Transneft will deal with Caspian Pipeline Consortium

The Russian Federation will contribute its share in the consortium to the company's capital.
Transneft began the procedure of obtaining ownership of 31% in the Caspian Pipeline Consortium (CPC), now owned directly by the Russian Federation. Transneft will issue an additional share issue and exchange it for CPC shares, due to which the state's stake in Transneft's capital will grow, and the stake of minority shareholders owning the prefs will be diluted.

Transneft's board of directors will consider an additional issue on October 19, the company said. It will be about entering into the capital of Transneft the Russian share in the Caspian Pipeline Consortium, an oil pipeline that delivers Kazakh oil through Russia to Novorossiysk, where oil is shipped to tankers. Now the shareholders of the consortium from the Russian Federation are Rosimushchestvo (24%) and CPC Kompani (7%, formerly Oman). "Transneft" is a trust manager of both packages, but does not own them.

During the additional issue, Transneft will exchange new common shares for 31% of the CPC belonging to the Russian Federation and become the sole shareholder of Russia. Since Russia owns 100% of the ordinary shares of Transneft, the state's share in them will not change, but the state's share in the company's capital will increase - now, ordinary shares account for only 78.1% of the company's authorized capital, the rest are preferred shares. The main pref owners are NPF Gazfond pension savings, ZAO Gazprombank-Asset Management and Russian-Chinese Investment Fund (RCIF, 50% of RFPI and China Investment Corporation).

In mid-summer, RFPI head Kirill Dmitriev proposed to convert the prefs of Transneft into ordinary shares, but so far this idea has not been developed. Meanwhile, the inclusion of the CPC stake in the capital of Transneft will unambiguously dilute the minority shareholders' package, but it is unclear how much this will depend on how much is valued at 31% of the CPC, what will become known the other day. Based on the last deal with the shares of the CPC, during which in May 2009 KazMunaiGas bought 1.75% of CPC from BP for $ 250 million, the value of the Russian stake in CPC can be estimated at $ 4.4 billion. The cost of Transneft's preferred shares is The Moscow stock exchange yesterday amounted to 280 billion rubles. That gives the company's capitalization at the level of about 1.3 trillion rubles. ($ 22.4 billion at the current exchange rate).

Also, the shareholders of the CPC are Kazakhstan (20.75%), Chevron Caspian Pipeline Consortium Company (15%), LUKOIL LUKoil B.V. (12.5%), Mobil Caspian Pipeline Company (7.5%), Rosneft-Shell Caspian Ventures Ltd (7.5%), BG Overseas Holding Ltd (2%), ENI International N.A. N.V. (2%) and Oryx Caspian Pipeline LLC (1.75%).