privatization presentations

7/28/2019 Privatization Presentations

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AUCTIONS FOR SALE OF PROPERTY


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2 AHR the first nationwide Russianuniversal auction platform

Sale of stateproperty Sale of privateproperty


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3

Real-estate

Business (shares)

Rights of real-estate lease

Art works

Universal auction platform


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Structure and financial indicators4

Volume of transactions 1.65 billion

on the classic platform on the electronic platform

1.09 billion 0.56 billion

On-site auctions, in the auction

hall, with an auctioneer (English

and Dutch auctions)

All interested persons from any

part of the world may take part in

the Internet auctions


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Geography of sales

5 Financial network

6 auction platforms

Classic auctions:

presence in over40 regions of the

Russian Federation

CIS countries

Electronic auctions:

the geographical scope

of electronic sales isincomparably wider


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6

Khanty-Mansiisk Bank

44.2% of sharesKhanty Mansiisk Bank Joint StockompanyPrice of sale - 266.5 million poundssterling

Major transactions

The National Hotel in Moscow

100% of shares in the National HotelPrice of sale 97.6 million poundssterling

AHR the first private seller ofstate property in Russia

Total volume of transactions with state property 794 million


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Goal: To acquire property or business in Russia

Solution: Open AHR auctions

Receivinginformation On the site

www.auction-

house.ru

On the site

www.torgi.gov.ru

Submittingapplication

Payingdeposit

Winning AHR

auctions

You are theowner of a

business in theRussian

Federation

AHR auctions are the simplest way forforeign investors to become owners ofbusinesses in Russia
http://www.auction-house.ru/http://www.auction-house.ru/http://www.torgi.gov.ru/http://www.torgi.gov.ru/http://www.auction-house.ru/http://www.auction-house.ru/http://www.auction-house.ru/


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8 AHR services for foreign clients

Marketing and consulting services

Legal assistant

Evaluation of real-estate and business

Deals structuring

Wide advertising of objects for sale and media coverage


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9 AHR proposals today

13.11 % of shares in UAZ

25.5 % of shares in Murmansk Shipping Company

20% of shares in Northern Shipping Company

31.32% of shares in Northern River Shipping

Company

25.5% of shares in Amur Shipping Company

25.5% of shares in Anapa airport


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Welcome to our auctions


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Privatization of Russian companies


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12 Privatization of Russian companies

Ocean and river transportationMurmansk Shipping CompanyNorthern River Shipping LinesNorthern Shipping Company

Amur Shipping Company

Air transportationAnapa Airport

Automobile manufacturingUAZ

36 enterprises, including:


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13 Ocean and river transportation

Murmansk Shipping Company 25,5%

14.8 million

Northern Shipping Company 20%

4.2 million

Northern River Shipping Lines 31,32%

1.7 million


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14 Proposal to investors

Northern Shipping

Company 56.36%

Murmansk Shipping Company

Northern River

Shipping Lines56.9%

Leading position on the market of sea and river shippingoperations in the northern and north-western regions of

Russia

P l t i t


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Northern ShippingCompany

Northern RiverShipping Lines

20%56.4%

56.86%

11.82%

Murmansk Sea ShippingCompany

Other Shareholders Russian Federation

G h


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16 Geography

Access to the biggest market Northern trade routeNorth, North-west and South of Russia, Western Europe

North-Atlantic regionAntarctic region

Cargo shipping all over the world

The company has reinforced ice-class shipsUnique fleet: bulk carriers, tankers, icebreakers,

passenger and auxiliary shipsShips for construction and dredging worksOil and oil products reloading services

Key features:

O d i t t ti


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The largest shipping company of Siberia and Far-Eastregion of Russia25,5% share

Domestic shipping: Far East, Khabarovsk TerritoryJapanSouth KoreaNorth KoreaChina

Geography:

Ocean and river transportation

Ocean and ri er transportation


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18 Ocean and river transportation


5.5 million

Unique fleet - 220 ships of 211,1 thousands of dead-weighttonnage

Ships of river-sea mixed class

Bulk carriersTankersHigh capacity vessels

The company manages the number of river and sea ports, portloading complexes, repair and maintenance bases.

