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9 September 2011
Russia could sell Rosneft, VTB, Sovcomflot stakes in 2012, RZD in 2014

MOSCOW. Sept 9 (Interfax) - The Russian Economic Development Ministry proposes to sell up to 15% of the shares in oil producer Rosneft (RTS: ROSN) in 2012, a ministry official told reporters.

The ministry also suggests selling 10% of VTB (RTS: VTBR), 25% of Sovcomflot and 4.11% minus one share in Federal Grid Co (RTS: FEES) next year, and enough shares in RusHydro (RTS: HYDR) to ensure that the state retains 50% plus one share, said Alexei Uvarov, head of the Econ Ministry's property relations department.

Uvarov said the proposals were referred to the Finance Ministry for the purposes of amending the 2012-2014 budget projections.

Planned privatization revenue is 300 billion rubles in 2012, 380 billion rubles in 2013 and 475 billion rubles in 2014, he said.

The privatization revenue forecasts are "very approximate and fairly conservative," Uvarov said, adding that the actual figures could be higher, following the sales.

Other companies in which shares could be privatized in 2012-2014 include Russian Railways (RZD) (RTS: RZHD), Rosselkhozbank (RTS: RSHB), Transneft (RTS: TRNF), Zarubezhneft, Alrosa, United Grain Corp, United Ship Building Corp and Uralvagonzavod.

"We expect the most revenue in 2012 from the privatization of Rosneft. So far we're discussing 10% or 15%, or best to say up to 15%, from which we plan to net more than 200 billion rubles," Uvarov said.

The sale of 10% of VTB next year could generate at last as much as [the 94 billion rubles] in 2011, he said.

"We plan to start privatizing RZD in 2012-2014, but probably not until 2014. The issue is still open as to whether we sell federal shares or whether new shares are issued to raise money for the company's investment programs," Uvarov said.

"RZD is a very large, complex company, for which we are being very cautious in our planning," he said.

Uvarov said 25% minus one share in RZD might be sold, but it is so far impossible to say whether this will be sold in one fell swoop or whether the stake will be split up and sold in stages.

"We plan to reduce the state stake in RZD to 75% plus one share. I don't know whether we'll do so by [selling] 25% in a single lot as 25% of RZD is a lot anyway, not to mention the fact it has no public history. On the other hand it would also be strange to split the stake up as investors might adopt a wait-and-see attitude in the knowledge that this is not the last portion of the stake. This is a question of the sale tactics that the investment banks selected will work out," Uvarov said.

As for this year's privatization, Uvarov said the budget has so far received 100 billion rubles, but some major sales might happen at the end of the year. Shares in Sberbank (RTS: SBER) might be sold, but it is for the Central Bank to decide that. In addition, shares in liquefied gas distributor SG-Trans might be sold, as might 20% of the Novorossiysk port.

As for 25% of Sovcomflot, Uvarov said "we're preparing this package for sake this year," adding that the sale could theoretically take place late November or early December, depending on the market.

Another 25% minus one share in Sovcomflot might be sold in 2012, Uvarov said. "We'll be selling all of Sovcomflot over a long period of time. We have 100% of Sovcomflot and plan to pull out of it altogether," he said, adding that the shipping company would be sold in installments.

Uvarov was unable to say how much of RusHydro might be sold in 2012. RusHydro is about to absorb a stake in Eastern Energy Systems (RAO ES Vostok), so its capital will increase, by an as yet unknown quantity.

He said regarding United Grain Corp that plans existed to increase its charter capital and raise money for it directly.

As for Transneft, this is an infrastructure company in which the government stake cannot fall below 75% plus one share, so 3% or slightly more of this company will be sold in 2012-2014.

Zarubezhneft is a "very complicated company [to privatize] as it is bound by international agreements, and in order to prepare the company for sale it is necessary to examine those agreements and hold additional international negotiations," Uvarov said.

United Ship Building Corp is "definitely a forward-looking, large and interesting company." "It is in the final stage of its formation, and we think the last integration processes in the ship building industry will take place in the next 18-24 months, and then we'll be able to offer it on the market."

"We and the Finance Ministry both believe we should start to sell Alrosa." "But the thing here is that there are other shareholders in the form of constituent members of the [Russian] federation and municipalities, and we have to coordinate out plans with them, so we can't act on our own." "Not everything is clear yet, but the general polity is that we will be pulling out of Alrosa," Uvarov said.

The sale of 25% minus one share in Uralvagonzavod is possible, as is an IPO, but not until after 2012.

Asked whether the new-look Rostelecom (RTS: RTKM) might be privatized, Uvarov said "we talked about the possible privatization of Rostelecom and Svyazinvest post-merger. We are not now going back on this, but we are saying the reorganization process has to be finally rounded off and some regulatory issues resolved."

Finally, Uvarov said the Inter-District Grid Company Holding (IDGC Holding) itself would not be sold, but the regional grid companies would be reformed by selling the subsidiaries, so the holding will eventually cease to exist anyway.

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