Tags: Official Russia Considers 50 Billion 5-Year Asset Sale

Official: Russia Considers $50 Billion 5-Year Asset Sale

Wednesday, 15 September 2010 08:17 AM

Russia plans to earn $50 billion from privatisation over the next 5 years and the government will overrule any objections from company managers over the sale of their firms, Finance Minister Alexei Kudrin said on Wednesday.

"We will have a privatisation programme for approximately five years, worth around $10 billion a year," Kudrin told the Reuters Russia Investment Summit.

This marks an increase from a previously announced plan to earn some $29 billion from asset sales over 3 years. Kudrin said new companies had been added to the list, but declined to specify which ones.

The original plan featured 10 companies, including largest oil firm Rosneft , Russian Railways, the Federal Grid Company (FSK), Rushydro.

"It (the privatisation plan) is in the high stage of preparedness ... The plan which we have submitted, in general, is for 5 years starting from 2011, which does not mean that we cannot start even this year if we are ready," Kudrin said.

Yuri Solovyov, the head of VTB Capital, a state-run investment bank and likely organiser of the deals, said on Monday that two privatisation transactions could happen this year, in the infrastructure and financial sectors.

"Now the situation on the whole is favourable for the sale. But ... volatility will be high for now on global markets, including on Russian assets. So if there is an insignificant fall, then we will press on with the plans. If there is a big fall, of over 20 percent, then we will have to think."

The sale would be Russia's biggest privatisation since the 1990s, and some analysts have expressed doubt that stakes in the big firms really will be on offer after some previous promises failed to become reality.

This time though, the government needs the cash to plug a budget deficit and to enable it to keep social spending high as Russia heads into 2012 presidential elections.

Kudrin played down the significance of the protests from the managers of some privatisation targets, such as Nikolai Tokarev, the head of state-run monopoly Transneft, who oppose the sale of their companies.

"The main thing is that the government wants to do it," Kudrin said.

"They (the managers) will not get out of it, because it is not those officials that make the decisions, but the government. The government has on the whole decided on this issue...I do not think that the opinions of individual managers will change the positions of the government."

Transneft's preferred shares were up more than 1 percent against a broadly weaker market, with analysts citing hopes that privatisation would improve management's relationship with minority shareholders and may boost dividends.



Privatisation is a key step towards modernising the Russian economy and ensuring that in the future it can catch up with the fast pace of growth seen in other emerging markets, Kudrin said. For the next three years, Russia's can grow just 4 percent annually, he added -- about half as much as China.

"To raise our (growth) potential, we need to carry out structural reforms, raise competitiveness in the economy, and improve the work of institutions of state governance," he said.

While the 2012 presidential vote should not shake the political stability in Russia, pre-election spending does pose a risk for the economy, and thus for potential investors in its privatisation drive, Kudrin said.

"We are in the pre-election period when there is a pressure on spending towards its increase. I think we cannot increase spending any further but I understand that in such a period there is always a desire to solve some more social issues," Kudrin said.

"Budget spending for 2011 corresponds to the Finance Ministry's aims. The spending for 2012-3 is a bit higher."

Prime Minister Vladimir Putin on Tuesday pledged continued state support for Russian industry in a sign that future spending commitments should not be ruled out.

Other internal risks for Russia include the need for extensive borrowing, high liquidity and fluctuations in the oil prices on which the economy heavily depends, Kudrin said.



Kudrin, for a decade the finance minister, is credited with storing up oil revenues to help Russia through the crisis and is well respected by foreign investors. He said his job was "very difficult" but he had no immediate plans to leave.

"I will resign in the spring of 2012 because the whole government will resign with the election of a new president," Kudrin said.

"What happens later will be a separate discussion."

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Russia plans to earn $50 billion from privatisation over the next 5 years and the government will overrule any objections from company managers over the sale of their firms, Finance Minister Alexei Kudrin said on Wednesday. We will have a privatisation programme for...
Official Russia Considers 50 Billion 5-Year Asset Sale
Wednesday, 15 September 2010 08:17 AM
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