Dmitry Mazurov still hopes to deploy New Stream to his side

Three years ago, Dmitry Mazurov estimated his oil business at $ 1 billion. Since then, he has lost his key assets, Sberbank suspects him of conducting double-entry bookkeeping, and influential partners have drifted away.
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Dmitry Mazurov, the founder of the New Stream group, has been building the largest independent oil refinery in Russia for 14 years. The company cost him and his influential partners more than $ 3 billion. But in the spring of 2019, the Antipinsky Oil Refinery stopped and declared itself bankrupt. Forbes figured out why the ambitious project failed.

Black oil stream

At the end of March 2008, Dmitry Mazurov was woken by a bell. At the end of the line was a lawyer who was at 8 am in the registration chamber of the Swiss Zug. The company he designed for Mazurov required a name. Asleep Mazurov recalled yesterday's news release, which spoke about the Nord Stream gas pipeline. Without thinking twice, Mazurov proposed to name the new company New Stream (“New Stream”).

With Nord Stream, the newly created New Stream Advancement AG was united not only by the name. The board of directors of both companies includes the Swiss lawyer Urs Hausheer. This is not the only eminent lawyer among partners Mazurov. Since 2008, Nikolay Egorov, founder of the Egorov Afanasyev, Puginsky and Partners law firm, has been a member of the board of directors of New Stream Advancement. He is known to the general public as a classmate of Vladimir Putin.

Yegorov was summoned into the business of Mazurov by another of his influential partners, Vladimir Kalashnikov, a longtime acquaintance of the Moscow mayor Sergei Sobyanin. It was he who headed the Tyumen region, when in 2004 Mazurov started a construction of the Antipinsky Oil Refinery near Tyumen.

Initially, the flagship asset of New Stream was conceived as a classic "samovar" - a small refinery that supplied fuel oil for export. This is a primitive business that existed due to the fact that the export duty on crude oil was higher than on fuel oil, says one of the oil industry workers: "It was only necessary to put the difference in your pocket." The margin was $ 100 per ton of fuel oil.

But in 2010, the authorities proclaimed a course for deep processing and an increase in duties on fuel oil. Antipinsky Oil Refinery promised massive losses. By that time, although it was processing 2.5 million tons per year, it remained a “samovar”. Mazurov was immediately puzzled by the modernization of the plant.

Debt pyramid

On October 7, 2016, the Antipinsky Oil Refinery marked the 10th anniversary of the launch of the plant on a large scale. The entire Tyumen political elite, headed by the governor and former deputy Sobyanin Vladimir Yakushev, arrived at the celebration. Of the major businessmen, only the head of Sibur Dmitry Konov could come. The remaining oil workers flew to Moscow for a meeting with Deputy Prime Minister Arkady Dvorkovich.

Mazurov and Kalashnikov, along with Yakushev, cut the red ribbon, which symbolized the launch of the installation of deep processing of fuel oil. Thanks to her, the refinery increased refining depth to 98% and got rid of fuel oil. By this time, New Stream acquired its own oil fields in the Orenburg region and bought the Mari refinery from VTB. Moreover, the Antipinsky Oil Refinery was going to compete for Bashneft. Mazurov also promised that in 2017, New Stream will launch a network of gas stations throughout the Urals and will cost $ 1 billion. He predicted $ 0.5 billion in EBITDA per year to the Antipinsky Oil Refinery.

Those were just plans. In fact, the plant was buried in debt. Sberbank gave the refinery about $ 2.5 billion in loans for development, turnover and purchase of deposits. And the “tax maneuver” launched in 2015 in the oil industry, the fall in oil prices and the collapse of the ruble brought the refinery $ 500 million in losses. “Everything began to crumble,” recalls a former employee of the plant. Mazurov had to negotiate with traders about a 60-day, and in some cases, a 90-day prepayment. Thus, Mazurov collected from traders $ 300-400 million every two months and allowed them to pay interest on loans (about $ 16 million per month) and the purchase of oil. Essentially, a pyramid lined up, said one of the traders: “Old supplies were paid for with new prepayments”. Counterparties were used as creditors, one of them sighs: “Everyone was allowed into the furnace”. Dmitry Mazurov and his New Stream declined to comment for this article.

