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Government privatization plans move ahead in contradictory fashion
BusinessNewEurope - bne.eu - 5.28.12 - JRL 2012-98

The newly appointed Russian government's privatization plans are set to move ahead against the backdrop of equity market turmoil, but are beset with contradictions. Economy minister Andrei Iousov has written to prime minister Dmitry Medvedev asking to accelerate the privatization process, while first deputy prime minister Igor Shuvalov in a meeting called on Iousov to broaden the list of assets planned for privatization. At the same time, President Vladimir Putin appears to have excluded privatization of assets in the all-important energy sector from the government's remit.

Boardroom with Empty Chairs
file photo
Economy Minister Andrey lousov, in a letter to prime minister Dmitry Medvedev quoted by Interfax May 28 , advocated accelerating privatization by selling within months 7.9% of Sberbank, 49% of United Grain Company, 10% of Rosnano, 24.9% of Sovcomflot, 55% of Vanino Port and 25.5% of Murmansk Port. According to business daily Vedomosti, the updated programme should be ready in two weeks.

In a parallel development, First Deputy Prime Minister Igor Shuvalov has demanded that the government expand the list of assets to be privatized, according to Vedomosti May 28. Shuvalov, responding to a publicly aired call from Medvedev May 22 to push on with privatization, called on deputy prime ministers and the economy ministry to add more large companies including federal unitary companies to the list.

Plans to accelerate and broaden the privatization programme could be compensation for the apparent exclusion from the government remit of the sector, say analysts. President Vladimir Putin has apparently transferred responsibility for privatization of state assets in the oil and power sectors to Rosneft CEO Igor Sechin, in his capacity as chairman of the board of state energy holding company Rosneftegaz. Sechin, President Vladimir Putin's long-standing 'energy tsar', now seems set to continue in this role in his new position, and is opposed to privatization of energy assets in current market conditions. May 22 Putin signed a decree naming Rosneftegaz as a state actor in the energy sector with a remit to boost valuations by investing in and consolidating assets.

It is likely that Sechin will push ahead with consolidating and restructuring assets, before proceeding with privatization in the sector. According to Kommersant May 29, today citing unnamed sources, state-owned energy companies MRSK Holding and FSK, could be merged into a unified company on the basis of the National Grid Company (NGC), a 100% subsidiary of Rosneftegaz.

Further muddying the waters, Iousov in the letter to Medvedev quoted by Interfax proposed full privatisation of regional electricity distribution businesses, a long-held aim of government liberals, despite Sechin's apparent policy remit for the sector.

"While, according to state officials, some of the assets from the former privatization list, such as 7.9% of Sberbank, 24.9% of Sovkomflot and 10% of Rosnano could be prepared and privatized in the coming 3-5 months, we believe this plan is highly ambitious," write Alfa Bank analysts. "First, with the exception of Sberbank, other companies on the short list are not public and are not known by investors. Second, after the recent presidential decree ordering assets in the energy sector to be consolidated under the umbrella of a state-controlled entity, privatization as a long-term government priority looks very questionable."

"This news is soothing confirmation that the overall vector towards the ambitious privatisation push remains intact, notwithstanding the time-out on the privatisation of the energy and electric utilities sector introduced by President Vladimir Putins decree last week," write VTB analysts. "Even as the privatisation is a source of additional sizable supply of Russian equities, implementing it in a determined way would act as a powerful indication of the new governments execution capacity and, hence, would enhance the credibility of the constructive policy agenda promoted by Putin and Medvedev over the past six months."

Keywords: Russia, Economy, Business - Russian News - Russia

The newly appointed Russian government's privatization plans are set to move ahead against the backdrop of equity market turmoil, but are beset with contradictions. Economy minister Andrei Iousov has written to prime minister Dmitry Medvedev asking to accelerate the privatization process, while first deputy prime minister Igor Shuvalov in a meeting called on Iousov to broaden the list of assets planned for privatization. At the same time, President Vladimir Putin appears to have excluded privatization of assets in the all-important energy sector from the government's remit.

Boardroom with Empty Chairs
file photo
Economy Minister Andrey lousov, in a letter to prime minister Dmitry Medvedev quoted by Interfax May 28 , advocated accelerating privatization by selling within months 7.9% of Sberbank, 49% of United Grain Company, 10% of Rosnano, 24.9% of Sovcomflot, 55% of Vanino Port and 25.5% of Murmansk Port. According to business daily Vedomosti, the updated programme should be ready in two weeks.

In a parallel development, First Deputy Prime Minister Igor Shuvalov has demanded that the government expand the list of assets to be privatized, according to Vedomosti May 28. Shuvalov, responding to a publicly aired call from Medvedev May 22 to push on with privatization, called on deputy prime ministers and the economy ministry to add more large companies including federal unitary companies to the list.

Plans to accelerate and broaden the privatization programme could be compensation for the apparent exclusion from the government remit of the sector, say analysts. President Vladimir Putin has apparently transferred responsibility for privatization of state assets in the oil and power sectors to Rosneft CEO Igor Sechin, in his capacity as chairman of the board of state energy holding company Rosneftegaz. Sechin, President Vladimir Putin's long-standing 'energy tsar', now seems set to continue in this role in his new position, and is opposed to privatization of energy assets in current market conditions. May 22 Putin signed a decree naming Rosneftegaz as a state actor in the energy sector with a remit to boost valuations by investing in and consolidating assets.

It is likely that Sechin will push ahead with consolidating and restructuring assets, before proceeding with privatization in the sector. According to Kommersant May 29, today citing unnamed sources, state-owned energy companies MRSK Holding and FSK, could be merged into a unified company on the basis of the National Grid Company (NGC), a 100% subsidiary of Rosneftegaz.

Further muddying the waters, Iousov in the letter to Medvedev quoted by Interfax proposed full privatisation of regional electricity distribution businesses, a long-held aim of government liberals, despite Sechin's apparent policy remit for the sector.

"While, according to state officials, some of the assets from the former privatization list, such as 7.9% of Sberbank, 24.9% of Sovkomflot and 10% of Rosnano could be prepared and privatized in the coming 3-5 months, we believe this plan is highly ambitious," write Alfa Bank analysts. "First, with the exception of Sberbank, other companies on the short list are not public and are not known by investors. Second, after the recent presidential decree ordering assets in the energy sector to be consolidated under the umbrella of a state-controlled entity, privatization as a long-term government priority looks very questionable."

"This news is soothing confirmation that the overall vector towards the ambitious privatisation push remains intact, notwithstanding the time-out on the privatisation of the energy and electric utilities sector introduced by President Vladimir Putins decree last week," write VTB analysts. "Even as the privatisation is a source of additional sizable supply of Russian equities, implementing it in a determined way would act as a powerful indication of the new governments execution capacity and, hence, would enhance the credibility of the constructive policy agenda promoted by Putin and Medvedev over the past six months."


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