Deputy Finance Minister: If we call investors in Moscow and placed themselves in another place, who would believe us?

Deputy Finance Minister: If we call investors in Moscow and placed themselves in another place, who would believe us?


Moscow. 26 Oct. Weaker commodity market conditions forced authorities to seek additional sources of replenishment. What are the expectations of the Ministry of Finance from privatization in the coming years, whether the infrastructure is ready the domestic market to large transactions, and disputes departments on dividends for state-owned companies in an interview on the eve of entering the state Duma a draft budget for the coming three years, said Deputy Finance Minister Alexei Moiseev.

– Between the Ministry of Finance and Ministry of economic development there is some disagreement on the assessment of the possible revenues from privatization in the coming three years. The Finance Ministry has budgeted privatization revenues in 2017 of 138 billion rubles takes into account proceeds from privatization of VTB and Sovcomflot, and 14 billion in 2018-2019. The Minister of economic development Alexey Ulyukayev expects that the proceeds can be 200-300 billion roubles annually, while it is as likely to privatise next year, called for another 20% of NCSP and 8% ALROSA. How, in your opinion, to realize such plans?

– Let’s be clear about the differences with the Ministry of economic development – actually no, just the revised estimate of the Ministry of economic development received after the budget was planned and delivered. In principle, this is not a very big problem, because when we talk about privatization in the classical sense, it does not affect the basic parameters of the budget, it only affects the sources of financing the deficit within approved parameters, and we can within these parameters to reduce the amount of the expenditure of the Reserve Fund and to increase the revenues from privatization. What we plan to do. I think we will try the amendments to the draft budget for 2017-2019 for the second reading to take this into account.

– Which downwardly revised privatization proceeds you will consider?

– That they sent us. Ask the Ministry of economic development, I can’t hear other people’s documents. But it is significantly larger – about 2.5 times – than that now laid down, because in addition to VTB, Sovcomflot, from the proceeds of the transaction on Sistema Shyam Teleservices (SSTL, the Russian Federation sells the basic shareholder – AFK “System” – a minority stake of the company, the transaction is paid in installments) and a so-called mass privatization, which was founded and amounted to 138 billion rubles, the Ministry of economic development proposed to add a few large blocks of shares. And even beyond such things as the sale of shares of “ALROSA”, where there is no full understanding, this is really, goes to the number that is in the sound range.

– In addition to the NCSP and ALROSA, which have already been discussed, the Ministry of economic development, what other major packages can be privatized in 2017?

– There are assumed to be packages of Russian Railways, “Transneft”. I don’t remember the years they gave us the forecast for the next three years, and in the three-year plan there are these packages, there are “grids” and “Rostelecom”, that is, there is a wide range of companies, we stood in the privatization program, approved in earlier years.

– This year was sold a package of OJSC ALROSA in the amount of 10.9 per cent, while the Ministry offered to sell 18,9% of the company, but the Finance Ministry the proposal was opposed. As you look at the prospect of the sale of 8% of the company in the next year?

– We are not that opposed. The issue of “ALROSA” is a bit more complicated than with other companies, due to the fact that Russia is one of the three significant groups of minority shareholders, Yakutia and the Russian Federation. We now have approximately equal shares between all three groups and absolutely equal shares between the Russian Federation and the Republic taking into account the share of the Yakut uluses (25% plus one share owned by Yakutia, 8% – municipal areas – ulus). Our joint agreement, which was signed under the previous round of privatization in 2013, came from the fact that the share of the Russian Federation and Yakutia should be equal, so before talking about the privatization of ALROSA, it is necessary to raise the issue on signing of a new shareholders ‘ agreement. This issue was raised, but while on it there is nothing. Until we see that we are acting in the framework agreement, which had been, and there is no draft of a new agreement, even there have been no talks with the Republic about how the agreement might look like.

– Change of the shareholders ‘ agreement is a mandatory condition of sale 8% of the shares?

– From our point of view, Yes.

– And the Ministry of economic development agrees with this point of view?