Due to the huge debts, the plant had a negative value, and dividend payments were postponed indefinitely. This did not suit the co-owners of the refinery - Yegorov and Kalashnikov. Their “patience began to crack” back in 2015, when the plant’s losses amounted to 60 billion rubles, says their friend. After the start-up of the deep processing plant, they expected that “the money will flow like a river”. But the surplus was only the last months of 2016. The conflict was really brewing, it follows from the words of Yegorov, which he conveyed through a representative: "I did not agree with the management policy and the majority shareholder." Egorov also complained that he was in an “information vacuum”, and his company's requests were ignored. Kalashnikov refused to communicate with Forbes in response to a request transmitted through his friend. In early 2017, Mazurov’s partners began to actively look for a buyer for their holdings of shares (20% from Egorov and an option for 40% from Kalashnikov), two sources close to New Stream say. Mazurov, on the other hand, needed an investment partner, whose "live" money would allow the plant to be modernized. In early 2017, it seemed that a solution was found.

Hope from the past

In 2002, the founder of the gas company Itera, Igor Makarov, gave Mazurov a ticket to big business. The young petrochemist, who was then 26 years old, had just moved from Kazan to Moscow and established his first business. Through friends, he went to the owner of the country's largest independent gas company and offered to supply its gas to Tatarstan. Renowned for his cool temper, Makarov nevertheless listened to an arrogant young man and agreed.

In 2017, old friends met again. Makarov has just expired a four-year ban on transactions in the Russian oil and gas industry under an agreement with Rosneft, with which he sold his Itera. The businessman was looking for objects for investment, and Mazurov needed them badly. Under a promise to invest in the Antipinsky Oil Refinery $ 200 million, and also for $ 100 million and $ 200 million to buy back the shares of Egorov and Kalashnikov, respectively, Mazurov copied 50% of the Cyprus offshore Vikay, which owned 80% of the refineries, to Makarov, a source familiar with the deal said. Makarov's representative declined to comment for the article.

Sberbank was pleased with the new shareholder, says a former employee of the state bank: Makarov's money would have helped to cope with the shortage of turnover, which arose because of the tax maneuver. Sberbank agreed and another deal. In the spring of 2017, representatives of the banker and St. Petersburg acquaintance of President Vladimir Kogan came to Mazurov and offered him to direct the Afipsky refinery. Mazurov agreed. In addition, the asset management company associated with it acquired 16% of the company for $ 200 million, which it borrowed from the Vitol trader for future deliveries, says an acquaintance Mazurov. The price was inflated, he admits, but the deal involved an option for a controlling stake.

The official negotiations between Mazurov and Sberbank never talked about buying control at the Afipsky refinery, a former employee of the state bank stresses: “We talked about 16% [of shares in Afipsky refinery] and about the synergistic effect [with the Antipinsky refinery] in supply and marketing.” However, the main surprises were still ahead.

Second circuit

In early December 2018, the new general director of the Antipinsky Oil Refinery Maxim Andriasov met with the company's employees. A day earlier, the plant stopped due to cessation of oil supplies. This happened two weeks later, as Andriasov replaced Mazurovsky’s head Gennady Lisovichchenko, who had headed the refinery since its inception. The new manager assured the labor collective that Sberbank was loyal to the plant.

It was Sberbank that initiated the change of leadership at Antipinsky Oil Refinery in November, three Forbes sources say. In the summer of 2018, the state bank received a “golden share” by Vikay Mazurov. The use of the "golden share" is a common tool to protect the rights of the lender, explained the representative of Sberbank. There is another version. An ally in the form of a state bank needed Mazurov to secure, says a source close to the refinery: to freely part with Makarov, who in six months has not invested in the plant. Makarov's representative declined to comment.

