IPO renaissance

26 May 2010 By Jason Bush

After a fallow period, Russia is preparing to restart privatisations. That could raise billions to plug a budget hole, and deliver bumper fees to investment banks. But the state is set to retain control of what it floats, so the full benefits of privatisation will prove elusive.

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Russia's State Duma passed amendments to the privatisation law on May 19, designed to widen the methods available for privatisation and simply the procedure. Banks and stock exchanges will be allowed to sell state property alongside the State Property Agency, and initial public offerings are recognised as a privatisation method. Russia has begun discussions with UBS, JP Morgan, Merrill Lynch and Troika Dialog, a senior privatisation official has said.

On May 18, fuel and energy minister Igor Sechin said that it would be desirable to privatise shares in oil company Rosneft and electricity company Inter RAO, with discounts for Russian retail investors. "All will depend on the market," he said.

On May 17, business lobby group the Russian Union of Industrialists and Entrepreneurs called on the government to expand privatisation in order to finance a proposed fiveyear moratorium on tax rises. The organisation proposed "golden shares", giving the state veto rights in strategically important companies, as an alternative to 51percent state ownership.

Russia aims to privatise nearly 1,000 enterprises in 2010, earning 100 billion roubles ($3.37 billion). The biggest privatisations planned for this year include the sale of 25 percent plus one share in the country's largest shipping company, Sovkomflot, a 25.1 percent stake in power firm TGK5 , and 13 percent of insurer Rosgosstrakh.

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