– No. They believe that this is not the problem, it is possible to make (without changing the shareholders ‘ agreement – approx. If). Sometimes we blame that on the fact that “our”, we are against the sale, and by the fact that “not ours”, we are ready. In this case it was just a coincidence (that the activities of ALROSA in charge of Finance), because there is, indeed, a very complex joint structure, it is unique. So you need to carefully approach the issue of change. If we somehow agree in the future, let’s sell, but not yet started to talk about it.

– A package of VTB is there assessment whether you are ready to consider selling at a discount?

– Any privatization is always a discount if it’s not a premium for control. Here as we sell stake to 10.9%, a control premium is not provided, so if we’re talking about selling in the market, it will be a discount. Even the privatization of this summer package “ALROSA”, which from the standpoint of all metrics is the best in the history of our sale, the discount was 3%. This is an absolute record from the point of view of the size of the discount, but nevertheless, the discount was. So in any case we this discount is limited in price, and then there’s a bureaucratic thing, because when the Ministry of economic development brings us a number, it’s the price of a stock over a prior period if share traded, if not traded, they are evaluating, together with the banks-consultants.

Now we have 103 billion rubles in the forecast package prices is 10.9% of VTB’s shares. But the shares are sold at a fair price at the time of the transaction, any sales at a price that was in the plan, it never happens. Just need to put the figure in the plan, and if the privatization occurs after some time, it is clear that figure may change. The same “Bashneft” was sold for 23 billion rubles more than it was in our plans.

In General, privatization of VTB in connection with the sanctions there is a problem. We and the Ministry are in discussions with the organizer of the sale, they try to offer different arrangements until I direct outlet on sale can not see. I believe that the basic scenario – it is better to sell when sanctions will not.

– That is the privatization of VTB may be beyond 2017?

Maybe. In the case of VTB I would not rule that out.

– How is the situation with the preparation for the privatization of the NCSP? We discuss whether the simultaneous selling of packages belonging to the government and “Transneft” which also wants to sell its stake in NCSP?

I don’t know anything about it. We, of course, interested in maximizing the value of our package. In principle, we broadly welcome, when state-owned companies to sell assets that are considered non-core for themselves, as it is a positive for the economy. But the specific scheme of the transaction fulfills the government always. We don’t climb, write: do as you wish to maximize income. The only thing we always insist: if it’s market placement, it should be “Moscow exchange”.

– How then do you feel about the accommodation of “Sovcomflot” on the new York stock exchange with a parallel listing in Moscow?

– We categorically against. As options for accommodation package “Sovcomflot” proposed new York stock exchange, Toronto, but we believe that Moscow has now absolutely all opportunities to sell the company. 5-10 years ago there was a story that investors in the freight business is concentrated in Toronto or new York, investors in gold in Toronto, and Chinese investors in Hong Kong. The work of the “Moscow exchange” is now very changed – the exchange is fully integrated into the international financial system, we saw this clearly in the sale of packages “ALROSA” and the placement of sovereign Eurobonds.

We should fulfill the tasks set by the President to develop the national financial market, it is necessary to develop “the Moscow exchange”. And how to do it? Any accommodation must be carried out in Moscow, issuers should enter the market through the “Moscow exchange”, there should be no double listings, it’s all in the past. I am deeply convinced – this is the story of when the financial markets of different countries from each other isolated, or at least when the Moscow exchange was not connected to Euroclear. Now the exchange is connected to Euroclear, the Depositary is our quality from the point of view of SEC (Securities and Exchange Commission, the Commission on securities and stock exchanges of the USA), we are working on getting the same confirmation from the Europeans. All the investors came and bought our bonds, the shares of ALROSA, and had no problems for anybody. When we say, “go to Moscow”, while they themselves go to sleep in another place, who would believe us?

– And why, by the way, Sovcomflot this year are unable to sell? It’s your famous phrase that “if the Earth will fly the celestial axis”, do you expect the privatization of Sovcomflot in 2016.

– Flew like. As one much more experienced officer – I hear these things for 15 years. Long, sorry, will work to in 2017 it happen.

– The privatization of 19.5% of “Rosneft” should be held before the end of 2016, this is considered the variant, where the “Rosneft” can redeem shares from Rosneftegaz. Do you see any risks in connection with this variant of privatization to the budget, including from the point of view of the income?

