RusEnergy

MOSCOW, Jan. 14 - New York Times
By ERIN E. ARVEDLUND
Robert Dudley, chief executive of TNK-BP, and Viktor Vekselberg, right, in 2003. Mr. Vekselberg is a co-founder of TNK.
TNK- BP, the Russian oil company, showed stockholders on Friday its long-awaited plan to begin melding its more than a dozen subsidiaries into one overarching company. The plan set TNK-BP's value at no less than $18.5 billion.
Shareholders in TNK-BP, the British-Russian joint venture that is powering BP's growth, have been anxiously awaiting details of the restructuring. They will have a choice of swapping their shares for new stock in the umbrella company, or being bought out.
"We're offering shareholders a fair deal, something they don't get very often in Russia," TNK-BP's chief financial officer, Kent C. Potter, said at a news conference Friday.
TNK-BP's structure - a collection of more than 17 subsidiaries and about 600 legal entities like trading companies - was a legacy of Russia's 1990's privatizations. The company was founded by the Russian billionaires Mikhail Fridman and Viktor Vekselberg and the Russian emigre Len Blavatnik. They bought up oil wells and operations around Russia to create the country's third-largest oil producer. In 2003, BP purchased half of TNK in a deal blessed by both Prime Minister Tony Blair of Britain and President Vladimir V. Putin of Russia.
Amid increasing Kremlin scrutiny of the energy sector and huge tax claims against the troubled oil company Yukos, TNK-BP has also legally incorporated in Russia, in the region of Tyumen, near the Kazakh border. TNK-BP was registered in Cyprus and the British Virgin Islands, a sore point for Russia's government, which wants more control over collecting taxes from oil and gas companies.
TNK-BP expects production to grow 7 percent this year, Robert Dudley, its chief executive, said at the news conference. TNK-BP's output grew 15.6 percent in 2004, to 1.4 million barrels a day, making it one of the fastest-growing energy companies in Russia last year. TNK-BP has also helped BP's fortunes, pumping roughly a third of the British giant's oil.
The reorganization will be carried out in two stages. In the first, minority shareholders in the company's top three subsidiaries - TNK, Sidanco and Onaco - can swap for stock in the new TNK-BP Holding, or be bought out. TNK-BP controls 90 percent of the shares in the three units. Shareholders of those three subsidiaries, which produce at least 60 percent of TNK-BP's oil, will vote on the plan at meetings on March 1.
The company offered a buyback price of 92.50 rubles ($3.31) for each TNK share, 66.50 rubles ($2.38) for each Onaco share and 815.90 rubles ($29.20) for each Sidanco share. On Friday, TNK traded at $3.43; Onaco traded at $2.75; and Sidanco, whose shares trade in very small volume, at $23.50. TNK-BP also proposed swaps for 14 smaller subsidiaries scheduled to be consolidated this year in a second phase.
The restructuring does not include some valuable assets like Slavneft, which is jointly owned with its Russian oil rival Sibneft; some gas stations; and some operations in Ukraine. Mr. Dudley said that going forward without them was necessary to keep the restructuring on schedule.
"It would have delayed us from moving forward" with the swap terms, Mr. Dudley said. He did not rule out that they could be added at some point, and he also said he expected the company to list on a Russian exchange. Still, Deloitte & Touche, hired to do an independent valuation, said the entire new holding company was worth $18.5 billion, and industry analysts and investors roughly agreed with that estimate.
"The consolidation terms are very fair," said Steven Dashevsky, an analyst at Aton Capital. Based on a dollar value for each barrel of reserves, the company is offering the top of the range for Russian oil companies, he said.
Deloitte & Touche's equity valuation for TNK-BP, he said, "is roughly in line with our $20 billion to $25 billion estimated market value, which assumes TNK-BP becomes a normal publicly traded company."
Ian Hague, co-founder of Firebird Management, a hedge fund in New York, owns shares in the TNK-BP units and said the deal was appealing.
"TNK-BP will now assume the mantle of Yukos - a Western-style Russian operating company, and after the whole Yukos affair, that's extremely valuable," he said.