Bloomberg: Russia to Sell $4 Billion Railcar Fleet to Competing Billionaires: Freight
Russia is set to move 40 percent of the state’s
475,000 rail cars into billionaires’ hands in the government’s
biggest sale of transportation assets.
State-run OAO Russian Railways is offering
almost 75 percent of its OAO Freight One cargo unit, owner of
192,000 railcars used to carry oil products, metals, fertilizers
and coal across the country and for export. The auction is
scheduled for Oct. 28 with a starting price of 125 billion rubles
($4 billion).
Gennady Timchenko, co-founder of energy trader
Gunvor Group Ltd., is favored to beat steelmaking billionaire
Vladimir Lisin, 55, and an oil transportation company called ZAO
Neftetransservice, said Konstantin Yuminov, an analyst at ZAO
Raiffeisenbank in Moscow. Timchenko’s oil business faces less risk
from a slowing economy than do other kinds of commodity companies,
he said.
Russia ships 42 percent of its freight over the
world’s second-longest rail network, with an average journey of
almost 1,700 kilometers (1,000 miles). Putting Freight One into
private hands may hasten upgrades of the fleet, said Elena
Sakhnova, an analyst at VTB Capital in Moscow.
“The stakes are high,” Sakhnova said. “The
winner will get about a quarter of Russia’s rail-freight
transportation market.”
Losing Ground
Russian Railways, formed from a government
ministry in 2003, is losing market share to the upgraded fleets of
large, non-state railcar operators. Last year, the rail monopoly’s
share of cargo shipments dropped below 50 percent for the first
time, according to its 2010 annual report.
Since 2003, cargo rail volume has risen 21
percent and industry costs have fallen 22 percent, Salman Babayev,
a Russian Railways vice president, said in e-mailed comments.
“Private companies ensure a balanced approach to maintain prices
affordable to clients.”
The increase is slowing: Cargo volume rose 3
percent to 921.7 million metric tons in the first nine months of
the year from the same period a year ago, Russian Railways said
Oct. 3. That compares with 8.8 percent growth for all of last year.
Moscow-based Freight One had earnings before interest, taxes,
depreciation and amortization margin of 22 percent last year. That
probably will climb under new ownership, VTB said.
Transcontainer IPO
Globaltrans Investment Plc, Russia’s largest
non-state operator, had a 43 percent Ebitda margin, compared with
38 percent at Omaha, Nebraska-based Union Pacific Corp. and 32
percent at Canadian Pacific Railway Co.
Lisin and Timchenko’s jockeying may
boost Freight One’s price as much as 15 percent from the starting
level, said Alexey Rozhkov, an analyst at IFC Metropol in
Moscow. Lisin has about the same influence in
government as Timchenko, who is seen as an ally of Prime Minister
Vladimir Putin, he said. Putin, 59, who was honorary head of a judo
club founded by Timchenko in St. Petersburg, has said he isn’t
involved in the billionaire’s businesses.
Russian Railways, whose prices are regulated by
the government, started selling blocks of railcars and stakes in
its cargo units last year. One was a $400 million initial public
offering of almost 35 percent of OAO Transcontainer, to help fund a
1 trillion-ruble, three-year upgrade.
Lisin, Russia’s richest man according to Forbes
magazine, and Neftetransservice, controlled by brothers Vadim and
Vyacheslav Aminov, each acquired lots of 20,000 railcars.
Global Conditions
Russian Railways retains 50 percent of
Transcontainer, whose shares have slid 1.3 percent in London from
its November sale price. The unit may be the country’s next big
rail-industry offering.
Globaltrans, which decided not to participate in
the auction for Freight One “due to global financial conditions,”
will bid instead for Transcontainer. Lisin’s UCL Holding
transportation company and Neftetransservice may also turn to
Transcontainer, which focuses on container traffic between Europe
and Asia, if their bids fail this week.
Neftetransservice is unlikely to present a
challenge at the auction because of its limited access to the funds
for the deal, Rozhkov said.
While the Freight One sale is aimed at opening
up the market and encouraging investment in newer and better
railcars, it may lead to higher tariffs for small customers without
resolving bottlenecks and lack of cars that held up grain and coal
cargoes this year.
‘More Flexible’
“Freight One will become more flexible, trying
to remain attractive to large commodity producers, while boosting
tariffs for small and medium clients,” Rozhkov said.
A win by Lisin, whose OAO Novolipetsk Steel is
Russia’s biggest steelmaker by value, may help solve the dearth of
general-purpose railcars such as gondolas and boxcars used to carry
coal and metals, while a triumph by one of the oil carriers may
prolong the issue, Korolev said.
Putin ordered Russian Railways Oct. 15 to pull
about 200,000 railcars leased to small operators and clear backlogs
that had tied up grain and coal shipments. Most of the current
1,850 operators should be consolidated, leaving only five to seven
of the largest and a handful of regional carriers, and the
government needs to charge fines for idling railcars, Freight One
Chief Executive Officer Igor Asaturov said last month.
Mandatory Leasing
Russian Railways is seeking the right to lease
cars from non-state owners on demand to fight bottlenecks, a
regulated price corridor within which it can lease cars, First Vice
President Vadim Morozov told reporters today. The monopoly is in
talks about the share of the fleet it will have claims on.
Andrei Romashkin, a St. Petersburg-based
Transoil spokesman, and Dmitry Baukov, a Moscow-based UCL
spokesman, both said by phone the proposal won’t affect plans to
bid.
Lisin controls about $2 billion of
transportation assets. Among them are seaports in St. Petersburg
and Tuapse, shipping companies and Independent Transportation Co.,
which has 27,000 railcars to carry bulk cargoes and metals and is
the country’s third-biggest rail carrier by market share.
Timchenko’ rail carrier, OOO Transoil, runs
30,000 cisterns and 36 locomotives. His Gunvor Group handles more
than a fifth of Russian seaborne oil export and is expanding in
coal.
Whichever businessman wins, he faces long hours
of talks with state officials.
“The new shareholder will have to work out a
long-term plan with the government and shippers of socially
important goods,” said Dmitry Korolev, head of the Railcar
Operators’ Council, which includes Timchenko’s and Lisin’s rail
units. “Determining a new tariff policy will be a priority.”
http://www.bloomberg.com/news/2011-10-25/russia-to-sell-4-billion-railcar-fleet-to-competing-billionaires-freight.html