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Russian govt plans to sell shares in Sovcomflot and ALROSA by yearend

September 05, 2013, 23:51 UTC+3
Russia will also continue to privatise state-owned banks after 2015
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STRELNA, September 5 (Itar-Tass) - The Russian government is planning to sell state-owned shares in the shipping company Sovcomflot and diamond producer ALROSA before the end of the year, Federal Property Management Agency Head Olga Dergunova said on the sidelines of the Group of Twenty Summit in St. Petersburg on Thursday, September 5.

Speaking of ALROSA, Dergunova said she could not comment on the issue -- “it’s the period of silence now.”

She confirmed plans to sell 5 percent of shares in Russian Railways. “We intend to do this in two stages: 5 percent at the first stage in 2014 and the next 20 percent in 2015-2016,” she said.

The privatisation of Sovcomflot has been postponed several times. The Ministry of Economic Development suggested selling 25 percent minus 1 share not earlier than 2014 and reducing the government’s share in the company to 25 percent plus 1 share by the end of 2016.

In August 2012, Deutsche Bank was chosen as organiser of stock placement. In July of this year it was announced that the company might IPO its shares on the New York Stock Exchange.

The Sovcomflot Group is one of the oldest shipping companies in Russia. It specialises in providing oil, gas and LNG transportation services. Its adjusted net income in the first half of 2013, according to the international accounting standards, decreased by almost 77 percent year on year to 13.4 million U.S. dollars.

Fourteen percent of ALROSA shares, of which 7 percent will be provided by the company’s principal shareholders - the governments of Russia and its constituent republic of Yakutia - will be offered on the market in October or November 2013 after consultations with investment companies in London, New York and Washington.

The shares to be sold are appraised at 1-1.4 billion U.S. dollars, based on the company’s overall value of 7-10 billion U.S. dollars. The company’s current value is 7.4 billion U.S. dollars.

ALROSA is the world’s largest diamond producer in terms of carats. It accounts for 30 percent in the global diamond production in terms of value. The company is among the top ten of Russia's most efficient enterprises and accounts for 97 percent of Russia’s overall diamond output.

ALROSA’s output in the first half of 2013 had totalled 17.1 million carats, a 5 percent growth year on year.

The company’s probable reserves make up about one third of the world's diamond resources. About 95 percent of the company’s total diamond production (in terms of value) are gem and near-gem quality diamonds. ALROSA has its own advanced exploration complex enabling it to maintain and expand its proven reserves.

The Russian government said earlier its privatisation plan included more than 850 organisations, such as VTB bank, Sovcomflot, the United Grain Company, RusHydro, Sberbank, Rosneft, Rosagrolizing, Rosselkhozbank, Russian Railways Company, and others.

Russia will also continue to privatise state-owned banks after 2015.

According to the privatisation plans, the government intends to reduce its share in Sberbank, VTB and Rosselkhozbank to 50 percent plus one share before 2013.

Finance Minister Anton Siluanov admitted earlier, however, that privatisation targets for 2013 will not be met but this is not the reason to give up the sale of state-owned property.

Subject to privatisation will be large enterprises in the oil and oil transportation sector, air transportation, financial sector, machine-building, and defence industry.

There are 2,500 more enterprises across Russia that can be of interest to investors. These companies are engaged in wood processing, agriculture and other industries.

The Russian government plans to receive 3,000 billion roubles from the privatisation of state-owned property in 2012-2016.

This exceeds privatisation revenues over the past 18 years.

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