In June, the shareholder agreement with Makarov was terminated, after which he transferred his share in Vikay to Kalashnikov, their acquaintance tells (data on the transfer of ownership are confirmed by information from the Cyprus registry). During the preparation of the transaction, the “second contour” of the Antipinsky Oil Refinery's reporting was opened, says a former Sberbank employee. According to him, it turned out that Mazurov attracted loans to the affiliated trading companies under the surety of the plant, which were not reflected in the financial statements: “I just ran a business in parallel and did not put [the refinery guarantee] in balance”.

The money was needed to close the hole in the turnover, which arose because of the "tax maneuver" and lack of funds for development, says a former employee of the plant. According to the interlocutor of Forbes, Sberbank did not agree on additional funding and had to borrow money from VTB, Promsvyazbank and the IBC. According to him, about $ 500 million of loans were issued to "friendly companies", who lent money to the plant, "so that it does not die out." Sberbank was aware of transactions, according to the interlocutor of Forbes. The former Sberbank employee denies this: “What was explained to us as our own funds turned out to be borrowed.” According to him, the revealed information undermined the credibility of Mazurov and forced Sberbank to act decisively.

The refinery's debt load was significantly larger than Sberbank had intended, its spokesman said: “Naturally, this is a problem for us.” She believes that this could be one of the reasons for the financial problems of the plant. The tax maneuver had a significant impact on the economy of the plant, recognizes the representative of Sberbank, but to assess its consequences and make a conclusion about the loss "is not possible." VTB declined to comment, Promsvyazbank and the IBC did not answer questions from Forbes.

First stop

In November, representatives of Sberbank were given three seats out of seven on the board of directors of Antipinsky Oil Refinery. Together with the new CEO Andriasov, the majority was obtained. Participation in the board of directors is a common creditor protection tool, a Sberbank spokesman notes. “Sberbank is our main creditor, but there is no question of managing the plant,” said a representative of the Antipinsky Oil Refinery.

Two months earlier, Mazurov launched Euro-5 gasoline, actually completing the long-suffering modernization of the plant. Since then, Antipinsky Oil Refinery's EBITDA was $ 30 million per month, a former employee of the plant said. According to him, Mazurov agreed to strengthen Sberbank, as he believed that he had fulfilled his obligations and there should be no serious complaints against him.

In early December, the first deputy chairman of Sberbank, Alexander Vedyakhin, met with refinery traders. They were alarmed by changes in the supplier’s management and they demanded that Sberbank guarantee the uninterrupted operation of the refinery. Vedyakhin allegedly refused to guarantee anything and, in turn, insisted that traders retain a 60-day prepayment, says an oilman familiar with the content of that meeting. The bank can not guarantee any indicators of the borrower, emphasizes the representative of the state bank.

According to another Forbes source, the position of the bank did not suit the traders and they did not pay in advance. Creditors behaved very carefully and refused to finance the plant, which was in a difficult situation, confirms the representative of the refinery. This allegedly led to the plant shutdown. In order to launch it again, at the end of 2018, Sberbank was forced to “pour” another $ 400 million into the working capital of the refinery. As a result, the plant’s total debt to the state bank increased to $ 3 billion. Soon another attack hit the Antipinsky refinery.

Pre-bankruptcy collapse

In mid-April 2017, the oil tanker Polar Rock entered the port of Murmansk. The ship was built in 1996 and sailed under the flag of Liberia until it was bought by New Stream. The group was going to use the tanker as an oil storage tank. In May 2019, it was in the center of the scandal.

In Murmansk Arbitration Court, VTB Commodities Trading demanded the arrest of 165,000 tons of vacuum gas oil onboard Polar Rock. Almost 200 million euros worth of goods intended for a VTB trader turned out to be resold to another buyer. Murmansk court refused VTB. But the trader was supported by the High Court of London, where VTB Commodities Trading appealed on April 29. He decided to freeze the assets of Antipinsky Oil Refinery to 225 million euros. De facto, this meant freezing the entire export of the refinery, to which about 80% of all petroleum products were directed, says a former top manager of the refinery.

