A fight for control of OAO Novorossiysk Commercial Sea Port (NCSP), owner of Russia’s two biggest oil-export terminals, threatens plans to diversify into grain and cargoes that are more profitable than crude.
OAO Transneft, a shareholder and Russia’s oil-pipeline operator, is seeking to bring in OAO Rosneft, the state-run crude producer, to buy the government’s 20 percent stake in the port company and bolster its position. A feud erupted between Transneft and its partner Summa Group over management last month, and Novorossiysk Chief Executive Officer Rado Antolovic stepped aside March 19 amid a criminal investigation.
Rosneft’s entry may threaten Novorossiysk’s shift away from oil, hurting its share price, said Andrey Rozhkov, a Moscow- based transportation analyst at IFC Metropol. Crude accounts for about 70 percent of cargo volume and less than 30 percent of revenue, according to company statements. Shipments, about 40 percent of exports from Russia, the world’s biggest oil producer, fell last year and may be little changed this year.
“Rosneft doesn’t bring much to the table in terms of the port’s management, and other oil companies don’t want to see it among the shareholders,” Rozhkov said. “Rosneft CEO Igor Sechin is looking to consolidate oil distribution and transportation properties.”
Transneft last month dropped a demand to change management at the port after agreeing with Summa, controlled by businessman Ziyavudin Magomedov, to elect Maxim Grishanin, the pipeline operator’s first vice president, as Novorossiysk’s board chairman. Summa and Transneft hold 50.1 percent of the port group known as NCSP through a joint venture.
The port operator’s global depositary receipts fell 5.4 percent at $8.10 in London today, the lowest since Jan. 30, after the board suspended Antolovic and set a vote for a new CEO on June 18. The stock had soared 34 percent this year to a peak of $9.53 on Feb. 14.
Antolovic said he was stepping aside “temporarily” and would defend himself against “groundless” charges, according to a March 19 statement relayed by the company’s press service.
Novorossiysk’s offices were raided for documents on March 15 in connection with a claim that in 2011 a former acting CEO of the port stole $1.5 million paid by a local client to extend a contract, the Investigative Committee said on its website. The statement didn’t identify the suspect by name.
The company’s board named Executive Director Yuriy Matvienko acting CEO, according to a March 20 statement on Transneft’s website.
“We’re seeing clear pressure on the company and its management, including the recent checks by the investigative committee,” Kirill Kazanli, a Moscow-based analyst at Citigroup Inc., said in a March 15 telephone interview. “In my opinion, the end goal is to get control over the oil-handling terminals.” Citigroup rates Novorossiysk the equivalent of hold.
There is no conflict between Transneft and Summa, said a Summa official who asked not to be identified, citing company policy. Summa will decide whether to bid for the state’s stake after the terms and conditions of the sale are set, he said.
“The government will act in its own best interest,” Igor Dyomin, a Transneft spokesman, said by phone March 18. “We will continue to develop the port.”
Crude volumes fell at Novorossiysk’s port in the Black Sea city of the same name and its Primorsk facility on the Baltic Sea last year, after Russia opened new oil-export capacity at Ust-Luga near St. Petersburg and expanded Kozmino port on the Pacific coast.
In the first two months of 2013, handling fell to 15.8 million tons, down 17 percent from a year earlier, the company said March 14. The Black Sea crude-oil volumes probably will drop by 12 percent this month, according to a loading program obtained by Bloomberg.
Novorossiysk’s strategic plan to 2020, approved last year, called for the expansion of high-margin freight, such as containers, refined products and bulk cargo. The port charges about $2.70 a ton to handle liquids such as crude, while it earns between $5 and $8 for each ton of grain, Rozhkov said. Metropol has a buy recommendation on Novorossiysk.
The government plans a sale of Novorossiysk shares this year, probably missing the “spring window,” Olga Dergunova, the head of Federal Property Management Agency, said in Moscow last month. The port may sell new stock to dilute the state’s holding, or a strategic investor may buy the stake, she said.
State companies will be allowed to participate in privatizations only as a junior partner in a venture, she said.
Rosneft and Transneft may seek to take over the port group’s crude and oil-product export terminals and leave Summa in control of the grain, metals, containers and coal terminals, according to Kazanli. Summa controls almost 50 percent of Russian trader United Grain Co.
Sechin, a former aide to President Vladimir Putin, has built Rosneft into Russia’s largest oil company through acquisitions and is carrying out a $55 billion takeover of TNK- BP, Russia’s third-biggest oil company, to become the world’s largest publicly traded crude producer by volume.
More than 30 strategic investors may be interested in buying the government’s stake, including United Capital Partners Fund, owned by Ilya Sherbovich, who is on the boards of Rosneft and Transneft, Vedomosti newspaper reported this month, citing an unidentified person with knowledge of the state’s sale plans.
“It’s very likely that Rosneft may become a shareholder in Novorossiysk port,” Kazanli said. “Sechin has said more than once that he believes NCSP is a strategic asset that should remain under state control.”