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11 Jan, 2012 13:14

Undervalue puts privatisation into question

Vice Prime Minister Igor Sechin, who’s responsible for the energy sector, is suggesting the Government shouldn’t rush its privatisation programme.

According to Kommersant Daily, Mr Sechin says Russia’s major energy companies are currently undervalued. In 2010 the Ministry of Finance put forward the privatisation program to reduce the budget deficit. The privatisation of major state companies was expected to bring in around $9 billion a year to the country.The list of companies to be privatized includes major energy and mining companies – all driving the country’s economy. Now the Vice Prime Minister is questioning whether the sales of such enterprises as Rosneft, Transneft, RusHydro, and Zarubezheft, should go ahead as proposed. It was planned to sell 15% Rosneft stock by 2015. Igor Sechin insists the current Rosneft stock price of $7 is undervalued. The Vice Prime Minister is suggesting a price for the secondary public offering of about $11 per share. Rosneft had its initial public offering in 2006 and was worth about $6 per share back then. The price peaked in 2008 at about $9. Some analysts agree Rosneft shares will reach the government target price.“In 2008 the drop in securities price was caused by the crisis. The price has been growing since then along with the energy companies undergoing rejuvenation. Now the prospect for growth is rather bright due to the growing oil price”, says Vitaliy Mihalchuk from Investcafe. The analyst also points out Rosneft have got priority access to new deposits, which makes its development secure.On Transneft privatization Igor Sechin says selling its shares was unreasonable because of the complicated management and ownership structure and could take place only by 2013. Vitaliy Mihalchuk agrees with Mr. Sechin: “The company structure is not transparent, due to government control. The company securities will also go on growing if the owners make Transneft more open and attractive for investors”.Transneft securities have shown a consistent growth since 2009 a year after its shares entered the market. The Vice Prime Minister thinks RusHydro – the world's second-largest hydroelectric power producer – should conduct an IPO in 3 years’ time, when its stock will be worth more. Zarubezhneft should not IPO at all, being state company operating strategically.Jaroslav Lisovolik from Deutsche Bank thinks that even though the current challenging global market condition ”makes the strategic assets sale problematic, but more likely we will see more aggressive efforton the part of authorities to privatize in the second half of this year”.