On April 30, Andriasov reported on the preparation of the plant for bankruptcy. And on May 18, he filed a relevant application with the Tyumen Arbitration Court. The total debt of the plant amounted to about $ 5 billion. It was to blame for bankruptcy, including VTB Commodities Trading, representatives of the oil refinery and Sberbank said: the VTB trader arrested the plant’s assets and did not pay advances. As a result, the refinery was unable to purchase oil and finally stopped.

VTB was not supposed to make regular advances, but was forced to go to court, the bank’s representative objected, and denied the bankruptcy charges. He emphasizes that before the change of management of the refinery, VTB had professional, working relations with the company. According to Forbes, Mazurov was personally acquainted with the head of VTB Andrey Kostin since 2014. The former top manager of the oil refinery believes that the new management of the plant created an “intentional collapse”: “We fell out with the traders and sold the goods twice.” The main reason for bankruptcy is a significant shortage of working capital, the representative of Sberbank believes, and the arbitration manager will determine the culprits. Anyway, the launch of bankruptcy led to a change in the owners of Antipinsky Oil Refinery.

Sunset of the empire

Under the loan agreements, Sberbank pledged all the assets of the Antipinsky Oil Refinery (including fields in the Orenburg Region), as well as Vikay shares, through which Mazurov and Kalashnikov owned 80% of the plant. When signs of bankruptcy arise, Vikay shares automatically became the property of Sberbank, says a Forbes source familiar with the terms of the loan agreement. What happened in May 2019.

Kalashnikov tried to intervene in the situation. In early May, the related Sibneftegazpererabotka sent the head of Sberbank, German Gref, a letter in which she promised to buy the Antipinsky Oil Refinery together with a debt. A proposal from a St. Petersburg company registered in February 2019 with an authorized capital of 100,000 rubles was not taken seriously, says one refinery lender. The Azerbaijani oil giant Socar, who has been interested in purchasing refineries since 2018, looked more convincing. Among other possible interested parties are Lukoil and billionaire Mikhail Gutseriev F 28.
The emergence of a strong industry owner is seen as the most effective way to resolve the current difficult situation, a representative of Sberbank said. However, she stressed that the procedure for selling the plant's property is strictly regulated by bankruptcy law. Sberbank will not rush to sell the refinery, a banker close to him says: “We need to build the right operating model, get rid of all the ballast, clear the debts, build the right value-added system.”

The plant may start as early as July. Due to the ban on exports during bankruptcy, the give-and-take scheme is likely to be implemented (oil is processed for a fee and returned to its owner in the form of oil products) with the participation of Socar, a source close to the plant believes. According to him, for this, at the end of May, Sberbank and Socar created the Sokar Energoresurs joint venture in Moscow. The State Bank and Socar did not comment on this.

And what about Mazurov? Before the change in the management of the plant, he remained an optimist, because according to his plans, from November 2018, the plant was supposed to be in surplus, his friend says: "He knew that there were problems, but he believed that everything would even out." But the reasons for optimism was becoming less. Even before the loss of Antipinsky Oil Refinery, its New Stream lost its shares in the Afipsky Oil Refinery, which went to Mikhail Gutseriev. Bankruptcy lawsuits were filed with the Mari refinery in mid-May. In fact, now only the management company remains from New Stream. Mazurov, by any means, sought to complete the modernization of the Antipinsky Oil Refinery, guided by the principle “the winners are not judged,” says an oilman familiar with him: “But it turned out that they were judging.”

At present, it is known about the only lawsuit that Egorov disputes the new edition of the Antipinsky Oil Refinery Charter adopted by Mazurov. She, according to Yegorov, who still owns 20% of the plant, limited the rights of minority shareholders. The likelihood of monetary claims to the founder of New Stream is also high - he personally entrusted himself with Sberbank loans. Left without oil assets, Mazurov still owns 20% in the small metropolitan Interprombank. Sberbank is tough and intends to seek and recover assets, says a banker familiar with the position of the state bank. It seems that Mazurov does not intend to retreat. At the end of April, the Development Management affiliated with it challenged the sale of the Afipsky refinery to Gutseriev. Apparently, the struggle for the legacy of New Stream is still ahead. In the New Stream declined to comment.