BRIEFING OF HEAD OF FAS IGOR ARTEMIEV AFTER A MEETING OF THE GOVERNMENT COMMISSION FOR CONTROL OVER FOREIGN INVESTMENTS

From the verbatim:

Igor Artemiev: Today [on 28.04.2018] there was a meeting of the Government Commission for Control over Foreign Investments in strategic spheres of Russian economy. The meeting was conducted by Chairman of the Government, Dmitry Medvedev. Let me present briefly its results.

The Commission, in particular, took a positive view and approved “Fortrum” buying “Unipro”, which owns electric power facilities in Russia (a lot of grid assets and other electric power facilities). “Fortrum” is allowed to acquire 47% and more of the “Unipro” shares. Since “Fortrum” is controlled by the Government of Finland, they cannot buy over 50% under the current law, so they get nearly the maximum of what they asked for, and the deal will be approved.

Next transaction concerns “Siemens”. The company is buying shares of such important strategic plants as Tver Rail-Car Works, Bryansk Machine-Building Works, Kolomna Plant that produce lots and of lots of our locomotives and diesel-units (the plants are involved in machine building for transport). “Siemens” is buying shares of “Alstom”, practically replacing them as minority shareholders with blocking ownership. It means that in the end “Siemens”, an established German company, will work with these plants instead of “Alstom”. The petition also was supported by the Government Commission.

Next petition supported by the Government Commission concerns a citizen of Kazakhstan, Timur A. Kulibaev, who decided to buy Vysotsk Port from some Russian shareholders. The Port is located 50 km from the Russian-Finnish border and 90 km from St Petersburg. He will gain control over the Port. Apparently, it continues the work within the Customs Union, and a Kazakh representative gains such serious assets on the Baltic, which, overall, pleases all of us.

The background of the next approved transaction is a bit convoluted. “Bratsk Fish” Ltd. is a company that has quotas for catching aquatic biological resources, particularly, our fish in the Irkutsk region. The deal was completed by Mr. Wolf Bernard, a Swizz national, a bit early. First, the deal was concluded without an approval from the Government Commission, but the legal error was eliminated by the buyer. Then they approached the Government Commission asking to approve the transaction nonetheless, referring to the lawyer’s mistake. The Government Commission thought it fit to approve the deal. Therefore, a rather big company will be formed, the sole owner of which is a Swiss national, who will be catching fish in Eastern Siberia.

Finally, the deal which the Government Commission has been working on for already three years: “Schlumberger” buying a Russian company “Eurasia”. “Schlumberger” asked the Government Commission to determine under the current economic environment, to what extent it is possible and what package the company can claim. The Government Commission made a preliminary decision that the Russian Government and the Commission would not wish to give out control over “Eurasia” (i.e., 50 + 1%). They specified the boundaries, however, that it can be the blocking package (i.e., 25 + 1, or even 49% shares). The Commission proposed and instructed the Federal Antimonopoly Service to hold talks with “Schlumberger”. As announced earlier, the deal should have been broken into two stages (also in accord with the plan that we had with “Schlumberger”). First, the Government was supposed to determine what and how much could be acquired. The Commission states that, most probably, the blocking package will be permitted, however, subject to certain conditions. We set 11 conditions. It was for the controlling package; 11 conditions that would neutralize the adverse consequences of various sanctions and all other with regard to the deal if the company were to gain control. Regarding 25 + 1 – or 49% (the allowed range today), we shall see which of these conditions should apply and which – not. Still, we will promptly enter into negotiations with “Schlumberger” and hopefully head into the homestretch.

That is our today’s outcome. We considered petitions filed by Finnish, German, and Kazakh companies. Adding some more: Swiss and French-American companies. Transactions that will be finally approved at the next stage include the United Arab Emirates, Saudi Arabia and several other deals concerning companies from Arab states.

Also, very active work continues with China and India. More than a dozen of countries with big capital continue investing to Russia in spite of everything.

Q: Do you consider any transactions jointly with the Russian Direct Investment Fund?

Igor Artemiev: Yes. They all were considered. It is simply that for some transactions there were several applicants. I think that perhaps in some cases tenders could have been held. In principle, all transactions with the Russian Direct Investment Fund were considered carefully and positively but in each case some things should be improved.

Q: So it is not final yet?

Igor Artemiev: There are no final decisions on them and it is necessary to give it another brush together with the Russian Direct Investment Fund. The Chairman of the Government gave these instructions; they will be entered in the protocol. It is an operational procedure, and I am confident that we will get to positive decisions already at the next meeting.

Q: Are “FESCO” and “Eurasia” among them?

Igor Artemiev: “FESCO” has not been considered at all today.  “Eurasia” - there is a deal alternative to “Schlumberger”, and it was discussed.

Since there are two applicants for “Eurasia” (on the one hand, the Russian Direct Investment Fund and funds from the United Arab Emirates, and on the other – “Schlumberger”), FAS jointly with our respected partners (it concerns, first of all, the Ministry of Natural Resources and the Ministry of Economic Development) was asked to determine an optimal configuration.

So, if we now talk that it is quite possible to give Schlumberger” 25% + 1 “ (as an option if we agree with the company, price is also important, as well as other additional conditions), then it is possible that the Russian Direct Investment Fund and the United Arab Emirates together acquire 16%.

25+16 is a pretty good configuration, without control but bringing significant hundreds of millions and even a billion dollars for “Eurasia”; at the same time the company gets interesting foreign shareholders, that have significant experience and modern technologies. This configuration will definitely be one of the negotiated options.

Therefore, it isn’t that the Government Commission approved the deal with the Russian Direct Investment Fund, but simply asked to include it in the “Schlumberger” package as an integrated solution that ultimately leads to the final decision - who is going to get what: Russian shareholders, the United Arab Emirates and “Schlumberger”.

Q: So they also have to agree between themselves?

Igor Artemiev: They probably can also talk between each other. But we are going to talk with each of them separately because ultimately it is essential for us to make arrangements with everybody. Hopefully, as a result there will be foreign investors, and they will be from different countries, and it is very good because everybody brings in their experiences and it can be seen only positively.

Once again, the talks are ahead so I can’t say how they are going to end.

Q: Can you give us the overall transactions amount?

Igor Artemiev: At the Government Commission today Dmitry Medvedev has said that only in the recent period 16 billion dollars have been attracted to the Russian economy: these are the deals that already passed the Commission, are approved and the money are invested.

Today we have considered transactions for around 3 billion dollars. It is also a good result.