– Rosneft is traded publicly, so the question of assessment is the easiest: if there is a public price, given the fact that 19.5% just because the market is not put, obviously, some pros and cons can occur in different situations. Who will buy, as a buy – this is a topic which I would try now to avoid. It is important that the transaction took place this year that it was held at the highest possible price, and the budget has received as much money as possible, and to income received in the budget this year.

First Deputy Finance Minister Tatyana Nesterenko said that there is a risk of receipt of these revenues in January 2017.

The risk, of course. Tatiana, as the person responsible for cash execution of the budget should be prepared that the transaction will not take place, it is responsible for ensuring that under all conditions all the commitments were fulfilled. So she laid on such risks, and she said based on this promise. I like a man who is responsible for privatization, I can say that we believe that the deal is happening this year at the highest possible price. Who will buy and as a buy, I don’t know in these discussions are not involved. And we believe that money is coming this year.

And you don’t care how the deal will be structured?

– I care about a lot of things, but that doesn’t mean I have to fit into someone else’s sphere of responsibility. There are people who structure the deal, and we do not need to strive in their work not to get involved.

– Not planned to involve in the organization of the transactions of the Russian banks?

– I know nothing about it. I have endorsed a draft Executive order (government), Intesa, all I saw and other documents were not delivered to us. But there are times when the seller connects an assistant. Such a situation has developed in the sale of “ALROSA”, when the savings Bank at a very early stage hooked “VTB Capital” and then in the final possession were two banks. It happens, but it results in documents already in the final stage.

– What is the fate of the draft Executive order directing “Rosneftegaz” to raise the budget of all dividends on the shares of “Gazprom” and “Rosneft” and the proceeds from the sale of shares of “Rosneft”?

– This project is in government, he has not been signed, subject to legal examination, while no procedures and discussions it was not. We believe that this order will be accepted.

– Why is it not mentioned shares of “inter RAO”, after all, the company plans to increase dividend payments?

Good question, the logic should be, but RNG has many other assets, so somewhere I had to stop.

– How is the discussion of the draft resolution on the establishment of 50% of the first strap of dividends for state-owned companies?

– It has a large number of differences. The resolution consists of two parts. The first part involves the introduction of standards for the payment of dividends in the amount of 50% according to IFRS excluding anything from 2017. Let me remind you that in 2016, the rule provides for the possibility of payment of dividends from the company or IFRS, depending on what reporting more profit. We are reproached that we do from the idea of maximizing the revenue depart, because there was one or two companies, the same VTB, which paid 70% and over 1500% in accordance with IFRS. It is rather a unique situation. We believe that if adopted the standing resolution, we must give a clear understanding for the company, which determines its dividend policy based on it. Choice – RAS or IFRS – does not give a clear understanding of the dividend policy, so we decided to stay on one and still write IFRS.

This part of the Ordinance has drawn criticism, including the Federal property Agency and Ministry of economic development. One of the lines of criticism, it from the government, for the establishment of collection of dividends only from net profit according to IFRS, the Agency says, let and RAS and IFRS. The second line of criticism on the part of the Ministry of economic development proposes to consider in determining the threshold of dividends of investment companies. The third line, and say it all – why 50% forever, let us introduce for three years, while a fiscal consolidation. In the latter case, we enlisted the support of minority shareholders, we understand that such a rule for all shareholders is good as it encourages management to improve their efficiency. If management believes that the need to Finance the projects, even reduces costs, improves efficiency, increases profits, after dividend will be given 50%, have enough money for what he thinks should be done.

In addition, there is the valve for those who really really need: the government may decide at any company and say that dividends should be below 50% of the profits. But we believe that it is better when companies need to explain why they can’t pay 50% more than us to explain to companies why it is to do. This difference is important – better to let those companies to pay dividends below the 50%, come and explain to the supervising Vice-Prime Minister, the Prime Minister, why they have to pay not as much as expected. Such a situation sometimes, it happens with companies that are 100% owned by the government, when the government decides that it will be faster to use dividends to solve production problems. Such a possibility exists. But overall, we for such an approach: if the government believes that it must be something, or a company that supposed to do something, JSC pays dividends based on 50% of the profits, and then receives the subsidy. It is better also because when a company receives a grant, use it inappropriately it will be difficult. The government said that it is necessary to build the plant, has provided a grant of it, and just try to use those funds on something else, then the audit chamber and the Prosecutor’s office tortured. The system of budgetary control is tuned to the control over the targeted use of budgetary expenditures, there is already not going anywhere and dividends control much more vague.

