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State Lists 14 Stakes for Privatization

The government on Monday announced a list of the most attractive assets that it hopes to privatize next year, in a bid to improve the management of the enterprises and reduce the federal budget’s gaping deficit.

The list, which the Cabinet will review Tuesday, consists of 14 companies — mostly ports, airports and shipping businesses — that are currently classified as strategic, barring complete government withdrawal from their capital.

14 Stakes Up for sale

CompanyStakeProfits (2008, unless stated otherwise)
Sovkomflot
25% minus one share$406 million
Novorossiisk Seaport 20%
$129 million
Vanino Seaport (Vanino, Khabarovsk region)55%$76.7 million
Rosgosstrakh (Moscow)13%1.2 billion rubles
Yenisei River Shipping Company (Krasnoyarsk)25.5%518 million rubles in the nine months of this year
Sakhalin Sea Shipping Company (Kholmsk, Sakhalin region)25.5%199.1 million rubles
Murmansk Seaport 34%971 million rubles
SG-Trans (Moscow)100%283 million rubles
Tuapse Seaport 25%740 million rubles
Koltsovo Airport (Yekaterinburg)34.5%583 million rubles
Tolmachevo Airport (Novosibirsk)51%128.5 million rubles
Volga River Shipping (Nizhny Novgorod)25.5%151 million rubles
Murmansk Sea Shipping Company 25.5%215 million rubles
Northwestern Sea Shipping (St. Petersburg)
25.5%8.3 million rubles
- MT

In addition to stakes in the previously announced insurance industry leader Rosgosstrakh, the country’s largest tanker shipper Sovcomflot and the largest seaport Novorossiisk, the government will put on the block stakes in the smaller Tuapse Seaport and airports near major cities Novosibirsk and Yekaterinburg and sea resort Anapa, a Cabinet source said at a news briefing.

The government intends to sell a 25 percent minus one share in the fully state-owned shipper Sovcomflot, the source said, correcting previous reports that the stake would measure 20 percent.

The privatization plan also calls for the sale of stakes in the Far Eastern port of Vanino, Murmansk Sea Shipping, Northwestern Sea Shipping and Sakhalin Sea Shipping companies as well as the Volga River Shipping and Yenisei River Shipping companies, the source said. The plan includes selling a stake in SG Trans, which ships liquefied petroleum gas by rail, for about 8 billion rubles ($278 million) in the first quarter of next year, he said without specifying the size of the stake.

The government earlier said the Murmansk Seaport would go on sale next year, too.

For the sales to go ahead, President Dmitry Medvedev will have to strike these companies, except Rosgosstrakh, from the government’s list of strategic companies, the source said. Medvedev removed Rosgosstrakh from the list earlier this year.

Medvedev, who called for more privatizations in his state-of-the-nation address earlier this month, is likely to approve of the measure.

The government anticipates that it will collect 77 billion rubles in these and other sales, the source said. The figure compares with a budget deficit of 3 trillion rubles.

The other assets for sale are 435 wholly government-owned companies, which the source didn’t specify. They are so small that their sales account for 22 billion rubles out of the total figure, he said.

The privatizations are expected to improve the management of the companies by reducing the swollen size of properties that are under government oversight.

“It’s obvious to everyone that they are excessive,” the source said, speaking on condition of anonymity, which is Cabinet policy for presession briefings. “It’s impossible to manage all this huge mass effectively.”

While most potential investors will be more interested in such industry leaders as the Novorossiisk Seaport and Sovcomflot, the smaller companies could draw bids from their current private co-owners, said Nadezhda Timokhova, a transportation analyst at investment company Metropol.

Billionaire Oleg Deripaska’s investment vehicle Basic Element owns around 13 percent in the Vanino Port that handles a lot of cargo from aluminum giant RusAl, where Deripaska has a holding.

Basic Element spokesman Sergei Babichenko said he had no comment when asked whether the company would be seeking the government’s 55 percent interest in the port.

Norilsk Nickel, which is a major co-owner and client of the Yenisei River Shipping Company, didn’t respond to a request for comment Monday afternoon.

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