The preparation process for privatizations in the fuel and energy complex can also be applied to the companies included on the list of strategic enterprises, Interfax yesterday cited Presidential Aide Elvira Nabiullina as saying. The purpose of the inclusion of companies on this list was not to abandon the privatizations, but to make a decision on privatizations at the presidential level, she explained. Nabiullina also reiterated that Rosneftegaz could be viewed as an investor in the government's stakes ahead of the privatizations and as a center for recapitalization of the companies in the fuel and energy space.
Troika's view: It is positive that Nabiullina noted that inclusion on the list of strategic enterprises does not block possible privatizations. However, it has yet to be seen which companies Rosneftegaz could enter and whether new shares will be issued for this purpose.
The most obvious candidate for such a recapitalization in the utilities space is RusHydro, in our view. As part of a complex deal, VEB was supposed to buy RusHydro's treasury stock (circa 11%), but the transaction was put on hold. Now, Rosneftegaz could enter RusHydro's capital by buying these treasury shares.
Kommersant reported yesterday that Federal Grid Company (FGC) and MRSK Holding (both were recently added to the list of strategic enterprises) could be merged on the basis of National Grid Corporation (NGC; allegedly to be created as a 100% Rosneftegaz subsidiary). During the first stage, the state's stakes in FGC (79.55%) and MRSK Holding (53.69%) would be transferred under the management of NGC and then swapped into NGC. Rosneftegaz' stake is supposed to be more than 75% in NGC. In our view, this represents one possible scenario for the FGC/MRSK Holding structure. It is unclear whether this would slow the privatizations of separate MRSKs. The positive is that the Economics Ministry recently asked that the government speed up the approval of its instructions regarding changes to the 2011_13 privatization plan, in which the ministry proposes adding MRSKs to the list of assets to be sold. We continue to argue that MRSK privatizations through transparent market auctions would be the best way to improve efficiency in the electricity distribution sector.