Key features:

19 Key advantages of sea shipping business in Russia


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19 Key advantages of sea shipping business in Russia

- Northern Sea Route (NSR) the shortest way from Europe to Asia(access to markets of Northwestern Europe and Pacific Ocean region);- Expected growth of NSR cargo shipping by the 2030 - 50-80 million tonsper year;- Active development of northern oilfields of Russia.

growing marketincreasing incomes

20 Air transportation


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20

International Airport

Anapa 25,5% share

- The airport ranks 5th in terms of increase in the rate ofpassenger thoroughfare 5th result by growth of passengerstraffic;- one of the 20 leading airports of the Russian Federation;- Passengers traffic in 2012 more than 0,5 million;

Airport serves 24 airlines covering 47 directions

Key features:

Air transportation



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International Airport

Anapa 25,5% share

- Active development of Southern Russian region;- Sochi Winter Olympic games in 2014;- Soccer world championship in 2018;- Krasnodar territory the best Russian health resort.

Key advantages:

2 million

22 Automobile manufacturing


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UAZ

13,2% share

UAZ is one ofthe largestRussianenterprises inthe sphere ofautomobile

manufacturing

FinancialindicatorsIn 2012 thecompanys

turnover was

590 million.Profit was 21 million.In 2012 thecompany sold70,517automobiles.

Company turnover (million GBP)



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UAZ is an automobile manufacturer of off-road vehicles(SUV) and pick-ups, commercial automobiles, light trucks(LCV) and minibuses (MPV).

Automobile market share:- minibuses (MPV) - 27%;

- pick-ups - 12,3%;- commercial automobiles and light trucks (LCV) - 11%;- off-road vehicles (SUV) - 3%.

Key features:

Automobile manufacturing



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24

Russian Federation (13%) + Privateshareholders (17%) = blocking stake of UAZ

Consolidate sale

Proposal to investors

20,7 million

Private Shareholders

Russian Federation


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Welcome to our auctions


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A Good Time to Take Part in Russian Privatisation ?

Investm ent Climate and Macro-economic Outlo ok

28 May 2013


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Contents

1. Why Russia? 3

2. Why now? 11


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1. Why Russia?

Solid Performance Despite Recent Slowdown


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Solid Performance Despite Recent Slowdownand Vast Resources

Stable and growing economy

Russia Brazil India China Mexico Turkey South Africa

Population (2011,m) 142 197 1,241 1,344 115 80 52

GDP growth (2013E) 2.4% 3.1% 5.2% 8.0% 3.5% 4.0% 2.6%

CPI (%, 2013E) 6.8% 6.0% 9.0% 3.0% 3.8% 7.0% 5.7%

Current account balance(% of GDP, 2013E)

2.3% -2.8% -4.9% 2.5% -1.1% -6.7% -5.8%

Intl reserves (USD bn) 514 374 290 3,180 168 118 50

Rating(S&P/Moodys/Fitch)

BBB/Baa1/BBB BBB/Baa2/BBB BBB-/Baa3/BBB- AA-/Aa3/A+ BBB/Baa1/BBB+ BB+/Baa3/BBB- BBB/Baa1/BBB

