President of Russia Vladimir Putin: Mr Sechin, I would like to congratulate you on the conclusion of a privatisation deal to sell a large stake in our leading oil and gas company Rosneft: 19.5 percent. The deal was made on an upward trend in the price of oil and it therefore reflects on the value of the company itself.
In this respect, the timing is very good and the overall value of the deal is significant: 10.5 billion euros. Together with the Bashneft company that you acquired recently, this amounts to $17.5 billion. Even the first by itself is the largest privatisation deal, the largest sell-off and acquisition in the oil and gas sector in the world in the outgoing year 2016.
I very much hope that new investors – a consortium of the Qatar state fund and Glencore, a major international trading company – I hope that their participation in managing bodies will improve corporate procedure and the company’s transparency and will ultimately increase its capitalisation. Meanwhile, the company’s controlling stake will remain in the hands of the Russian state: over 50 percent.
Overall, this is a very good result. I would like to congratulate all of you, your colleagues who have worked on it. And naturally, the question arises: when will the money come to the Russian budget?
Rosneft CEO Igor Sechin: Mr President, allow me to update you on the results of the work to fulfil your assignment to sell a 19.5 percent stake in Rosneft oil company.
As part of our effort to enlist potential investors and conclude this sale, we have conducted commercial talks with over 30 companies, foundations, professional investors, sovereign funds and financial institutions in Europe, the Americas, the Middle East, and the Asia Pacific region.
Today, I am reporting to you the conclusion of these talks, the completion of the consideration of proposals submitted, and the signing of the comprehensive privatisation deal, including Bashneft, as you rightly said. This amounts to over 1 trillion rubles, which will come to the budget, including 10.5 billion euros for Rosneft’s 19.5 percent stake.
The consortium that will become Rosneft’s shareholder was established by the Qatar Sovereign Wealth Fund and Glencore trading company, which is our long-standing partner. The consortium participants hold equal stakes: 50 percent each.
Payment to the state budget will be made both with our own resources and with a loan organised by one of Europe’s largest banks.
Therefore, it was a market transaction based on Rosneft’s stock exchange quotations. We believe that we got the highest possible price with the minimum discount of 5 percent to the exchange quotations as of December 6.
This transaction is not a simple portfolio investment but a strategic deal with additional elements, such as the signing of a long-term offtake agreement with Glencore, the coordination of our market positions and the creation of a joint venture, which will work both in Russia and under international projects.
As you said correctly, this transaction is the largest privatisation deal in Russia. Overall, the privatisation of 49 percent of Rosneft in a series of transactions has earned us $30 billion, no, nearly $34 billion, which is four times more than returns from all other privatisation transactions in Russia’s oil and gas sector.
This transaction is also important for the global oil sector and, as you have said correctly, is the largest asset sales transaction in the global sector in 2016.
I am sure that the high standards of our investors and Rosneft’s transition to a new dividend payment system, which the Government has approved at 35 percent, will definitely improve the company’s capitalisation, including the state-owned stake. We estimate the state-owned stake after the transaction at approximately 80 billion rubles.
Mr President, considering the foreign economic challenges, I can tell you that we have signed this transaction so quickly exclusively thanks to your personal contribution and support. Also, I would like to say that we received the necessary amount of assistance from the Government while preparing the deal.
I am honoured to convey our sincere gratitude to you on behalf of the company and all those who were involved in this transaction.
Vladimir Putin: Thank you.
A large amount of foreign currency will be supplied to the financial market, but the budget must receive the full sum in the ruble equivalent, in rubles. Therefore, we must devise a method that would preclude a negative impact on the market and prevent any hikes on the exchange market.
We know that Rosneftegaz, which will ultimately transfer the money to the budget, has considerable ruble resources. First, we should use these funds, and second, we should work jointly with the Finance Ministry and the Central Bank to plan a system of measures for currency conversion that would prevent market hikes. I ask you to coordinate these issues with the Government, including top Government executives, as well as the Finance Ministry and the Central Bank.
Igor Sechin: Certainly, Mr President, we will do as you say.
We will receive the first money transfers from our foreign investors in the next few days. We also maintain contact with the Central Bank and the Finance Ministry. We will certainly report to the Prime Minister and will devise a system under which the impact on the market will be the smallest possible.
Vladimir Putin: Please invite our investors and new Rosneft shareholders to Russia. We will organise a government reception for them.