October 14 – October 20, 2013

Mozyr Refinery will be sold off if Russia doesn’t give loan

The situation has not changed
Mozyr Refinery will be sold off if Russia doesn’t give loan

On October 10th, the State Property Committee said it was preparing for state property sales.

The difficult economic situation requires Belarus to seek resources to support its socio- economic model. The Mozyr Oil Refinery is the key asset included in the privatization plan. Only Russian companies make up the potential pool of bidders, and the deal’s closure may be delayed due to the peculiarities in forming the asset’s price in Belarus.

On October 9th, a governmental meeting on Belarus’ socio -economic development was held which focused on the need to unload stocks, maintain financial stability, and support the real economy’s balanced development. GDP growth plans for 2013 were rejected as unfeasible. The currency market situation and the steady decline in international reserves have speeded up the decision to privatise state property.

All in all, 34 state enterprises will be put on sale, with Mozyr Oli Refinery being the largest. The pool of potential bidders is extremely narrow. Only Russian bidders can meet Belarus’ requirement to ensure the refinery’s full capacity load with hydrocarbons for five years. Mozyr Refinery is already partially co-owned by Gazprom Neft and Rosneft (21.29 % share each). Rosneft shows the greatest interest in the asset due to certain agreements with Vetek enterprise and in view of the upcoming launch of Lisichansk refinery in Ukraine in early 2014. Rosneft’s chances are also higher due to the ongoing negotiations about a partial monopoly on oil supplies to Belarus. If that agreement is reached, only one bidder will remain in the ‘pool’.

The refinery share book value (about 55 %) is around USD 500 million. The refinery was one of Belarus’ most profitable enterprises in H1 2013, with a net profit of USD 120 million. Its shares will be put up for sale at a much higher price than their book value. Over the past three years, prices of similar assets sold in the EU were based on USD 100-150 per processed ton, depending on the availability of petrol stations, enterprise condition, and its investment needs. Therefore, the Belarusian asset could be assessed at USD 1.5 billion.

Simultaneously, by analogy with the Beltransgaz sales, Belarus may also include an increase for ‘national heritage’ in the final price, which may delay or even put an end to the negotiations.

Belarus has recognized the need to start privatization and is waiting for proposals from potential investors. The privatization process may once again be frozen or suspended if Belarus manages to get enough loans.

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Once a week, in coordination with a group of prominent Belarusian analysts, we provide analytical commentaries on the most topical and relevant issues, including the behind-the-scenes processes occurring in Belarus. These commentaries are available in Belarusian, Russian, and English.

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