A diversified Russian group Summa is ready to sell two engineering companies with a total portfolio of 130 billion. Both companies are experiencing problems with the contracts due to failure of terms of works
The Summa group, which owns assets in port logistics, engineering, construction, telecommunications and oil and gas sectors, is considering selling its two engineering companies Globalelectroservice and “Stroynovatsiya”, told RBC a source close to Summa, and consultant of the company. Selling one of the variants of optimization of the construction business, said one of them. The representative of Summa, owned by Ziyavudin Magomedov (63-th place in the Russian rating Forbes 2017), confirmed that the group intends to reorganize the engineering unit of the company, to disclose the details refused. However, the “Amount” will be other construction companies with their own facilities — LLC “Kontakt-s”, JSC “Mostootryad-99”, OJSC “AK Elektrosevkavmontazh”.
The “Amount” does not leave attempts to buy out the Railways company “TransContainer” — the operator of railway container transportation, told “Kommersant”. According to the publication, Ziyavudin Magomedov sent a letter to Vladimir Putin with the request to support the project of creating a national container operator on the basis of the group’s assets with a controlling stake in TransContainer (now the group owns 25,07%, even 50% plus two shares of OJSC “RZD”). As stated in the letter, the integration of TransContainer logistics assets “Amount” will give the economy a multiplier effect in the 560 billion rubles.
Globalelectroservice and “Stroynovatsiya” execute turnkey projects: the first is building transmission lines and power plants, the second — pipelines and infrastructure. Revenue “Globalelektroservis” for 2016 amounted to 7.5 billion rubles., the loss is 1.8 billion rubles. Revenue “of Stroynovatsia” for 2015, 12.4 billion rubles., profit of 324 million rubles, the data for 2016 no. The total portfolio of the two companies over 130 billion rubles., says their representative.
In 2016, Stroynovatsiya has not won a single tender, in 2017, signed a contract with Russian Railways on the development of BAM and Transsib in 2014-2017 5.9 billion. Globalelectroservice in 2016 signed contracts with “Lenenergo” and FGC (the”daughter” of the state “Russian grids”) to 1.1 billion rubles, in 2017, the new contracts did not receive, from the data of SPARK.
Based on the statements of the company, Globalelectroservice taking into account the debt is 8 billion and low profitability of the business can cost a symbolic one ruble, analyst FK “Opening” Alexey Pavlov. “Stroinovaciya” based on market multiples, can cost from 1.2 to 1.9 billion rubles., evaluates it. But the score can change dramatically if the consolidated financial results differ from the company, the analyst said.
Both companies have issues with current projects. Globalelectroservice recently lost part of the work on a major contract for the construction of CHPP in Sovetskaya Gavan to “RusHydro”. The company won the tender to 13.2 billion RUB. was the General contractor of the CHP construction in 2014. The power plant in Sovetskaya Gavan is one of four in the far East, the construction of which RusHydro in 2012 received 50 billion rubles from the Federal budget. The General contractor complied with the contract by more than 50%, but can not provide the necessary pace, said RBC representative of “RusHydro”. The contractor is in a difficult financial position, explained, “RusGidro” informed. To speed up the construction part of the contract, the company handed its “daughter” — “Ust-Srednekangesstroy”.
“Stroinovaciya” also lost the contract to 3,1 billion rubles for the reconstruction of Khrabrovo airport in Kaliningrad region, it occurred in the fall of 2016. Reconstruction was carried out for the world Cup in 2018, the customer (Rosaviatsia) hoped that construction will be completed by the end of 2016. But the contractor is behind schedule more than nine months, completed less than a third of the work and “did not provide construction works” 700 million rubles of the advance, said the head of Federal air transport Agency Alexander Neradko. “Stroinovaciya” challenged the contract termination in court.
Globalelektroservis has received a loss in 2016 because of overdue debts of the contractors, said RBC representative of the company. In the portfolio there are contracts that are sold on basavanagudi basis, the company largely finances the construction at their own expense, he adds.
Given current market conditions to sell these companies will be difficult, says the analyst of the company “BK-Savings” Sergey Suverov. After a surge of bankruptcies of engineering companies in 2015, the banks have recognized this business is high risk and has reviewed the terms of the loans and Bank guarantees for the industry. “Before the crisis, fees for the granting of Bank guarantees amounted to 0.7–1% per annum, today, the 3-6% per annum with cash collateral (bills, Deposit) is not less than 40%. The contracts are often sold on basavanagudi basis,” said Suverov.
Currently in the bankruptcy process are such major contractors as NPO “Mostovik”, OJSC “VO “Tekhnopromexport”, Corporation “Transstroy”, “Volgomost”, the CJSC “ECC “Soyuz-grid” and JSC “E4 Group”, he enumerates. Terms on Bank guarantees and credits has changed, the contractors began to experience a shortage of working capital, confirms a source in “Amount”.
Interest in risky assets may be investment funds, analysts said. Suverov said that, in assessing such companies, the investor first looks at the portfolio of technology and business. In General, according to him, the profitability of the engineering business is now at the level of 9-12%. The representative of the Russian direct investment Fund declined to comment on this subject, the representative of one of the largest Russian investment companies — Fox, specializing in direct investments, and did not answer the question RBC.
Globalelectroservice and “Stroynovatsiya” is not the only structure of the Summa, which are experiencing financial difficulties. FESCO transportation group (“the Amount” of 32.5% of its parent company “far East sea shipping company”, the Boston consulting group) in may for the third time are unable to pay the coupon in two Eurobond issues — a $550 million (8%) and $325 million (8.7% per annum). FESCO does not serve and ruble debt: in October 2016, the company has defaulted in the payment of the third coupon of bonds of BO-01 and has not paid the fourth coupon on the securities in April 2017. The payment of both coupons DMIT proposed to postpone to October 2017.
Hardly “Amount” sells the company to repay debts or find money for “the TransContainer” — their value is too small, the head of INFOLine-Analytics Mikhail Burmistrov. Most likely, Sum wants to optimize the structure of the engineering business and the money spent on the development of the remaining companies, he said.