RusEnergy

28.04.2006 MosNews - F&C Asset Management, one of the Britain's biggest investment institutions, took the unusual step on Thursday, April 27, and publicly threatened to boycott the planned London listing of Russia's state-owned oil company Rosneft, which is expected to raise at least $15 billion. Karina Litvack, head of corporate governance and socially responsible investment at F&C, said the initial public offering raised serious questions of governance and legal risk. "Investors should tread carefully when considering investing in Rosneft. The Russian legal regime is opaque and difficult to navigate," she was quoted by the British Financial Times as saying. She added: "We don't pretend to understand it and if we cannot understand something, we won't invest in it. Unless Rosneft can provide us with credible assurances that it has identified, and made adequate provisions for, any liabilities stemming from the acquisition of its Yuganskneftegaz assets, we won't be interested." F&C's statement highlighted how much is at stake for the London Stock Exchange if UK institutions, which make up the bulk of investors in the series of Russian companies that have floated or hope to float in London, decide to follow suit. It also helped explain why Clara Furse, the LSE's chief executive, wrote to the Russian President Vladimir Putin urging him to reconsider the "arbitrary" ban on William Browder, who runs Hermitage Capital Management, one of the biggest investors in Russia, from entering the country. UK investors look on Browder's situation as an indication of attitudes to shareholder rights in Russia. "It gives us a feel for the culture in the home territory," one of them told the paper. "It begs the question whether companies under the government's influence will be managed for the benefit of the government, not shareholders." However, Richard Segal, chief strategist at Argonaftis Capital Management, the hedge fund, said: "I don't think many foreign investors will be too worried about the impact on their investments. These types of events help to explain the Russian risk premium and are already factored into prices." He added: "I can't see letters such as these, open or not, leaked or not, changing the behavior of Russian authorities, at least not quickly. There's quite a long history of foreigners being denied entry or re-entry into the country, permanently or temporarily, even well-connected foreigners." For example, in 1997, American Boris Jordan, a former investment banker who helped set up the Russian stock market and helped found Renaissance Capital, the Russian bank, had his visa revoked. Taru Oksman-Ison, director at Principal Search doing work in the Russian market, said: "There will be more questions [about Russian flotations] but specialists who work in the Russian market will be quickly working the phone and saying that this too will pass." He added: "There is so much action in this area at the moment . . . I don't think it is going to stop the investor base from investing in Russian companies in a significant way. You expect that it will be complex to invest in Russia." Some market observers said intervention by Clara Furse is surprising since it comes at a time when listings by Russian companies have become an increasingly important source of revenue for the LSE. Admission fees for international companies on the main exchange range between 5,000 pounds and 272,000 pounds, depending on the company's market capitalization. For AIM (Alternative Investment Market) companies, there is a flat fee of 4,340 pounds. International companies also pay an annual fee of between 4,000 pounds and 17,000 pounds. The exchange generates additional revenues from trading; the value traded on the LSE's international order book rose 146 percent from the year to March, helped in no small part by the growing interest in Russian offerings.