Russia wants to split Sovcomflot sale among small-stake investors

MOSCOW: Russia plans to sell part of state shipping firm Sovcomflot next month, hoping to draw in a wide range of small-stake investors rather than a strategic buyer who could threaten Moscow’s control of the group, banking and industry sources say.
The current era of low tanker market prices is far from the ideal time for Sovcomflot to raise revenue with a share offer, as freight rates were at their highs in 2015. Sovcomflot operates the world’s second largest fleet of oil tankers.
But the tangled history of Russian privatisations has often been driven as much by political and personal factors as commercial ones.
Sovcomflot is led by Sergei Frank, once transport minister under President Vladimir Putin, whose privatisation programme is an effort to replenish state coffers hit by the oil price collapse and Western sanctions over Moscow’s actions in Ukraine.
The firm has long-term contracts with major energy producers, making it one of the jewels in the programme.
Analysts say the deal could be especially favourable for investors, because low oil prices are likely to push down the current price of shares, with the prospect of big returns later.
A banking source close to the deal, and a government source, said that the latest plan calls for a wide range of investors, with no strategic or anchor investors involved.
“A strategic investor will ask for the right to be involved in the management, one day or another. This is not what Sovcomflot needs,” a government source said.
The banking source said that the plan is to attract as wide number of investors as possible, including foreigners.
Both declined to identify any potential bidders.
People familiar with the sale said there were plans for an initial public offering in Moscow in June.
In e-mailed comments to Reuters, Sovcomflot declined to comment on the details, saying that it was for the shareholder, the Russian state, to decide.
The Economy Ministry, which is overseeing the privatisation, said in e-mailed comments, “There is a high interest seen from both Russian and foreign institutional investors.”
Russia is selling 25 per cent of Sovcomflot, and hopes to earn as much as 30 billion roubles ($533 million) from the sale, according to the finance ministry.
The firm ships oil from remote locations not connected to the Russian pipeline system.
These include some of Russia’s biggest fields, such as Gazprom Neft’s Prirazlomnaya platform in the Pechora Sea, or the ExxonMobil-led Sakhalin-1 project.
Sovcomflot also has the contract to ship liquefied gas from Russia’s newest liquefied natural gas plant, Yamal LNG. “When you have 30-, 25-, 20-year-long contracts, it is an easy-to-sell story, especially via IPO,” the government source said.
First mooted in 2009, the launch of the privatisation has been repeatedly stalled.
The initial plan was to list Sovcomflot in New York and Moscow, but the US listing was dropped because of sanctions, another banker said.
Sovcomflot itself is not subject to sanctions but “there is an understanding it is better to do the deal here,” the banker said.— Reuters