Rosneft could halve its mulled IPO - daily

MOSCOW, May 3 (RIA Novosti) - Russia's largest state-owned crude producer Rosneft could halve the value of its IPO to $10 billion and pay its debts from own resources, Russian business daily Kommersant said Wednesday.
Kommersant said Rosneft could change its IPO plans in the hope it would be able to pay its $10.968-billion debt without resorting to the public offering and following negative forecasts for demand for Rosneft stock abroad.
"The state is likely to drop plans to hold the IPO in two stages," the daily said.
The Kommersant report echoes an earlier article in The Financial Times, which said citing anonymous IPO advisers to Rosneft that the IPO value would be cut from the originally planned $15-$20 billion to $10 billion. The experts also said the government planned to float Rosneft shares to pay the debt of Rosneftegaz, which owns 99% in the oil producer (the remaining share belongs to the Federal Property Agency).
Rosneft Vice President Peter O'Brien declined to comment, saying it was up to the government to decide on the IPO value. But he told the paper that the company was in good financial shape, had secured reduced loan rates, production was growing rapidly and performance was improving.
The decision to raise funds through an IPO to pay Rosneftegaz's $7.6-billion debt was made last spring, the newspaper said. Rosneftegaz borrowed the money in 2005 to buy a stake in Gazprom, which was liberalizing its share market, in order increase the state's share in the energy giant to a controlling block.
The IPO could also help Rosneft repay the loans it had to take out to acquire Yuganskneftegaz, the core production unit of embattled Yukos, which auctioned off as payment on the oil firm's multi-billion back tax bills and then re-sold to Rosneft.
According to the paper, the controversial Yugansk deal fuelled foreign investors' criticism of Rosneft's transparency and their fear of legal risks. F&C Asset Management even invited companies last week to boycott Rosneft's IPO. George Soros also criticized the planned placement.
Rosneft was to sell its stock in two stages in Russia and on the London Stock Exchange, floating a total of 30% of shares, which could be Russia's largest IPO to date. As a next step, the company planned to consolidate its assets, which would give its minority shareholders a total of up to 11.85% of shares. The state's share in Rosneft would thereby shrink to 60%, the newspaper reported.
Kommersant said the new $10 billion scheme would prevent Rosneft from acquiring a strategic foreign investor.
Under the rules set by the Russian financial markets watchdog, no more than 70% of the overall IPO value, or 12% of Rosneft shares, can be floated on foreign markets. Leading foreign companies would therefore only be able to buy minor share blocks in Rosneft and would not be able to take part in running the oil company, whereas the state would retain at least 70% of shares in Rosneft.
Originally, Rosneft's IPOs were to take place on Russian and foreign trading floors in the third quarter of 2006.