MOSCOW, November 1 (RIA Novosti) International corporations neglect Russia's expansion - experts / Alrosa set to enter Angolan market / TNK-BP expelled from list of Russian shareholders in Burgas-Alexandroupolis / Gazprom buys everything on sale - expert / Russia's largest mobile retailer eyeing Indian market

 

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Vedomosti

International corporations neglect Russia's expansion - experts

Russia is one of the top three developing markets for investment in foreign assets, say analysts from The Economist Intelligence Unit (EIU).

The country will keep its position over the next few years. However, the heads of international corporations do not regard Russian businessmen as serious rivals. This neglect will cost them a lot, say Russians.

By 2005, Russian investors had spent $120 billion on purchasing foreign assets, Hong Kong $470.5 billion, and the British Virginian Islands $123.2 billion, most of which can be considered to be Russian money.

The real volume of Russian investments is impossible to calculate, the report authors say, since many of the purchases are carried out through offshore companies.

Analysts say that by 2010 Russian companies will spend another $52 billion in foreign asset purchases. EIU predicts that the bulk of Russian investments will go to Eastern and Western Europe, and Africa.

Russians will buy assets in the power industry (34%), the metals and mining sector (23%), and will also invest in chemical, pharmaceutical and biotechnological operations (11%).

Russians have often bought up companies and assets which Western competitors did not consider particularly valuable, and the tendency was to view them as "younger brothers", EIU said.

Another reason is that few Russian companies are comparable in size with Western ones, says Yury Ignatishin, managing director of the information analysis project Mergers.ru. Among 500 corporations with the largest capitalizations, only six are from Russia, and even those are perceived as part of the state.

"Until recently Russians have been buying assets only in the raw materials sector," said Alexander Filatov, director for business development at Russkiye Mashiny. "We won't be considered fully-fledged investors until we start making strategic investments in consumer and high-technology companies."

"Our corporate standards are in no way inferior to those of Brazil, India or China," said Oleg Tsarkov, managing director of Renova Capital. "But Russian companies have been known to Europe for 10 years, while Indian ones have been known for a century."

Russian companies are prepared for global competition, says Deutsche UFG chief economist Yaroslav Lisovolik. "Inattention to competitors will cost Western managers dearly," he warns.

Gazeta.ru

Alrosa set to enter Angolan market

Russian diamond giant Alrosa has decided to invest over $60 million in regional projects, after Angolan President Jose Eduardo dos Santos gave his personal guarantees to Russian companies operating in the country.

Experts said Alrosa was taking its chances, because no top-level promises can guarantee stability to foreign business in Africa.

Dmitry Oreshkin, director of the Merkator think-tank, said U.S. gold producers had recently been expelled from Liberia, after lavishly financing local projects for five years. He said it was hard to estimate Angola's former Soviet debt, which was written off after regular military coups.

Alrosa is set to enter the Angolan market prior to federalization, which will give the government a majority stake in the company. Oreshkin said Alrosa will assume risks as a private company, but will list its losses as public debt if Angola receives another government.

Finam analyst Denis Gorev said Alrosa will act in the interests of its majority shareholder, the Russian Federal Property Management Agency, which has a 37% stake in the company.

Alexei Pavlov, head of research at Vika investment group, said Alrosa's move was politically motivated. He said Russia had already written off $11.3 billion of African debts and planned to write off another $700 million soon under a cooperation program with Africa.

"This is why major Russian companies are already operating in Angola, Guinea, and South Africa, and are expanding their presence in other countries in the region," Pavlov told the paper.

Dmitry Baranov, head of research at Prado Banker and Consultant, said Russia was returning to countries which had long depended on the Soviet Union. "We must now hurry, because other countries may grab all attractive projects in conditions of African economic growth," said Baranov.

Alrosa, which controls 25% of the global diamond market, owns a 32.8% stake in Angola's mining company Katoka, which controls 3% of the world's diamond market.

Kommersant

TNK-BP expelled from list of Russian shareholders in Burgas-Alexandroupolis

Russian-British joint venture TNK BP will not be a shareholder of a Russian company that will control 51% in the Burgas-Alexandroupolis oil pipeline project.

Russia is seeking control of oil transport routes in southern Europe, and only state-controlled companies will be able to take part in the project, the paper said.

TNK-BP, which until recently has been a Russian project coordinator, still expects to control 25% in the project. However, it will be able to do so only if it agrees to buy out the Greek or the Bulgarian stakes.

Yesterday, an official statement was made that Russia will control 51% in the project to build an oil pipeline from Bulgaria's Burgas to Greece's Alexandroupolis.

Semyon Vainshtok, CEO of Russian pipeline company Transneft, said his company will share the stake with Gazprom Neft, the oil arm of Russian energy giant Gazprom, and state-controlled oil company Rosneft.

