Russia’s privatization plan to become far less ambitious – paper

(Interfax – MOSCOW, June 17, 2013) Russia’s privatization plan, which has been very ambitious in the past two years but slow to be implemented, will become more realistic.

The government came up with its big plans to divest a number of key assets in the summer of 2011, when current Prime Minister Dmitry Medvedev was still president. Last June the government approved an updated privatization program for 2011-2013, but there have been very few genuinely big deals in the past two years. There was the sale of 7.6% of shares in leading lender Sberbank (RTS: SBER) from the Central Bank’s stake, which generated the lion’s share of privatization revenue, as well as the inclusion of part of the government’s stake in oil major Rosneft (RTS: ROSN) in the deal to buy TNK-BP (RTS: TNBP).

Finance Minister Anton Siluanov said earlier that the shortfall in privatization revenue will have to be offset by additional oil and gas revenues, as privatization is now expected to raise just 60 billion rubles in 2013 instead of the initially budgeted 427 billion rubles.

The government will consider the privatization plan for 2014-2016 at a meeting on June 27, business daily Vedomosti reported. The Federal Property Agency is proposing to cancel or draw out some previously planned sales. While under the current plan the government is supposed to completely sell off its shares in Rosneft by 2016, the new plan proposes for the government to retain control and sell only 19.5%.

The agency is also proposing for the government to retain control of power company RusHydro (RTS: HYDR) and oil company Zarubezhneft, in which the government was supposed to completely sell its interest by 2016 under the current plan. And even the plans for Zarubezhneft’s partial privatization will be more long term, with the plan proposing to reduce the government’s stake to 50.1% only by 2020.

The new plan still proposes to sell 13.7% of shares in power company OJSC Inter RAO UES (RTS: IRAO) and oil pipeline monopoly Transneft (RTS: TRNF) by 2016.

The new plan no longer calls for the government to sell its shares in VTB (RTS: VTBR) by 2016. The government now intends to retain control of Russia’s second largest bank, Vedomosti reported.

The new plan also formalizes a number of decisions made at the government level, such as to not privatize Russian Agricultural Bank (RTS: RSHB) and to sell a 25% stake in Russian Railways (RZD) (RTS: RZHD) by 2016 rather than by 2014.

The Property Agency also proposes to not privatize United Aircraft Corporation (UAC) in the foreseeable future and to sell only 24.9% of United Shipbuilding Corporation (USC) by 2017 rather than 49.9% by 2016. The government had previously planned to reduce its stake in UAC to 50% by 2016, but the new plan pushes back the date to 2024.

The new plan includes Rostelecom (RTS: RTKM), Russia’s national telecommunications provider, which was not included in privatization plans until now, though its privatization has long been discussed publicly by government officials. The new plan also proposes to privatize the government stakes in OJSC Vnukovo Airport and OJSC Vnukovo International Airport.