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Rosneft privatization deal is completed — Kremlin

December 07, 2016, 21:06 updated at: December 07, 2016, 21:27 UTC+3

The budget will receive 10.5 bln euro from the privatization

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Vladimir Putin and Igor Sechin

Vladimir Putin and Igor Sechin

© Mikhail Metzel/TASS

MOSCOW, December 7. /TASS/. The deal on privatization of shares in Russian oil major Rosneft is completed, Chief Executive Officer of the company Igor Sechin reported to Russian President Vladimir Putin on Wednesday.

"Igor Sechin reported to Vladimir Putin in the Kremlin that the privatization deal for 19.5% shares in Rosneft was completed," press secretary of the President Dmitry Peskov said. "A consortium of Glencore and Qatar’s sovereign fund has become the strategic investor," Peskov added.

"The budget of the Russian Federation will receive 10.5 bln euro from the deal," Peskov said.

Deal of the year

Putin said Rosneft privatization is the largest deal of the year on the global energy market, the press secretary noted.

"Vladimir Putin called it the largest deal on the global energy market in 2016," Peskov said.

"President Putin congratulated Sechin and all those related to the transaction with success and noted that the deal was completed on the upward trend of oil prices," the press secretary added.

The deal was made in the most successful time when oil prices are rising, Putin said at the meeting Sechin showed by Rossiya 24 TV Channel.

"The deal was made on the upward trend of oil prices; accordingly this influences on the company value and time is highly successful in this sense," the president said.

Сonversion of privatization earnings

Putin instructed to perform phased conversion of revenues from Rosneft privatization into rubles in order to avoid exchange rate fluctuations, Peskov said. 

"The President noted a huge amount of currency [from the sale of Rosneft shares - TASS] will come to the country soon and an appropriate phased conversion system should be provided," Peskov said.

"The President asked [Rosneft CEO Igor] Sechin to work out an appropriate conversion action plan in cooperation with the Government, the Finance Ministry, and the Central Bank," he added. Rosneft privatization deal should not lead to ruble fluctuations on currency market, according to Putin. 

Government will continue holding controlling stake in Rosneft, Putin said.

Rosneft will consult with the Central Bank to develop the tactics in order to avoid market volatility outbreaks when converting currency from sales of the stake in the oil company, press service of the regulator told TASS on Wednesday. "The case in point is consultations of Rosneft with the Bank of Russia to work out such tactics during currency conversion, which will help to avoid short-term volatility outbreaks on the currency market," press service of the Bank of Russia said.

Rosneft held talks with over 30 potential investors

According to Sechin, Rosneft hold talks with more than 30 potential investors in the course of preparation of its 19.5% stake for sale.

"We held commercial negotiations with over 30 companies, funds, institutional investors, sovereign funds and financial institutions of Europe, the US, Middle East, and Asia-Pacific nations," Sechin said.

"The consortium becoming the Rosneft shareholder was created by Qatar’s sovereign fund and Glencore trading company, our long-term partner. Each of consortium members has 50%," Sechin said.

Sechin added Consortium will pay for Rosneft shares by own and borrowed funds. Rosneft will set up joint venture in production sphere with the consortium participants.

The deal is strategic, with additional agreements, he noted. Rosneft selling price is the highest possible, he added. 

Growing capitalization

In general, Rosneft held talks with over 30 potential investors during preparations for selling a 19.5% stake. "We held commercial talks with over 30 companies, funds, professional investors, sovereign funds, financial institutions from the countries of Europe, America, Middle East, Asia Pacific," he concluded.

"I am confident high quality of attracted investors and Rosneft’s transition to a new dividend payment standard approved as 35% by the government will definitely lead to growth of company’s capitalization. According to our estimates, the price of the stake owned by the government, despite sale, will grow approximately by 80 bln rubles ($1.3 bln)," Sechin said.

The selling price of the stake in Rosneft is maximum possible, he noted. "The concluded transaction is a market one, based on stock prices of Rosneft. The selling price is a maximum possible from our point of view with a minimal discount, offered by the investor as 5% of exchange prices on December 6," Sechin said.

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