Russian government slashes privatisation targets

Thu Jun 27, 2013 6:12am EDT

* Next year's privatisation revenue goal halved

* "Lasting damage" from selling too cheaply - official

* State pension funds may buy Transneft, Russian Railways

* Rosneft unlikely to go on the block

By Darya Korsunskaya

MOSCOW, June 27 (Reuters) - The Russian government halved its target for privatisation revenues next year, saying on Thursday that selling off state companies at a time when financial markets are weak could inflict lasting damage.

In a presentation to a cabinet meeting as the government seeks to flesh out a three-year fiscal plan, the State Property Agency slashed its forecast to 180 billion roubles ($5.5 billion).

This year's privatisation revenues are likely to reach 60 billion roubles, or 14 percent of their original target.

"The current state of financial markets is such that it would, with rare exceptions, be impossible to avoid lasting damage from selling stakes in these companies," Olga Dergunova, head of the property agency, said.

The main sell-off pencilled in for 2014 is a stake in former state fixed-line telephone monopoly Rosteleom.

Dergunova's comments reflected a retreat from market reforms in Russia since Vladimir Putin returned to the Kremlin for a third presidential term in May 2012.

In that time, the biggest business deal in Russia has been a de facto nationalisation - state oil major Rosneft's $55 billion takeover of Anglo-Russian oil venture TNK-BP.

State capitalists like Rosneft CEO Igor Sechin oppose privatisation. Dergunova's agency is subordinate to the Economy Ministry, which has been temporarily weakened as minister Alexei Ulyukayev only took up his post this week.

The budget, buoyed by triple-digit oil prices, remains close to balance, sapping any sense of urgency to reduce the state's dominant role in the economy.

TOO CHEAP TO SELL

A poor investment climate, slowing growth and capital outflows have hit Russia's stock market, which has fallen by 18 percent this year and trades at a valuation discount of around half to other major emerging markets.

Privatisation revenues have repeatedly fallen short of target, although the state did raise more than $5 billion last autumn from the sale of a stake in Sberbank, Russia's largest bank.

In 2015, a further stake is due to be sold in bank VTB , which raised $3.3 billion in a recent rights issue. In 2016, a small stake should be sold in Russian Railways.

Privatisation revenues for 2015 would slip to 140 billion roubles - down by three-quarters from the previous target - before recovering to 300 billion roubles in 2016.

In her presentation, Dergunova retreated from the idea of placing stakes in large state companies on the stock market.

Instead, she proposed selling shares in Russian Railways and state oil pipeline monopoly Transneft either to the state pension fund or to the National Welfare Fund, where windfall oil revenues are saved to cover future pension costs.

There continues to be no firm plan to sell shares in Rosneft, where Sechin is entrenched also as the chairman of state holding company Rosneftegaz, which owns 69.5 percent of the world's largest publicly listed oil firm.

Ulyukayev suggested, however, that if Rosneftegaz does sell Rosneft shares, that could raise a further 1 trillion roubles in budget revenues.

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