Russia, Greece and Bulgaria are expected to sign a corresponding intergovernmental agreement before the end of this year. Russian-British TNK-BP is not mentioned anywhere.

Alfa Bank analyst Konstantin Batunin said TNK-BP was deprived of the right to part of the Russian stake "due to its ownership structure," as foreigners control 50% of its shares, and the other half belongs to a group of investors not affiliated with the government.

The analyst believes that after its failure to cooperate with foreign partners in transportation projects, such as the Caspian pipeline consortium, the Russian government will not choose to make new mistakes.

Though Russia controls 24% in the Caspian project to lay Russia's first private pipeline from Kazakhstan's Tengiz to Novorossiisk, it has been unable to influence the company's operations until recently.

The Caspian project has actually been a planned loss-making enterprise. As a result, Rosenergo put forward an initiative to subject it to tariff regulations for natural monopolies. In addition, a stake in the Caspian project may be transferred to Transneft.

TNK-BP is still hoping to join the Burgas-Alexandroupolis project. The company's president, Robert Dudley, said yesterday it might count on a 25% stake out of the remaining 49% in the project. However, TNK-BP will have to negotiate this with Greece and Bulgaria.

Gazeta

Gazprom buys everything on sale - expert

Reformer Anatoly Chubais is celebrating, because "the strategic correctness of energy sector reform has been validated." The upbeat mood of RAO UES' CEO is easy to understand - during the first floatation of a power generating company's stock in Russia (wholesale generating company OGK 5), demand from private investors was eight to 10 times higher than supply.

RAO UES plans to separate OGK 5 and the territorial generating company TGK 5 as part of the first stage of its restructurization as early as 2007. The government will hold a blocking stake (25% plus one share), while another stake will be sold to a strategic investor, which can later consolidate a controlling stake.

Yesterday, Chubais refused to name any potential investors. Official information will be disclosed by mid-November, but experts are already making their forecasts with great certainty.

The key strategic investor is Gazprom, said Semyon Brig, an analyst with the Finam brokerage. "There can be no doubt. It submitted a bid for the entire additional issue from the very beginning," he said.

"This scared the power generating industry, because the rechanneling of assets from one monopoly to another is not in line with the logic of reform," said Natalia Prokhorova, head of power generation research at the Institute of Natural Monopolies' Problems. "That is why they decided to diversify the additional issue."

Strategic investors in both OGK 5 and other generating companies are very likely to be Interros, Integrated Energy Systems, which is part of Sual Holding, and Enel and E.ON, experts said.

Although the float was diversified, some experts said that Gazprom would soon acquire all of it at market price. "It is unclear, however, whether the practice is sensible," said Vladimir Milov, president of the Institute of Energy Policy.

The gas giant is now acting as a vacuum cleaner, absorbing everything on sale. "In this way Gazprom is trying to create an image of itself as the key player on the energy market, and to show potential rivals 'who is boss'," he said.

Biznes

Russia's largest mobile retailer eyeing Indian market

Russia's largest mobile handset retailer Euroset has held the first round of negotiations with a potential partner in India. Experts and market players believe the project may be quite risky.

The Indian media report that Euroset intends to open 5,500 outlets in India together with local developer Ansal API in the next two years.

Euroset board chairman Yevgeny Chichvarkin admitted that the negotiations are underway with potential Indian partners, but said no specific decision has yet been reached. "We have just held the first consultations, and the market is really promising to us and is our priority," Chichvarkin said.

Euroset is also eyeing the markets in Cyprus, Pakistan and Turkey, the company's president Eldar Razroyev said. "We have already opened an outlet in Cyprus, and are studying Pakistan's market," he said. "The Turkish market is also promising, but overrated."

Market players say Euroset has turned its attentions to India because the Russian market has been slowing down. However, they are skeptical about the company's prospects in India.

"This year, the Russian market will for the first time perform negatively, and a 12% decrease is expected," said Ochir Mandzhikov, spokesman for the retail handset chain.

"The Indian market remains one of the world's fastest growing." However, the ability to pay is low among the bulk of the local population, and a big investment in establishing and developing a network is unlikely to be recouped, Mandzhikov said.

"There are a lot of factors hampering civilized marketing operations in India," warned Andrei Nevedeyev, project management director with the Apex investment fund, which is carrying out a number of investment projects in the BRIC countries (Brazil, Russia, India and China).

"There are about ten supermarkets across the country, and street vendors sell cellphones here and there at $30 maximum," he said.

"The telephones are cheap because they come from local operators, who provide them wired with a SIM-card. And these are mostly primitive phones. Philips has also attempted to establish cellular services and a retail chain in India, but failed, and now the company is touring local villages and states to sell its products off trucks."