Mostotrest General Director talks about Russian infrastructure risks

In an interview given to the Russian business daily Kommersant (13 November 2012), Mostotrest General Director Vladimir Vlasov discussed the issues that you face if you attempt to build infrastructure in Russia. He should know:  Mostotrest is a major diversified transport infrastructure construction company in the country, inter alia the largest bridge builder in the Russian Federation in terms of revenue.

He also disclosed that the company planned to buy from businessman Arkady Rotenberg for RUB 7.87 billion (approximately GBP 160 million)  the North-West Concession Company, which is the concessionaire of the high-profile construction project – the paid highway Moscow-Saint Petersburg, as part of plans to diversify the business.  At the same time, it is worth noting that Rotenberg is the main shareholder in Mostotrest.

Vlasov explains that, while there are no obstacles blocking the access of foreign companies on the Russian infrastructure construction market, there is one issue that may hold them back – the inability in Russian conditions to plan for all the potential risks that may arise and the fact that from the very outset in Russia sites are not ready for construction and necessitate a completely different approach: to build at extremely rapid tempos once the sites are ready to compensate for lost time.

Kerimov comes to rescue of SMP-Bank again

According to Russian business daily Kommersant (13 November 2012), billionaire oligarch and Dagestan Senator Suleiman Kerimov is once again providing funds for SMP-Bank, which is owned primarily by brothers Boris and Arkady Rotenberg (with interests of 37.27 per cent each), who allegedly have close ties with President Vladimir Putin.

As in August 2012, Kerimov is placing a USD 50 million subordinated deposit at the bank, which will subsequently be classified as capital further to a request filed with the Central Bank by SMP-Bank. This move will enable the bank to keep its capital adequacy ratio at above 10 per cent.

ChelPipe to dismiss 8 per cent of the personnel

According to the Russian business daily Kommersant (19 November 2012), welded and seamless steel tube and pipe manufacturer Chelyabinsk Pipe-Rolling Plant (ChelPipe) has submitted plans to the Ministry for Economic Development to dismiss 8 per cent of the personnel over 2012-2013 (1,400 production staff), attributing the move to the need to close down inefficient production facilities. It had already sacked 450 people by September.

According to analysts, the company had no choice due to its high debt burden, the debt restructuring assistance it received from the state and falling large pipe sales owing to the current economic slowdown.

 

 

Rosatom may acquire Czech interest in Slovak power plant project

According to Czech media (15 November 2012), Russian state nuclear power corporation Rosatom may acquire a 49 per cent interest in the JV Nuclear Energy Company of Slovakia from Czech energy company ČEZ. The other partner in the JV is Slovakia’s JAVYS.

The JV is building a new power unit of the Bohunice Nuclear Power Plant project located in Slovakia.  The construction contract is worth an estimated GBP 2.4 billion. Rosatom also supplies reactors for two units being built at Slovakia’s Mochovce Nuclear Power Plant.

Albert Kahn investing in rail car production plant, potentially with Sistema

According to Russian business daily Kommersant (16 November 2012), US architecture, planning, management and design company  Albert Kahn Associates is participating in the construction of a rail car production plant in Lipetsk at an estimated cost of RUB 14 billion (approximately GBP 278 million), with the capacity to produce 12,000 rail cars a year.

The project is to be implemented by the company Lipetksk Rail Car Construction Plant, which has filed a corresponding request with the authorities for the right to receive the status of resident of the Lipetsk Special Economic Zone, which would provide a significant number of tax breaks.

As well as Albert Kahn Associates, investors may include two businessmen linked to the diversified holding company Sistema. If this is the case, presumably these businessmen would then sell on their interests to Sistema, which has interests ranging rom IT and telecoms, to banking and insurance, media, pharmaceuticals and oil. Sistema has also been developing a rail freight business and sought to buy 25 per cent of Russia’s largest operator Freight One, only to lose out to Vladimir Lisin’s Novolipetsk Steel.

 

MegaFon CEO Ivan Tavrin to acquire interest in operator

According to the Russian business daily Kommersant (16 November 2012), the price per global depositary receipt will range from USD 20-25 during its listing on London Stock Exchange. and Moscow. As a result, the whole of MegaFon is being valued at approximately USD 11-14 billion.

Swedish telecoms operator Telia-Sonera and MegaFon Investments (owned by MegaFon) will be selling interests. After the IPO Alisher Usmanov’s AF Telecom will retain over 50 per cent of the mobile operator, with TeliaSonera holding 25 per cent minus one share.

