Rosneft/strategic investors
With friends like these, who cares about enemies?
The risks associated with Rosneft understandably unnerve investors. In response, the oil giant and its Kremlin backers are courting a handful of heavyweights to take strategic stakes. Petronas of Malaysia, the Chinese government, and BP are all reported to be interested.
Bringing in strategic investors to help underwrite privatisations is nothing new. BP bought a fifth of PetroChina’s flotation back in 2000. BP made a big profit on its stake when it sold out in 2004, but the rationale for these deals is all about getting access to markets and undeveloped resources.
That option value helps strategic investors get comfortable with prices and risks that most pension fund managers would balk at. Buying 1 per cent of Rosneft would cost BP between $600m-$800m. The UK oil major is already heavily involved in Russia’s energy sector via its TNK-BP joint venture. Its shareholders, having gorged on buybacks and dividends, are unlikely to clamour for the cash to go to them instead.
Rosneft hopes to raise between $10.8bn-$11.6bn, presuming the overallotment option is exercised. Petronas and the Chinese are said to be prepared to invest $5bn between them. If BP, or another buyer, took a 1 per cent stake, that would leave another $5.2bn-$5.8bn of Rosneft’s stock to sell. Just under a third of that must be placed in Moscow, where Russia’s own tycoons might help out.
In early February, the value of Russia’s free floating equity held by foreign investors was estimated at about $130bn. Even if that has not changed
