Partnership with God: why Mikhelson and Timchenko get richer

Mega projects of Novatek, which would not have been possible without the partnership of Leonid Mikhelson and Gennady Timchenko, can make them the richest people in Russia - with a big gap from competitors in the Forbes rating.
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The lobbyist and the builder - so it is possible to describe one of the most successful business alliances in Russia. Speech about co-owners of Novatek and Sibur Leonid Mikhelson and Gennady Timchenko, who from the end of yesterday, September 18, became richer by $ 1.3 billion according to Forbes Real Time. Mikhelson's fortune increased by $ 666 million to $ 21.6 billion: in fact, he is the richest businessman in Russia. Timchenko with a fortune of $ 19.1 billion (he became richer at $ 632 million) was first among the three richest businessmen in Russia. Between them, according to Forbes Real Time, the leader of the May rating of Forbes, Vladimir Lisin, has settled down with a fortune of 20 billion.

The path that Michelson and Timchenko accomplished in the rating of billionaires is due to the growth of Novatek shares. Technically, it's about rebuilding. On September 6, the shares of the gas giant reached their historic high of 1167 rubles per share - since the beginning of the year the company has risen in price by 66% - after which it collapsed for a week. The impetus for growth was immediately two good news. First, Novatek discovered additional gas deposits in the Morning deposit, which should become a resource base for the Arctic LNG-2 project. Secondly, the company agreed to increase LNG supplies to Asian countries with China National Petroleum Corporation (CNPC). This news added optimism, believes senior analyst at BCS Capital Sergey Suverov: "The Chinese are now just increasing their LNG consumption, and so the prices for it are at high levels."

It is the LNG projects - Arctic LNG-2 and the Yamal LNG that preceded it - can be called the symbol of the ten-year cooperation between Mikhelson and Timchenko and their wealth. The latter became a shareholder of Novatek in 2008. Mikhelson was already a rich man with a fortune of $ 5.9 billion, who built a large gas producer from scratch from scratch, who also managed to survive in the shadow of Gazprom's monopoly. But it was partnership with a close friend of the president, who possessed a huge lobbying resource, that brought Mikhelson and his company to a new level. Already in 2009, Mikhelson and Timchenko made one of the major transactions in the history of Novatek, becoming the final link in a multi-stage deal to transfer Yamal LNG and Tambeyneftegaz, which owned a license to develop a large South Tambey gas field in the Yamal Peninsula, from businessman Nikolai Bogachev in new hands. A year later the government decided to develop LNG production in Yamal - Novatek started the construction of a plant worth about $ 27 billion.

The first production line of Yamal LNG, despite the sanctions, was launched at the end of last year. In the fourth quarter of 2019, the final fourth is expected to be launched. The first line of the Arktig LNG-2 is planned to be launched in 2023 According to Raiffeisenbank analyst Andrey Polishchuk, Yamal LNG can generate free cash flow twice as large as Novatek itself. Running the project at full capacity doubles the cash flow. "If the" Arctic LNG-2 "will work at the same level, Novatek will get at least a threefold increase in cash flow," Polischuk believes.

The state of Michelson and Timchenko is growing not only due to the increase in the capitalization of Novatek. The gas giant also pays its shareholders very generous dividends in 29% of net profit. According to Forbes, in 2017 alone, partners were to receive a minimum of $ 400 million.

Should we expect further growth in the status of partners? Sergey Suverov believes that all the potential of LNG projects and optimism about them is already embedded in Novatek quotes. "This is already quite an expensive company with a P / E ratio (the ratio of the company's capitalization to profit - Forbes) of about 10," says the analyst. "Therefore, it is quite possible that in the future we will see a transition of some investors from Novatek shares into Gazprom shares, which is three times cheaper by multiples." With the fact that the success of Yamal LNG has already been laid in quotations, Andrei Polischuk agrees. But there is another incentive for growth. "In the short term, the dynamics of the company's shares are more connected with prices," explains Polishchuk. - They were higher than they had been predicted before - for the long-term perspective investors always look more conservatively and lay down more modest prices. Therefore, if prices continue to grow in accordance with the current dynamics, quotations will also grow. " Additional support for the shares may be provided by deals on the sale of shares in the Arctic LNG-2, which are expected in the past year. 10% in the project has already agreed to buy the French Total, Novatek is looking for buyers for another 40-50%.

Mikhelson and Timchenko have another mega-project that can make them the richest businessmen in Russia - with a big gap from competitors in the Forbes rating. Petrochemical giant Sibur is completing the construction of Zapsibneftekhim, a polymer production plant in Tobolsk. Its launch may coincide with the IPO of Sibur itself. The estimation of the company's capitalization is already known - $ 20-26 billion. According to Forbes, even if the placement takes place on the lower border, Mikhelson's fortune will grow by at least $ 3 billion, Timchenko - by $ 1 billion.