In addition, MegaFon CEO Ivan Tavrin will own 1.25 per cent of the mobile operator through the purchase of 7.75 million shares from MegaFon Investments within one month of the IPO.

 

Usmanov advisers edit Wikipedia profile in run-up to MegaFon listing

As reported in The Guardian’s sister Sunday paper, The Observer on 18 November 2012, in an article entitled Alisher Usmanov in spotlight over Wikipedia profile, the advisers of oligarch and Arsenal investor Alisher Usmanov have tweaked his profile on Wikipedia, in particular in respect of his conviction by the Uzbek authorities and six-year prison sentence meted down in 1980.

This change  would appear to have been dictated by a desire to clean up his record for investors prior to the planned listing by MegaFon (in which Usmanov has a significant interest) on the London Stock Exchange, where another shareholder in the Russian mobile operator Swedish telco TeliaSonera plans to sell a 15 per cent interest for an estimated USD 1.7-2.1 billion.

The article provides more details on the charges that Usmanov faced and his contacts with the current Uzbek authorities. Nowadays Usmanov spends most of his time in Russia, where he has investments in precious metals, iron ore, steel, natural gas and various media, as well as a shareholding in the UK in the Premier League football club Arsenal.

According to recent articles in the Russian press, Usmanov may also end up playing a more significant role at nickel producer Norilsk Nickel, as he facilitates the dispute between the main shareholders Vladimir Potanin (Interros) and Oleg Deripaska (RusAl, Basic Element).

Usmanov is one of the richest men in the world, with a fortune valued at approximately USD 18.1 billion by Forbes in 2011.

Zaitsev ringing in the changes at Rostelecom

According to Russian business daily Kommersant (14 November 2012), Rostelecom Sales Director Pavel Zaitsev has been promoted to Senior Vice-President responsible for sales, IT and media assets at the telecoms operator. In addition, he will plan and control execution of the budget in the areas of innovation, organisational development, administration and macro-regional branches and take decisions on hiring and firing regional branch directors.

The international and long-distance telecom operator, which is controlled by state holding company Svyazinvest, is currently prioritising inter alia the development of  its own service centres and planning sales of 3G and 4G devices following the launch of corresponding mobile networks.

AAR and BP settle outstanding dispute

As reported in the Russian business daily Kommersant on 14 November 2012, the AAR Consortium (Alfa Group, Access and Renova) has reached an out-of-court settlement with former TNK-BP partner BP over the later’s breach of the shareholder agreement when it talked to Rosneft about a possible partnership, bypassing TNK-BP. At one stage, it had looked as if BP might be forced to pay out billions to its former partner AAR, or at least spend considerable amounts on expensive law firms to defer such payments. Now AAR has agreed the payment of USD 325 million, which looks like a bargain by comparison.

At the same time, in the end BP has ended up getting what it wants – creating a partnership with Rosneft separately from TNK-BP and by association AAR. BP has also made a significant amount from its exit from TNK-BP. This deal with AAR provides closure on an eventful partnership with AAR which will for the time being partner Rosneft at TNK-BP, presumably once AAR and BP have taken out dividends from the company.

 

Ministry for Economic Development forecasts Russia will be richer than Europe by 2030

According to Russian business daily Vedomosti [12 November 2012), the Ministry for Economic Development has submitted a forecast on Russia’s socio-economic development to 2030. According to two versions of the forecast – innovation-based and forced, Russia may overcome the historic gap with the developed world both technologically and in terms of living standards by 2030, with oil & gas accounting for most of exports, with science and knowledge and not production serving as the basis for revenues.

According to Deputy Minister for Economic Development Andrei Klepach, the implementation of large-scale development projects will change the shape of the economy. He claims that this will not require any new innovation, but simple implementation of existing government programmes.

According to these scenarios, Russia will grow more rapidly than the global economy (4.1 or 5.4 per cent per annum from 2013-2030, compared to global growth of 3 per cent). GDP per capita will increase by 2020  from almost 60 per cent of the level of the eurozone to 78-87 per cent, and increase the European level by 2030 and will be 10 per cent less than in the USA.

Klepach admits that this can only be achieved if budget rules are alleviated. Interestingly, the Organisation for Economic Cooperation and Development issued a forecast on the global economy to 2060, which indicates that Russia will not reach European levels, owing in part to the ageing of the population.