Glencore, Qatar Sell 14% Stake in Rosneft to Chinese Energy Company -- Update
September 08 2017 - 11:09AM
Dow Jones News
By Scott Patterson and James Marson
Glencore PLC and Qatar have agreed to sell the bulk of their
nearly 20% stake in Russian state-controlled oil giant PAO Rosneft
to a Chinese energy company in a deal worth about $9 billion.
The deal, announced by Swiss commodity miner and trader Glencore
on Friday, gives CEFC China Energy Co. a 14.2% stake in Rosneft,
deepening a growing economic relationship between China and Russia.
It also adds a new twist in a complex agreement to raise money for
a cash-strapped President Vladimir Putin by selling off part of the
crown jewel of Russia's energy industry.
Glencore and the Qatar Investment Authority formed a consortium
to buy a 19.5% stake of Rosneft in an $11.3 billion deal last
December, giving Moscow a cash infusion during a budget crunch
caused by declining oil prices.
But, in the deal's complex structure, Glencore's actual equity
stake was only about 0.5% of Rosneft and Qatar's about 4%. The rest
of the deal was financed by Russian banks and Italy's Intesa
Sanpaolo SpA, which had planned to spread its risk by syndicating
the loan to other banks.
The Wall Street Journal reported in June that Intesa was having
trouble finding banks willing to help them finance the deal.
The deal makes CEFC Rosneft's third largest investor behind the
Russian state, which owns half of the company, and BP PLC, which
owns about 20%.
Rosneft Chief Executive Igor Sechin, a close ally of Russian
President Vladimir Putin, said in a televised interview Friday that
the high cost of servicing the debt behind the consortium's
investment prompted the Glencore and Qatar to seek another
investor. Glencore will retain its 0.5% stake in Rosneft and Qatar
will keep its 4.7% stake.
"For us, it's a serious event, which forms in a finalized shape
the shareholder structure of our company," Mr. Sechin said. "We are
pleased that it's a Chinese corporation."
CEFC, founded in 2002, is a private energy trading company and
investment bank that has been expanding its international presence
in recent years. In March it agreed to pay $100 million and provide
$175 million in debt financing for a 19.9% stake in New York
financial services firm Cowen Group Inc. A CEFC representative
didn't immediately respond to a request for comment.
Intesa said in a statement that its EUR5.2 billion funding for
the consortium would be fully reimbursed following the sale. CEFC
and Qatari representatives couldn't immediately be reached for
comment.
Japanese investors had also looked at investing in the stake, a
person familiar with the matter said.
The sale of the stake to investors outside Russia last year was
seen as a boon for Mr. Putin, whose country is under sanctions from
the U.S. and European Union over its military interventions in
Ukraine.
Mr. Putin has looked to China for investment and trade as
relations with the West have deteriorated since Moscow seized
Crimea in 2014.
Investments have been slower and smaller than some officials had
hoped. But China has taken stakes in energy and other commodities
projects and firms that Russia had long been loath to cede to its
giant neighbor.
China has signed large deals for oil imports, an agreement with
Russian state natural-gas giant Gazprom which is building a
pipeline to make China and an investment in a flagship Arctic
Russian LNG project.
Before Friday's deal announcement, Rosneft signed a contract
Sunday to allow CEFC to sell Russian oil supplies. Glencore also
retains its right to purchase an additional 220,000 barrels of oil
a day from Rosneft for five years for its trading business, a deal
it struck with last year's investment.
Glencore didn't disclose a sale price, saying only that a 14.16%
stake in Rosneft was sold Friday "at a premium of about 16% to the
30-day volume weighted average price of Rosneft shares." A Wall
Street Journal analysis put that price at the equivalent of $9
billion.
Jon Sindreu and Giovanni Legorano contributed to this
article
Write to Scott Patterson at scott.patterson@wsj.com and James
Marson at james.marson@wsj.com
(END) Dow Jones Newswires
September 08, 2017 11:54 ET (15:54 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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