Page 8 - FSUOGM Week 39

FSUOGM COMMENTARY FSUOGM

Russia pushes ahead

with Sovcomflot IPO

The plan to take Russia's shipping giant public has

been floated over almost two decades

RUSSIA RUSSIA is pushing ahead with a long-delayed proposed price range would leave plenty of space
plan to take its state shipping giant Sovcom- – potentially up to 25% – for the shares to rise
WHAT: flot (SCF) public, with the aim of raising up to in value after they are listed, Promsvyazbank
Russia plans to hold an $580mn from an initial public offering (IPO) analyst Vladimir Soloviev was quoted as saying
IPO for Sovcomflot next next month. by Reuters. This will be important if the govern-
month. The listing comes at a difficult time for Rus- ment follows through on its plan to reduce its
sian financial markets, as investor appetite has stake further in the future.
WHY: been sapped in recent months by fears of a The offering is organised by VTB Capital
It is looking to raise up coronavirus (COVID-19) resurgence, low oil (VTBC), Citigroup, Sberbank CIB, JP Morgan,
to $580mn to settle the prices and international tensions over the poi- BofA Securities and ING Bank. The Russian
company's debts and soning of Russian dissident Alexei Navalny. The Direct Investment Fund (RDF) has said it may
invest in new projects. ruble slumped to a six-month low of over 79 invest in the company.
against the US dollar on September 29, dragged SCF posted $1bn in EBITDA in the 12
WHAT NEXT: down partly by the escalating conflict between months ending June 30, and its net debt to core
A successful listing would Azerbaijan and Armenia over the disputed earnings ratio is now only 2.7, down from 5.63
likely lead to similar Nagorno-Karabakh territory. in 2017. Back then the company’s heavy debts
offerings at other Russian SCF is the world’s second-biggest tanker were seen as a deterrent to investors. Almost all
state companies. owner, commanding a fleet of almost 150 tank- of SCF’s revenues are generated in dollars, mak-
ers, dry cargo ships and other vessels. Among ing it resilient to the sharp decline in the ruble’s
other things, it is responsible for delivering gas, value over this year.
crude and oil products to markets from locations
too remote to be exported from using the coun- Privatisation back on track?
try’s vast pipeline network. The IPO, should it go ahead, would be Russia’s
An IPO at the 100% state-owned company first major privatisation sale since 2016, when
was first tabled almost two decades ago, and a 19.5% stake was sold in oil major Rosneft for
there have been on-and-off discussions about its $12bn, along with a 10.9% share of diamond
partial privatisation ever since. Russian officials miner Alrosa for over $800mn.
raised the prospect of an offering in 2016, at a Russia put its privatisation programme back
time when Moscow was scrambling for funds to on track earlier this year, revealing plans to
plug a hole in its budget caused by several years lower its shares in oil pipeline operator Trans-
of low oil prices. But as Russia got a hold on its neft, hydroelectric firm RusHydro, power grid
finances, the offering was put off. operator Rosseti, telecoms group Rostelecom
and grain exporter United Grain. The success or
Revived plan failure of the SCF offering will likely determine
SCF announced earlier this month it had taken whether these other sales go ahead.
the IPO off the shelf in a bid to raise finances for A sale at SCF should improve the company’s
investing in new projects and clearing some of its credit profile, BCS Global Markets said earlier
debts. The shipping firm is expanding its fleet to this month. The company’s financial perfor-
handle rising oil and gas exports from the remote mance has steadily improved in recent years,
Russian Arctic, and will need capital to do this. with its EBITDA margin rising from 39% in
The plan is to list 15.5%-17.0% of SCF on the 2018 to 50% in 2019 and 60% in the first half of
Moscow exchange, the shipping company said 2020. It reported a record-high profit of $225mn
in a statement on September 28. The price range in 2019, versus a loss of $45mn in 2018 and
has been set at RUB115-117 per share, which $113mn in 2017.
would value the company at around RUB250- While the company has made significant
270bn ($3.2-3.5bn). progress deleveraging itself, BCS GM notes that
In other words, the offering could net between management’s plan to increase dividend pay-
RUB39bn and RUB46bn ($490-580mn). Pric- ments to $225mn for 2020 from $97mn in 2019
ing is scheduled to take place on October 7. The could slow down the process. ™

P8 www. NEWSBASE .com Week 39 30•September•2020