Page 55 - IFR Opportunities in Russian capital markets

CHAPTER03
ifrintelligence reports/Opportunities in: Russian Capital Markets
IPO pipeline congestion
The IPO pipeline for 2007 and 2008 is already filling up quickly as more and more companies come to market either to take cash off the table or raise badly needed investment capital to fund ongoing expansion.
Banks
By far the largest category of IPOs in 2007 will be from the financial sector, with major issues expected from state-owned retail banking behemoths Sberbank and VTB.
Sberbank raised a total of US$8.8bn in its secondary public offering (SPO) on 22 February 2007, as opposed to the intended US$12.3bn (a target which included around US$3.3bn from the CBR). This made it the second largest share sale in Russia's history, after the IPO of Rosneft last year. Shares were sold at RUB89,000 (US$3,394), or a 4.3% discount to previous day’s closing price of US$3,545 on Moscow's dollar-denominated RTS exchange.
As a result, the government reduced its share in the bank to 55%. Foreign investors owned about 20% of the bank prior to the SPO. Oligarchs used their pre-emptive rights to up their stake and owned about 12% of the shareholders capital prior to the offer. In all, oligarchs and the CBR bought over half the SPO in a 24/35% split, according to analysts’ estimates. The rest was bought by international investors, with Russian retail investors accounting for minimal amounts. A total of 3.5m new shares were issued.
VTB raised US$8bn with an IPO in May, well above the target of US$4.5bn. The third big bank to float will be Gazprombank – this has been delayed and will probably IPO in early 2008.
Utilities
The other industry targeting a substantial IPO issuance is the electricity sector. The state-owned utilities operator United Energy Systems said in January it hopes to hold around 15 IPOs this year in the electricity sector, which will raise between US$10–15bn.
Table 3.10 assumes (as of February 2007) a total issue of US$6bn though 2007, while the CEO of UES has said that his ambition is to raise up to US$10bn via multiple generation and transmission company IPOs.
Table 3.10: RAO UES - Projected IPOs, 2007
EV/Capacity, M.cap., (US$m) (MW)
OGK-1 5,022 546
OGK-2 4,019 473
OGK-3 4,301 517
OGK-4 5,306 616
OGK-5 4,162 492
OGK-6 3,392 461
TGK-1 3,497 562
TGK-3 6,384 659
TGK-4 1,715 561
TGK-5 1,216 501
TGK-7 n/a n/a
TGK-8 1,664 452
TGK-9 2,028 690
TGK-10 n/a n/a Kuzbass- energo TGK-12 n/a n/a TGK-13 n/a n/a
Source: Company’s information, Trust estimates
Small companies
New shares placement, % of persent equity
–
– 61.00 46.80 25.03 – 64.01 40.70 – 36.60 – – 64.46 – – –
RAO UES board approval
–
– Approved Approved Approved – Approved Approved – Approved –
– Approved –
–
–
Analysts expected smaller issues to come early in January, so as to avoid being squeezed by the large issues planned in the banking and electricity sectors later in the year, but 2007 got off to a slow start with a modest US$1.2bn of issues in the first month. At the time of writing there was another US$15bn of proposed issues by companies that have confirmed an interest in an IPO, but have yet to start the formal process, as listed in Table 3.11.
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