Resource % of global Rank globally

Oil (production) 13 2

Oil (reserves) 6 7

Gas (production) 21 1

Gas (reserves) 21 1

Nickel (production) 20 1

Platinum (production) 13 2

Timber (reserves) 23 1

Fresh water 15 2

Arable land 10 4

enjoying vast natural resources

9.0%

11.9%13.3%

8.8% 8.8%

6.1%6.6%

2006 2007 2008 2009 2010 2011 2012

and decreasing inflation

_____________________________________________________

Source: Statistical office of the Russian Federation, Gazprombank

_________________________________________________

Source: Country statistical offices, Bloomberg, Gazprombank

__________________________________________

Source: Global Insight, International Energy Agency

Strong Financial Position of the Sovereign


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68.0%64.0%

45.0%41.0% 40.0%

22.0%

11.0%

India Brazil Mexico Turkey SouthAfrica

China Russia

g gBut Risk Premium Still High

but high perception of country credit risk and low P/E compared to peer countries

Total sovereign debt (2012), as % of GDP

balanced budget low government leverage

-5.8%

-4.5%

-2.4%-2.1% -2.1%

-1.8%

-0.6%

IndiaSouthAfrica Brazil Mexico Turkey China Russia

Budget balance (2013E), as % of GDP

18.1

12.6 12.311.3 11.0 11.0

9.1

5.1

Mexico SouthAfrica

India Average Brazil Turkey China Russia

____________________________________________

Source: Country statistical offices, IMF, Gazprombank

_________________________________________

1. Weighted average of presented countries

Source: Bloomberg, Gazprombank

_____________________________

Note: Data for India is not available

Source: Bloomberg,

__________________________________________________

Source: Country statistical offices, Bloomberg, Gazprombank

1

+122%

5-year country CDS, as of24.05.2013 Price to earnings ratio based on countries domestic index

171

143132

123

9079

South Africa Russia Brazil Turkey Mexico China

Resilience of Russias Fiscal Policy


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yto Various Oil Price Scenarios

Oil prices that balance the federal budget

Source: Finance Ministry, Gazprombank estimates

The State Duma approved the Federal Budget Law for 2013-15, based on a new fiscal rule for the management of oil &gas revenues: Allows reduction of the non-oil budget balance from 10.5%

of GDP in 2012 to 8.4% in 2015, as well as to improve theinvestment climate.

The rule proposes a net borrowing limit of 1% of GDP an additional source to ensure stability.

Any oil revenues received due to the oil price exceedingthe base price stipulated by law would be used toreplenish the Reserve Fund until it reaches 7% of GDP allows to build buffers against external volatility.

The Russian government has decent reserves for a badscenario: The Reserve Fund has accumulated RUB 2.65 trln (ca.

$85 bln) as of May 1, 2013. The fiscal safetymargin covers the annual budget deficit

in the most probable negative case (average annual Uralsgoes to $85.0/bbl).

The National Wealth Fund contains RUB 2.7 trln (ca. $89

bln) an additional source of capital investment.

0%

2%

4%

6%

8%

0

2

4

6

8

2009 2010 2011 2012 2013 2014 2015

RUB trln

Well-being Fund, RUB trln

Reserve Fund, RUB trlnReserve Fund, % GDP (rhs)Well-being Fund, % GDP (rhs)

0

20

40

6080

100

120

140

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

$/bbl

zero-defic it price actual/ forecasted pr ice


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2. Why now?

Why now?


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Russian capital markets are expected to show strong growth in the upcoming years due to attractive macroeconomic indicators andlow valuations

If anything, recent economic slowdown reinforces Russian governments commitment to structural reforms and improvements of the

investment climate

The Russian Government is taking measures to develop local capital markets:

Regulatory changes will allow pension funds to become active investors in Russian corporate bonds and equities

Capital market liberalization and infrastructure improvements simplify the access of international money into the Russian market

State-owned companies have been encouraged to increase dividend payout to 25% when possible

At the same time the Russian government announced its plans to privatize over 20 large companies through share issue; thecurrent phase of the programme is expected to be completed by 2016 with estimated total proceeds reaching up to $100bn

Access of Russian companies to the equity markets was restricted for several years due to the crisis which resulted in significantIPO/SPO pipeline of issuers waiting for the market window

Russia taking actions to broaden the investor base


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Russia taking actions to broaden the investor base