Russian President Vladimir Putin now says that some energy companies will find it difficult to pay 50% and the Ministry is preparing proposals on lowering that bar for them.

– Alexander Novak have said that there is no such position. And I can confirm that at the meeting the government’s disagreement on this decision of Ministry this position is not represented. Maybe because of the disagreements we have not eliminated it will be the decision of the Deputy Prime Minister, and there they arise. But yet declared a formal dispute from the energy we have received.

Returning to our draft decision, the second part provides bigger list of companies that are required to prepare IFRS financial statements. There’s a long list. The relevant Ministry considers that it in some cases is not necessary. I find it hard to understand why. Sometimes there are links to all the secrecy, but I don’t see how the introduction of the obligation to make statements according to IFRS may affect privacy. Match, gratuite, give only to the relevant agencies. However, the disagreement too. It is important for us, if we want to take the dividends with IFRS, we must understand that all the major payers of this dividend stream is obliged to make statements according to IFRS. Although the resolution says that in case the company is reporting under IFRS, it pays to IFRS, if not, then not. This window is, because there are hundreds of companies that do not even know this word, still there are some auto repair shops, pumping stations, and it is clear that they can not be expected to be IFRS.

– You propose to significantly expand the list of companies required to report under IFRS?

– Yes, there are about 50 companies.

– And the banks can ever be included in this rule about 50% dividends? VTB or Sberbank?

– The Ministry of Finance is responsible, in particular, VTB (control of Sberbank is owned by the Central Bank of the Russian Federation). VTB steadily paying more than 50%. About the other banks can’t say anything, but we believe that everyone should pay. Although the banks I hear the argument that banks, especially if they are under sanctions, there is no other source of capital except through retained earnings. But, knowing this argument, we still take the position that everyone should pay 50%. About the savings Bank can not say anything, he is not in control of the government, the responsibility of the Bank of Russia.

– And now there still any exceptions for companies in the draft resolution? For example, Rosneft, which this year paid dividends in the amount of 35%, not 50%.

– The draft document we have made no exceptions for “Rosneft” is not done.

– Is there any progress in the discussion of the payment of interim dividends in 2016? Anton Siluanov said that by the end of the year interim dividends will be paid by VTB, also talking about Gazprombank. The head of VTB Andrey Kostin said that the Bank is ready to pay the interim only the “preferred shares” issued under the recapitalization through Federal loan bonds. How did that worked out?

– We are in correspondence with the Federal property management Agency about the numbers. While the draft Directive they didn’t send us until it is at the level of reconciliation of amount of money. We are talking about the fact that you have to pay for all the “preferred shares”, not only VTB, but also other banks which received preferred shares. This position of the Federal property management Agency and bring. Given that the issue of capital for banks is now intense, given that all banks, we are talking about, they are under sanctions and have no other sources of raising capital or severely restricted in them, it is clear that the debate at some point will rise, yet serious discussion was not.

But before the end of the year there are not a lot of time.

– VTB is now no opportunity for the preference shares to pay interim dividends, so they will need to hold a shareholders ‘ meeting to convert these shares into another class of stock, which allows you to pay interim dividends. Until they do, we think. Before they do, we have to do to fail.

– Do you think digital-only on VTB?

– We calculated for all banks as we would like to, and directed in Rosimushchestvo. We use the accounting approach, we have calculated how much we would have received if they had not preferred shares, and would be. The would be a condition that they receive a coupon plus 1 p. p. and back immediately to the Ministry of Finance. On this basis we have calculated, we have a number, we said to the government, now the government talks about it. We understand that there must be a source for dividend payments, and have the same “the Russian capital” there is no profit in the current period or previous years, so the question on the final figures is still open.

– We are talking about two banks?

– No, with the exception of “Russian capital”, it remains three banks – VTB, Gazprombank and Rosselkhozbank.

– All wish to receive the interim dividend this year?

Yes.

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