Page 5 - bne_newspaper_December_14_2018

Top Stories
December 14, 2018 www.intellinews.com I Page 5
“It’s a fantastic thing how this story developed. We never delayed [the IPO], as we never announced it,” says Konov. “We started to discuss with the banks. We have our shareholder that strongly believes we should be public one day. As the end of the ZapSib investment comes into sight we started to discuss if it makes sense to make an IPO. Once we started these discussions we were immediately accused of targeting an IPO in 2018. Then it didn't happen so people started to say we were delaying the IPO.”
Sibur has been growing so fast in the last five years that it made no sense to IPO. With access
to the bond markets – Sibur issued a $500mn Eurobond in September 2017 – the company is not short of funds. The company’s debt level is also low, with a debt/Ebitda ratio of a modest 1.7x from about $5bn in total debt load, most of which is associated with ZapSib.
“Now that ZapSib is reaching completion it's the right time to start discussing it again,” says Konov. "But the final decision is up to the shareholders and will be subject to market conditions."
Insiders
One potential headache with the IPO is Sibur’s well connected shareholders. Three names stand out. Mikhelson came into the company in 2010 and owns 48.5% of the stock. The majority shareholder of Russia's leading privately owned gas company and LNG pioneer Novatek, neither Mikhelson, nor his companies, have been placed on any sanctions list.
Tycoon Gennady Timchenko, however, is said to be one of Russian President Vladimir Putin’s closet confidants and was one of the first names to be included in the sanctions lists in 2014. He owns 17% of Sibur.
And finally there is Kirill Shamalov who owns 3.9% and is on Sibur’s board. Shamalov caused a storm of comment when it was reported that he had married Putin’s daughter, only to be later reported divorced again.
Konov said the sanctions on the minority shareholders were a major inconvenience and caused the company a lot of extra work as their partners and clients did their due diligence. The company even postponed a bond issue in 2014 when the sanctions were imposed. However, the sanctions regime has not affected the company’s operations nor has it cost them a premium in their cost of borrowing, says Konov.
“We had to come to the banks and clients and make another effort to explain our shareholder structure and that the sanctioned shareholders are well below 50% of the total shareholder structure of Sibur, which means the company is not affected by them being a shareholder,” explains Konov.
As for Shamalov, he has been working at the company for over a decade, first running the government relations department, as he came to Sibur from the government, and later expanding his role to cover the legal and investor relations department. Konov quips that he has no idea if Shamalov was married to Putin’s daughter but says he was not invited to any weddings.
Where next?
Exports are key to Sibur, and they have also insulated the company against some of the wilder swings of the Russian economy in recent years. With some 60% of its production going to exports and earning hard currency it has a natural hedge against the volatility of the ruble. The make-up
of the Russian economy creates an automatic failsafe: if the price of oil falls and the ruble follows it down, that only lowers Sibur’s cost of production and increases its profits from exports. For example, revenues have grown from RUB79bn in 2013, when the oil price was $109 per barrel,
to more than double that level, RUB195bn, in its 2018 forecast, while oil prices fell to $40 in 2017 but have since recovered to some $65-$75.
The effect of these swings is of course visible in Sibur’s Ebitda, but the company has been turning in a steady circa $2.5bn of earnings a year. Sibur's