Domestic investors Foreign investors

Currently low allocation of pension funds into equity is expected to increase:Removal of the requirement for pension savings account of individuals to show

positive returns each year for non-state pension funds (NPFs)

Expansion of the list of securities eligible for investment of pension savings for

NPFs

Permission given to pension funds to participate in IPOs/SPOs

Solid growth of personal income and savings

together with tax incentives will lead to domestic

demand increase

0% tax rate on income from securities held for

more than 3 years

Tax incentives for pensions and life insurance

savings accumulation

Planned allocation of National Wealth Funds money into domestic equity

securities

Currently $88.6 bn of NWF funds are allocated in foreign government debt

securities (75%) and VEB deposits (25%)

Shift ofNWFs investment policy towards investing in the Russian securities market

Realistic opportunities for the NWF funds to participate in privatization

Upcoming liberalization of the Russian bond and equity

markets

NSD has already received the status o f Central Securities Depository

Euroclear / Clearstream have obtained access to Russian OFZ

market in Q1 2013

Access of Euroclear / Clearstream to equity market is expected in 2014

Further infrastructure build out, including introduction of improved

market access solutions

T+2 settlement cycle with partial collateral

Tariff reform

Modernization of listing requirements

Planned introduction of unified trading system for all markets

Russian equity market

1

2

3

1

2

The above mentioned measures could potentially lead to c. 2x increase in local funds invested in the securities market

Russian market infrastructure progress to meet


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35

global standards

Signing of law

on CD

Dec. 2011

Start of OTC trade

in OFZs

Jan. 2012

Law on CD comes

into force

July 2012

Euroclear /

Clearstream receive

approval for account at

CD

Sept. 2012

NSD status as

ND confirmed

Nov. 2012

Euroclear / Clearstream

open accounts at CD,

execute first deals

Introduction of T+2

New tariff model on

MICEX

OTC derivatives platform

2013

Jan. 2013

Centralized

CCP

Repository

2013+

Basket REPO withcollateral management on

MICEX

Fully integrated risk

management and clearing

platform

Access of Euroclear /

Clearstream to Russian

equity market

Jan. 1, 2012 Entry into force of amendments to CBR Regulations On the servicing and circulation of federal state securities issues, which authorizedOTC market transactions. In 2012, secondary placement and primary auctions of OFZs on MICEX were officially withdrawn from the special segment(where only authorized dealers were eligible to trade) and transferred to the main trade platform.

July 1, 2012 Entry into force of the Law on the Central Depository, signed in December 2011, and also amendments to the law on joint stock companies.

The Central Depository unifies the system for recording titles to securities in Russia. This is one of the mandatory conditions for a number of conservativeglobal investors. In addition, legislative acts introduce the concept of depo accounts held by a nominee foreign holder (or opened by a foreign organizationthat records and assigns the title to securities on behalf of other parties).

July 27, 2012 The Federal Financial Markets Service (FFMS) approves a list of organizations eligible to open depo accounts of a nominee holder at theCentral Depository where 84 organizations were shown on the list, including the parent companies of international settlement systems Euroclear andClearstream. The same FFMS Order approves a list of securities that can be credited to such accounts. These include state securities, bonds issued byconstituent entities and municipalities, bonds by other Russian issuers, as well as securities of foreign issuers (until July 1, 2014 ); and securities recorded inthe Central Depository (i.e. shares of Russian issuers, etc) until July 1, 2014.

