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20 I Companies & Markets bne May 2019
Russia’s state development bank VEB.RF to buy major stake in stoligarch Rotenberg construction company Mostotrest
Ben Aris in Berlin
The Russian state-owned development bank VEB.RF (formerly Vneshtorgbank) announced it will buy a stake in one of Russia’s largest construction companies Mostotrest that is owned by stoligarch and president Vladimir Putin’s close personal friend billionaire Arkady Rotenberg.
The deal is bound to raise eyebrows as Rotenberg has grown wealthy on numerous state contracts to construct major pieces of infrastructure. At the same time since VEB was taken over by Putin confidant Igor Shuvalov the bank has been tasked with overseeing the massive state-sponsored investment programme into infrastructure where billions of dollars
will be spent.
The size of the stake in Mostotrest is still under discussion and may be “more than a blocking stake”, as well as a significant stake in Alexey Krapivin Group of Companies 1520 (28.33%) and its partners, Vedomosti reported. VEB is prepared to buy from 30 to 49% in each of the companies, the paper said citing people close to the deals.
If the deal with Mostotrest goes through then VEB would become the major shareholder. Currently 94.2% of Mostotrest PJSC is owned by TFK-Finance, it is 100% owned by Stroyprojectholding LLC, which is owned by Rotenberg,
who is also named in the US sanctions lists.
Experts estimate the cost of the deal for VEB will be between RUB30bn ($466mn) to RUB130bn ($2bn).
Vedomosti reported that the idea for the deal came from Shuvalov, who is interested in creating a financial-industrial powerhouse that was a favourite business model of the oligarchs in the 90s called FIGs in those days, or financial- industrial groups.
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Russian stoligarch Arkady Rotenberg has made billions from fulfilling state construction contracts
Another commentator likened the structure to the Soviet-era Promstroibank, a federal organ that had its own authority to provided the capital for construction to firms also controlled by the state. The structure is also designed to compete with Chinese and Turkish firms that also undergo all the design and building work, but also often finance the projects using the resources of their large holding companies of ties with the state-owned banks.
VEB has already united two of its subsidiaries – the Federal Centre for Project Finance, which specialized in financial preparation of projects, and VEB Engineering, which
“The idea for the deal came from Shuvalov, who is interested in creating a financial-industrial powerhouse that was a favourite business model of the oligarchs in the 90s”
was engaged in designing – into a combined finance and engineering company called VEB Infrastructure.
The move might also represent a change in the way Putin is organising the top tier of Russia’s elite. As bne IntelliNews has argued elsewhere Putin has become less interested in running the country, leave the bulk of the economy to be managed by the liberal economics wing de facto headed by former Finance Minister and co-head of the presidential council Alexei Kudrin.