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. Last Updated: 07/27/2016

Timchenko’s Novatek Bid Approved

The government on Monday allowed an investment fund owned by Gennady Timchenko, an acquaintance of Prime Minister Vladimir Putin, to boost its stake in Russia’s second-largest gas producer, Novatek, to 23 percent, backing the businessman’s expansion into the politically sensitive business.

A government commission on foreign investment approved the increase, which would make Timchenko the biggest shareholder in Novatek, ahead of Gazprom and its 19.4 percent, said Federal Anti-Monopoly Service director Igor Artemyev, a commission member.

Timchenko, co-owner of the world’s third-largest crude trader by volume, Swiss-based Gunvor, has been seeking to diversify his business after registering his investment vehicle Volga Resources in Luxembourg in 2007. Volga already has slightly more than 5 percent of Novatek and is set to acquire another 13 percent from Cartagena Development Inc., a company controlled by Novatek’s managers, in a deal announced in May. Timchenko is a Novatek board member.

Monday’s decision would let it buy a total of 23 percent of the stock without asking permission from the government for any transactions to that effect, a Volga spokesman said in a statement. Volga has no other specific deals lined up at this point, he said.

Novatek managers will collectively own about 30 percent of the company if Volga completes the purchase of the 13 percent, news reports have suggested. A company spokeswoman declined to comment Monday afternoon.

Novatek’s shares jumped on the news, rising 3.4 percent on the MICEX and 5.5 percent in London.

Timchenko first met Putin when he sponsored a St. Petersburg judo club where Putin was honorary president in the 1990s.

Novatek is planning to considerably grow its operations with the launch of a Yamal gas field, South Tambeiskoye, in 2015. It bought 51 percent of the company with the rights to the field from Timchenko for $650 million and has an option to buy another 23.9 percent, which it plans to hand over to a foreign investor.

The commission also approved the sale of a blocking stake in the field to Pyotr Kolbin, another oil trader, Artemyev said. Kolbin, an owner of Surgutex, had sought the stake from Gazprombank, news reports said.

Gazprom owns a neighboring field, North Tambeiskoye, and has been in talks with Novatek about the joint development of the field and the possibility of building a liquefied natural gas plant in the area. Gazprom said in the summer that it was looking at Total, Shell, Mitsui and Mitsubishi as prospective partners in the project.

With his connections, Timchenko could cause Novatek’s value to go up, said Mikhail Alefirenko, an analyst at Pharos Financial Group, which has a gas investment fund.

“Timchenko is a rather influential person,” Alefirenko said. “If he can do something for Novatek, its price will sharply rise.”

Timchenko is likely aiming for a greater role in Novatek’s operations, not just viewing the stock as a financial investment, said Pavel Sorokin, an analyst at UniCredit Securities.

The government commission also allowed Dubai World to buy 25 percent in the Vostochny Stevedoring Company, which runs the Russian Far East’s largest container terminal, based in the port of Vostochny, Artemyev said.

In another decision, the government gave Vladimir Lisin, an owner of Novolipetsk Steel, the go-ahead to buy the Black Sea port of Tuapse, Artemyev said.

The commission said it expected clarifications from Oleg Deripaska on his request to buy Russneft, Artemyev said, attributing the request to reports that Sistema was interested in buying a 49 percent stake in the oil producer.

The commission reviews requests from Russian businessmen because many of them operate through foreign-registered investment vehicles.