RusHydro Discount Widens on Share Sale Concern: Russia Overnight

OAO RusHydro (RSHYY) sank in New York to trade at the widest discount versus Moscow shares in two weeks on prospects the board of Russia’s largest hydropower company will support a secondary share offering.

American depositary receipts of the Moscow-based company tumbled 11 percent yesterday to $2.30, extending the discount versus the shares to 3.7 percent, the most since June 5. The retreat sent the Bloomberg Russia-US Equity Index (RUS14BN) of the most- traded Russian companies listed in the U.S. down 1.1 percent to 87.53 in New York yesterday. The RTS stock-index futures retreated 0.8 percent to 131,765.

RusHydro may hold a secondary share sale to allow OAO Rosneftegaz to buy a 25.8 percent stake in the company, Kommersant said June 19, citing people familiar with the plan. The company’s board meets tomorrow to discuss development plans through 2016, and could signal it welcomes the deal, according to Otkritie Financial Corp. President Vladimir Putin said last month that state-owned Rosneftegaz can acquire more energy assets in addition to its control in oil and gas producers.

“This is a perfect illustration of unpredictability, not only RusHydro, but the whole sector,” Sergey Beiden, an analyst at Otkritie brokerage in Moscow, said by phone yesterday. “People are running away from such risks.”

The Market Vectors Russia ETF (RSX), a U.S.-traded fund that holds Russian shares, fell 2.3 percent to $25.60 yesterday. The RTS Volatility Index, which measures expected swings in the index futures, rose 1 percent to 38.45 points in New York.

‘Foreign Factors’

The Federal Reserve said yesterday it will expand its program to replace short-term bonds with longer-term debt by $267 billion through the end of 2012 in a bid to reduce unemployment and protect the expansion.

German Chancellor Angela Merkel declined to commit to direct sovereign debt purchases through the euro-area bailout fund in comments made yesterday in Berlin.

“The Russian market is a hostage of foreign factors,” Konstantin Chernyshev, head of research at UralSib Financial Corp. in Moscow, said by phone yesterday. “It depends on what is happening in Europe even more than on what U.S. news flow is, including stimulus measures. Europe is an extremely important factor for Russia.”

Oil dropped to an eight-month low in New York yesterday after the U.S. Energy Department reported that the country’s crude inventories climbed to the highest level in 22 years. Brent crude in London dropped to an 18-month low and Urals crude, Russia’s chief export blend, retreated to the lowest since 2010.

Valuation

RusHydro fell 7.6 percent to 77.82 kopeks in Moscow, or 2 U.S. cents, dropping by the most since May 23 yesterday. The government owned 60.38 percent of RusHydro as of March 31, according to the company’s website.

If the Kommersant report is right, the transaction would value RusHydro’s common shares at 1.1 rubles apiece, compared with 1.6 rubles expected by the market, Beiden said.

Elena Vishnyakova, the head of RusHydro’s press office in Moscow, said by e-mail yesterday that the company is not commenting on the Kommersant report.

VimpelCom Ltd. (VIP), the world’s sixth-biggest mobile phone provider, lost 0.2 percent to $8.12 yesterday, dropping for the first time in five days. A Moscow court rejected the company’s request to revise its May 25 decision in which it banned VimpelCom and its Russian unit from paying dividends from their 2011 profits, Interfax news agency reported yesterday.

The May 25 ruling came as the Federal Anti-Monopoly Service claimed Egyptian billionaire Naguib Sawiris’s Weather Investments II SARL sold 11.3 percent of VimpelCom’s voting stock to Telenor ASA, according to the statement.

Bobby Leach, the Amsterdam-based communications director for VimpelCom, didn’t immediately return calls made after hours.

‘Shouldn’t Take Years’

OAO Sberbank (SBRCY), eastern Europe’s largest lender, fell 2.5 percent to $10.48 in New York yesterday, falling by the most since June 1 and trading at a 0.5 percent discount to the bank’s Moscow-traded shares.

Russia’s government shouldn’t delay its planned sale of shares of Sberbank, Chief Executive Officer German Gref said in St. Petersburg yesterday. Russia plans to sell 7.6 percent of the bank.

“Choosing the moment shouldn’t take years,” Gref said. “It should take months, perhaps half a year.”

OAO Lukoil (LUKOY), Russia’s second-biggest oil producer after OAO Rosneft, retreated 0.6 percent to $53.80. Lukoil lost 0.1 percent to 1,748.60 rubles, or $53.64, in Moscow yesterday.

Oil for July delivery declined 2.7 percent to $81.80 a barrel on the New York Mercantile Exchange yesterday, the lowest since Oct. 5. Prices are down 17 percent this year. The July contract expired yesterday.

Rusal Falls

Brent oil for August settlement declined 3.2 percent to $92.69 a barrel on the London-based ICE Futures Europe exchange yesterday, the lowest since Dec. 17, 2010. Urals crude slumped 3.2 percent to $91.09 yesterday, the lowest since Dec. 30, 2010.

United Co. Rusal, the world’s largest aluminum producer, dropped 1.3 percent to HK$4.60 in Hong Kong trading as of 11:26 a.m. local time. The MSCI Asia Pacific Index fell 0.4 percent today as a preliminary reading of a purchasing managers’ index by HSBC Holdings Plc and Markit Economics showed China’s manufacturing may shrink in June.

To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net

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