Nov. 06, 2012 The National Settlement Depository (NSD) is officially vested with the status of Central Depository

Feb 07, 2013Launch of OFZ OTC market with Euroclears participation

Year 2013: OFZ auction with Euroclears participation, liberalization of access of corporate and

bond markets, Clearstream on Russian bond market, introduction of OTC derivatives platform,implementation of T+2 and new tariff model on MICEX

Ambitious Privatization Programme Likely to mark astep change for Russian Capital Markets


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step change for Russian Capital Markets

Company Sector % share

for sale

Expected deal

size, $ m

Russian Railways Transport 5-25% 1,680-2,700

Sovcomflot Transport 25% N/A

Sheremetievo Transport 83.4% 1,000

Aeroflot Transport


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Domestic pipeline

1 Privatization

The current stage of privatization is expectedto complete by 2016

Potential pipeline comprises 22 companiesspanning across 8 sectors, waiting for themarket window

Estimated total proceeds are up to $100bn

3 Secondary equity offerings

Potential pipeline of 15+ companies on thebasis of previous public announcements andour analysis

Over 10 sectors

4 Fixed income

894 registered fixed incomeissues as of December 2012

Low yields and ambitiousinvestment programmesmake debt capital marketsattractive source of financingfor Russian issuers

2 Private sector IPOs

At least 25 companiesacross 7 sectors thatannounced their plans to go

public

Poor market conditions in2009-2012 have led to anumber of private companiespulling their plans to gopublic until the market picksup


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FINANCIAL INSTITUTIONSENERGYINFRASTRUCTURE, MINING AND COMMODITIESTRANSPORTTECHNOLOGY AND INNOVATIONPHARMACEUTICALS AND LIFE SCIENCES

General overview of privatisation in Russia

Angelica PhillipsPartner

28 May 2013

Legal background


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On the View menu, click Header and Footer to update this text39

Legal background

Laws

Federal Law No.178-FZ dated 21 December 2001 On Privatization of

State and Municipal Property (as amended) (the Law);Resolution No. 2101-r of the Government of the Russian Federation

dated 27 November 2010 endorsing the Project Plan (Program) forPrivatization of Federal Property and Guidelines for Privatization ofFederal Property for 2011-2013 (the Plan);

Russian Civil Code;

Federal Law No.208-FZ dated 26 December 1995 On Joint StockCompanies (as amended); and

Federal Law No.14-FZ dated 8 February 1998 On Limited LiabilityCompanies (as amended).

Purchasers and Privatisation plan


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Purchasers and Privatisation plan

Purchasers

Any physical person and legal entity. Legal entities in which the RF

owns more than 25% could not be purchasers under the Law.LLCs and OJSCs could not buy their own participant interests/shares

which are subject to privatisation under the Law.

Privatisation plan

The Russian Government is allowed to set forth a privatisation plan ofthe federal property for a period from 1 till 3 years. The effective Planlists legal entities and assets which a due for privatisation before theend of 2013.

Determination of price and information support


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Determination of price and information support

Determination of price

The Law envisages a market mechanism for determining the starting

price based on an assets evaluation report prepared in compliancewith the Russian legislation on valuation activities.

For participation in an auction or tender an applicant shall make adeposit in the amount of 10% of the starting price of the appropriatefederal property.

Information supportThe Law introduces a concept of information support of privatization,

which includes a complex of measures aimed on creation of a freeaccess of the general public to information concerning privatization ofthe federal property.

Regulatory approvals and mandatory offer


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Regulatory approvals and mandatory offer

Regulatory approvals

Acquisition of the appropriate threshold of shares/participant interests could be

subject to obtaining approvals from Russian regulatory bodies: Federal Antimonopoly Service

Governmental Commission in case the target company is of a strategicnature

Industry regulators for example Central Bank, Federal Service of the

Financial MarketsMandatory offer

Acquisition of more than 30% of shares of OJSC will trigger an obligation of thebuyer to make mandatory offer to other shareholders of the target to buy out theremaining shareholding.

Corporate Structures - 1A i t i t t d i tti R i h h i


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An investor interested in setting up a Russian company has a choicebetween: a limited liability company, abbreviated in Russian as OOO (LLC); and

a joint stock company (JSC) which may be either:

(a) a closed joint stock company, abbreviated in Russian as ZAO (CJSC); or

(b) an open joint stock company, abbreviated in Russian as OAO (OJSC).

