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. Last Updated: 07/27/2016

Rosneft's IPO Likely to Precede G8 Summit

Itar-TassRosneft CEO Sergei Bogdanchikov at a March 23 news briefing in Moscow.
State oil giant Rosneft's long-awaited IPO could take place a day before the G8 summit, a banker working on the deal said Thursday.

The July 14 date — which was reported by Vedomosti, citing sources familiar with Rosneft's plans — "is consistent with what's been discussed so far," a banker working on the IPO said, speaking on condition of anonymity.

The timing would have serious political significance, coming the day before Russia hosts the July 15-17 weekend summit of Group of Eight leaders in St. Petersburg.

Russia chose the theme of energy security to highlight its role as a guarantor of global energy supplies but has been rocked by controversy this year as Europeans have questioned Russia's reliability and senior U.S. politicians have accused it of using energy as a political weapon.

The banker said that an IPO target price of $8 billion, reported by Vedomosti, was also consistent with plans discussed inside the company.

Officials had previous given target figures as high as $20 billion, which would have made the IPO the largest in history.

The banker said $8 billion was "about what is required to replay the loans, but of course it will depend on market demand. The company has refinanced its debts, and with oil prices where they are, they don't need as much as some people have speculated."

The highest projected prices "never came from the company anyway," he said.

The IPO is intended primarily to pay back a $7.5 billion bridge loan to holding vehicle Rosneftegaz that let the Russian government gain majority control of Gazprom last year.

The banker also confirmed Vedomosti's report that $3 billion of the IPO would be aimed at small domestic investors in a so-called "people's IPO" organized by state-run Sberbank.

In charge of the people's IPO is Bella Zlatkis, deputy chair of Sberbank's board of directors. Zlatkis spent 34 years at the Finance Ministry, and was deputy finance minister when she moved to Sberbank in May 2004.

Zlatkis could not be reached for comment Thursday.

Rosneft spokesman Nikolai Manvelov also declined to comment, saying that "all questions concerning Rosneft's IPO are the responsibility of the company's board of directors."

The people's IPO is likely a way of raising the company's profile in the eyes of ordinary Russians by giving them a chance to profit, MDM oil and gas analyst Andrei Gromadin said Thursday.

Gaz de France used a similar scheme during its partial privatization in 2005, giving retail investors the chance to buy shares at a slight discount before they began trading on the Paris Eurolist market.

The French "people's IPO" was particularly popular after the share price jumped nearly 30 percent on the first day of trading, Gromadin said.

Rosneft's equivalent "is probably an attempt to achieve the kind of popularity Gazprom has," Gromadin said.

The pre-G8 timing is almost certainly intended to muffle foreign criticism by staging a de facto vote of confidence in Russia's energy sector, Gromadin said, though he added it remained to be seen whether the date was a realistic one.

In addition to ongoing complications surrounding Rosneft's plan to consolidate Yuganskneftegaz, the RTS has suffered its longest drop in value in two years, falling for seven sessions in a row.

"In the present situation, when there's been a fairly strong market correction, it will be very complicated to do the roadshow," Gromadin said. "If you want to give the market a positive spin in June, even with these oil prices, the chances of success are going to be somewhat reduced."

 Gazprom has again delayed announcing its foreign partners for developing the $20 billion Shtokman gas field.

Energy and Industry Minister Viktor Khristenko said Thursday that partners would be named "this summer," Reuters reported, a day after Gazprom deputy CEO Alexander Ryazanov said the decision would be made by the end of May.

 Growing state intervention in the energy sector risks damaging Russia's ability to satisfy rising world oil demand and may force consumers into the arms of the OPEC export cartel, the OECD said in a report on Thursday.