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Russia May Sell Stakes in Rosneft, Other Companies to Raise $29 Billion
Russia may raise 883.5 billion rubles ($29 billion) to help cover its budget deficit by selling minority stakes in 10 companies including OAO Rosneft, the country’s largest oil producer, the Finance Ministry said.
The ministry also proposes the sale of holdings in pipeline operator OAO Transneft, Russia’s two largest lenders, OAO Sberbank and VTB Group, OAO Russian Railways, shipper OAO Sovcomflot, the OAO RusHydro utility, Russian Agricultural Bank and OAO Agency for Housing Mortgage Lending. The 2011-2013 privatization plan must be approved by the government, and will be discussed at its next meeting.
The government is seeking to boost revenue to narrow the budget deficit, which this year may reach 2.4 trillion rubles ($76.9 billion), equal to 5.4 percent of gross domestic product, the government said on June 10. Economy Minister Elvira Nabiullina said on June 18 that Russia may raise 72 billion rubles from this year’s government asset sales.
“Privatization is a measure of last resort for deficit financing, and with state debt at around 7-8 percent of GDP, we view the sale of state assets as premature,” Alfa Bank analysts including Natalia Orlova and Pavel Sorokin said in a note to investors today. “As the government is planning to sell only minority rather than strategic stakes, the ultimate decision will be sensitive to market conditions.”
‘Maximizing Value’
The Vedomosti newspaper reported details of the asset sale today. The report was confirmed by a Finance Ministry official, who declined to be identified in line with ministry rules.
Rosneft isn’t in formal talks with the government about a share sale, said company Vice President Peter O’Brien.
“No concrete discussions have been had yet with the company,” O’Brien said by telephone. “Clearly it would make sense to do after reform of the tax regime, in terms of maximizing value to the state.”
The government said last year it sought to sell state energy and transport holdings, earmarked about 5,500 enterprises for divestment and pledged to sell shares in companies that are already publicly traded. Stakes lined up for sale included as much as 25 percent of Sovcomflot, Chief Executive Officer Sergei Frank said on Dec. 28.
‘All Major Banks’
The Economy Ministry began talks with “all major banks” including JPMorgan Chase & Co., Bank of America’s Merrill Lynch unit, UBS AG and Troika Dialog to choose consultants for the privatization, Alexei Uvarov, head of the Economy Ministry’s property department, said on April 27.
“The Finance Ministry will still have to give preference to borrowing as the primary source of deficit financing,” Moscow-based Alfa Bank said. “The government is in a good position to attract additional debt.”
Prime Minister Vladimir Putin said on July 12 that Russia’s budget deficit may shrink to less than 5 percent of GDP this year from 5.9 percent in 2009, as the world’s biggest energy exporter recovers from a record 7.9 percent contraction last year. The shortfall is set to narrow to 3.6 percent next year, 2.4 percent in 2012 and 1.5 percent in 2013, Deputy Finance Minister Sergei Storchak said last month.
The government may earn 298 billion rubles from asset sales next year, 276.1 billion rubles in 2012 and 309.4 billion in 2013, the Finance Ministry official said.
The deficit was 2.3 trillion rubles, or 5.9 percent of GDP, at the end of 2009, the first shortfall since 1999.
Russia plans to borrow 1.5 trillion rubles next year, 1.3 trillion rubles in 2012 and 931 billion rubles in 2013, Storchak said, citing preliminary estimates in the government’s borrowing program. The country will meet 90 percent of its borrowing needs on the domestic market, he said.
To contact the reporter on this story: Maria Levitov in Moscow at mlevitov@bloomberg.net
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