2nd Leak Puts Fair Price on Yugansk

Investment bank Dresdner Kleinwort Wasserstein has completed its valuation of core Yukos production unit Yuganskneftegaz, pricing it at between $15.7 billion and $17.3 billion, Interfax reported Friday. If confirmed, the range would be in line with market analysts' hopes for a fair valuation.
Citing unnamed sources, the agency said the bank had not yet delivered its report to Yukos or to the Justice Ministry, which hired it to conduct the valuation ahead of a potentially market-transforming sale of the production unit as payment for Yukos' crippling back taxes.
The head of Russian investment banking at Dresdner, Bob Foresman, declined to comment Sunday on the figures given by Interfax. "We are still finalizing the report and have not yet submitted it to the Justice Ministry," he said by telephone.
But the estimate leaked to Interfax is in line with an earlier report by Vedomosti, which on Sept. 23 cited unnamed sources as saying that the bank had settled on a range between $15 billion and $17 billion. Dresdner immediately denied the report.
The market has seized on the reports of Dresdner's valuation as an indication that Yukos' core Siberian production unit could be sold off at a fair price.
Investors have feared that Yugansk could be sold for a song to Kremlin-friendly oil and gas companies at a time when the state is increasing its control over the energy sector, especially after the announcement of Gazprom's planned merger with state-owned Rosneft.
As news broke about the second leak of Dresdner's appraisal, Finance Minister Alexei Kudrin also attempted to assuage investor concerns during a G7 meeting in Washington over the weekend.
"I am sure that the sale of assets will be conducted on a transparent, competitive and commercial basis," he told reporters on Saturday. "The majority owners of Yukos keep saying that everything will be sold improperly, but we will see."
Kudrin blamed Yukos' core shareholders for destabilizing the situation by consistently raising the specter of possible bankruptcy for the company, an event that President Vladimir Putin has said he wants to avoid.
The Kremlin has been locked in a yearlong battle with Yukos core shareholders, in a legal onslaught widely seen as an attempt to destroy any political ambitions held by jailed Yukos owner Mikhail Khodorkovsky.
Yukos faces a slew of back taxes worth more than $7 billion and climbing. Due to a crippling asset freeze, the company has been hampered in its ability to pay them off.
The Justice Ministry has said it is preparing to sell off Yuganskneftegaz, which produces more than 60 percent of Yukos' total output, as payment for the tax bills.
But even as hopes rose that Yuganskneftegaz would be sold off at a fair price, it was unclear how any Russian company would be in a position to pay such a price.
Even if invited to bid for the asset, foreign oil majors could well shy away from an auction tainted by questions over Kremlin expropriation tactics. Neither of the two domestic front-runners, Gazprom and Surgutneftegaz, have enough cash to buy it outright.
The leak over the Dresdner valuation came ahead of a possible decision by the Natural Resources Ministry on whether to revoke Yuganskneftegaz's production licenses over nonpayment of taxes.
If approved, such a move would void Dresdner's valuation and slash Yuganskneftegaz's value to as little as $2 billion.
The ministry was due to rule on the licenses last Thursday, but at the last minute the decision was deferred indefinitely. Natural Resources Minister Yury Trutnev has indicated that Yukos might be given time to pay off the debt, saying that regulations would give Yugansk three months to rectify the violations.
Steven Dashevsky, head of research at Aton brokerage, said a three-month stay would mean nothing, as the company's accounts would likely still be blocked then.
He said that with no likely buyers for Yuganskneftegaz at $15 billion, the Dresdner valuation looked increasingly obsolete, even before it was confirmed.
"Right now it does not look like Dresdner's valuation will find any use. It is not practically applicable to anything," Dashevsky said.
"I don't see anyone in the world paying that amount for Yuganskneftegaz when the ownership of assets could be challenged in every possible way, in any court on the face of the Earth."
Lawyers for Yukos' majority shareholder, Group Menatep, have warned of international legal action against any buyers of Yukos assets, claiming any sale would effectively amount to expropriation by the Kremlin.
Although tax bills for 2002 and 2003 could still be levied, leaving Yukos with a potential total back tax bill of about $14 billion, the company has already paid off most of the bill for 2000, Dashevsky said. That means the outstanding tax bills against the company would still likely be below Dresdner's valuation, making any auction of Yuganskneftegaz a mockery, he said.
But Chris Weafer, chief strategist at Alfa Bank, suggested that Yuganskneftegaz could still be sold at auction at a reserve price of about $12 billion to cover outstanding tax bills plus costs.
Gazprom and Surgutneftegaz could buy if they joined forces to form a consortium, he said.
Surgut's estimated cash pile of about $6 billion could be offered in conjunction with an IOU from Gazprom in a sell-off of Yuganskneftegaz, if it kept its license. The government could take shares in the Gazprom-Surgut consortium as payment for the remainder of the sale, he said.
"This fits in with the state's consolidation drive over the sector and with the building of a state-owned energy giant, along the lines of Saudi Arabia's Aramco," he said.
Both Surgut and Gazprom have said they will not bid for any Yukos assets, but Weafer said that did not mean they could not bid as part of a consortium.
But despite Kudrin's reassurances, Dashevsky saw little chance for a market solution to the snowballing pressure on Yukos.
"We're soon going to be marking the first anniversary of Khodorkovsky's arrest and still there is no solution in sight," he said. "The government would have loved to have seen this wrapped up in a couple of months. The problem is that they still don't know how."

(From : Moscow Times)