Legal Status LLC and JSC may conduct any form of commercial activity. Any Russian and foreign

companies and individuals may be founders of LLC and JSC. LLC and JSC may beestablished by a single founder which must have at least two shareholders.

Management Bodies LLC and JSC have a three-tier management structure consisting of (1) General meeting

of shareholders/participants, (2) Board of directors, and (3) General director. Generalmeeting of shareholders/participants is the highest management body and it must meet

at least once a year


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The rights of minority shareholders of JSC depending on thesize of their shareholdings - 1


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size of their shareholdings- 1

Regardless of the size of shareholding

The approval of interested party transactions (together with other non-

interested shareholders) which, in accordance with Russian legislation, aresubject to approval by a majority of non-interested shareholders at thegeneral shareholders meeting (GSM) of the JSC.

Pre-emptive right to acquire additional shares or securities convertible intoshares (new issue).

Shareholding equal to 20%

All rights specified above. The right to elect one member of the board of directors if the number of

directors of the board of directors is equal to the minimum amount establishedby the JSC Law (i.e. - 5 members).

The ability to block the approval of major transactions with a value between25 to 50 percent of the balance sheet value of the JSC's assets, through its

representative in the board of directors since in accordance with the Russianlegislation requires unanimity of all members of the board of directors of JSC.

The rights of minority shareholders of JSC depending on thesize of their shareholdings - 2


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size of their shareholdings- 2

Shareholding equal to 25%+1 share

All rights applicable to Shareholding equal to 20%

The ability to block decisions of the GSM on matters which require a 3/4 majority ofshareholders present at the GSM, namely:

1. insertion of amendments and additions to the JSCs charter or approval of anew edition of the JSCs charter;

2. reorganisation of the JSC;

3. liquidation of the JSC, appointment of a liquidation commission and approval

of interim and final liquidation balance sheets;4. determination of the number, nominal value, category of declared shares

and rights granted by such shares;

5. acquisition by the JSC of the allotted shares in cases stipulated by the JSC Law;

6. approval of major transactions with a value exceeding over 50 per cent ofthe balance sheet value of the JSC's assets;

7. decrease of the charter capital of the JSC by reducing the nominal valueof shares.

Protection of minority rights in relation to approval of related partyor major transactions


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or major transactions

Major transactions

Minority shareholder is able to block the approval of major transactions with a valuebetween 25 to 50 percent of the balance sheet value of the JSC's assets, provided ithas a representative in the board of directors as well as other issues within thecompetence of the board of directors, which in accordance with the charter or Russianlegislation requires unanimity of all members of the board of directors of JSC

Minority shareholder is able to block the approval by the GSM on matters whichrequire a 3/4 majority of shareholders present at the GSM in particular the approval ofmajor transactions with a value exceeding over 50 per cent of the balance sheet value

of the JSC's assetsInterested party transactions

Minority shareholder is potentially able to block the approval of interested partytransactions (together with other non-interested shareholders) which, in accordancewith Russian legislation, are subject to approval by a majority of non-interestedshareholders at the GSM of the JSC. This means that if a major shareholder isinterested shareholder than minority shareholder will be the one to approve


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Disclaimer

The purpose of this presentation is to provide information as to developments inthe law. It does not contain a full analysis of the law nor does it constitute anopinion of Norton Rose (Central Europe) LLP on the points of law discussed.

No individual who is a member, partner, shareholder, director, employee orconsultant of, in or to any constituent part of Norton Rose Group (whether or notsuch individual is described as a partner) accepts or assumes responsibility, orhas any liability, to any person in respect of this presentation. Any reference to a

partner or director is to a member, employee or consultant with equivalentstanding and qualifications of, as the case may be, Norton Rose LLP or NortonRose Australia or Norton Rose Canada LLP or Norton Rose South Africa(incorporated as Deneys Reitz Inc) or of one of their respective affiliates.


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