Russia To Raise $2.5bn From Privatisation

Alfred Kokh, first deputy chairman of the state property committee, told reporters Russia would try again this year to sell the 25 per cent stake in Svyazinvest which it offered in an investment tender last year.

He said a tender had gone out to appoint consultants to the sale of shares in RAO Yedinaya Energeticheskaya Sistema Rossii (UES), also likely to interest foreign investors.

If these two go through, we will attract $2.0-$2.5 billion, Kokh said.

Kokh, frequently tipped to take over as privatisation minister, gave no details of the planned UES sale.

Russian officials said earlier this year the government would sell off part of UES, the national power company.

 

A governmemt resolution of December 1995 obliges the state to hold on to a 51 per cent stake in UES until the end of 1998.

However, UES president Anatoly Dyakov said last month a further 8.5 per cent held by the state should be used to attract investment. He also said an increase in the 20 per cent foreign shareholding in UES was inadmissible.

Kokh earlier told a conference on privatisation in Eastern Europe that Russian sell-offs had not attracted as much foreign investment as hoped.

Italy's Stet SpA won an investment tender for 25 per cent plus one share of Svyazinvest late last year but the deal fell through before completion.

Stet agreed to pay $1.3 billion in cash and investment but refused to pay a deposit before Svyazinvest's local telecom companies were registered. The government refused to do this.

The failure of the Svyazinvest tender was a major blow to the privatisation programme, which has formed the bedrock of economic reform in Russia. It was also tarnished by the controversial shares-for-loans scheme, under which state owned shares were tendered in exchange for loans to the government.

Winning companies were often close to the auction organisers and their bids were frequently barely higher than the starting price. The winners were obliged to hold their stakes until September 1 after which they had the right to sell and keep part of the capital gain.

Kokh told reporters the deadline after which firms could sell had not been extended and that he had no plans to do so.

He said Russia would in future hold trust management auctions but declined to say which companies would be involved.

We have prepared the draft decree and we expect it to appear next week, he said, adding such auctions were unlikely to be held until 1997.

Kokh earlier told the conference that one of the failings of the early privatisation programme was that it had offered privileges in obtaining shares in companies to the workforce.

Our analysis shows that the first shares to come on to the secondary market are those belonging to the workforce, he said.

A draft copy of the 1997 budget, obtained by Reuters on Tuesday, includes plans to scrap these privileges.

The budget also includes plans to sell off a further 24 per cent of Svyazinvest next year.

Anatoly Chubais, who masterminded the sell-off campaign and is now President Boris Yeltsin's chief of staff, told the conference, The main message of privatisation is that it is simply and 100 per cent irreversible.