrey Belousov also said that ruble price of the company’s shares are now roughly equal to the offering price in the IPO of Rosneft in 2006, while dollar — half. On Thursday one share of Rosneft on the Moscow exchange, rubles cost of 279.5, in London GDR the company was trading at us $3.62 per receipt (each one share). During IPO “Rosneft” the price of the placement amounted to $7,55 per share or receipt, in line with the capitalization of the company at $79.8 per billion (in Thursday, the company’s capitalization on the LSE amounted to about $38.4 billion).

In total, the placement of “Rosneft” in 2006 attracted $10.7 billion, of which about $750 million in the course “national” IPO (as a result the state share in the capital of the company decreased to 75.2%). Thursday on the Moscow exchange for 19.5% of “Rosneft” was worth 577 billion rubles (or $7,55 billion at the exchange rate on February 25).

Strategic investors in Rosneft privatization can become an Indian or Chinese company, says the portfolio Manager of the GL Asset Management Sergey Vakhrameev. In his estimation, 19.5% of the company can be sold at a premium to the market 10-15%, or approximately $8.5 billion, he said. From the signing of the Directive to the actual sale of a package “Rosneft” it may take six months, he said.

According to Raiffeisenbank analyst Andrei Polishchuk, Asian investors can pay a premium of 20-25% to current market quotes, then the transaction amount will reach $9.5 billion If the contract with the foreigners will not succeed, candidates for the repurchase of these securities may become “Surgutneftegaz” and LetterOne Mikhail Fridman — both companies have significant financial savings, says the expert.

At 30 June deposits “Surgutneftegaz” was 1,89 trillion rubles, dollars — to 1.87 trillion rubles ($33.7 billion at the exchange rate on June 30). Friedman with partners in 2013 sold to Rosneft 25% stake in TNK-BP for about $14 billion However, the representative of “Surgutneftegaz” has previously denied interest in Rosneft. LetterOne, the representative stated that the company is not interested to participate in the privatization. And the BP representative said that the company is satisfied with the current size of package in “Rosneft”.

Senior analyst at UBS Maxim Moshkov did not rule out that Rosneft may consider acquiring part of the privatization package, because the company’s management believes the asset is undervalued. Key employees of the company led by Igor Sechin are already and shareholders are interested in growth of capitalisation of the company, he adds.