Russia May Sell 12.67% of Rosneft Before IPO

MOSCOW, Dec 28, 2005 (Dow Jones Commodities News via Comtex)

Russia may sell a 12.67% stake in state-owned oil producer Rosneft (RNT.YY) before the company floats about 20% of its shares in an initial public offering, Russian news agency Interfax said Wednesday, citing an unnamed source.

The funds are to go towards paying down debts owed by Rosneft's parent company, Rosneftegaz, the report's source said.

The company plans to raise a total of $19.7 billion, according to Interfax. A 12.67% stake may be worth $7.6 billion according to the agency's source, who didn't say who the buyer might be.

The company originally planned to list shares on the RTS and MICEX exchanges in Moscow as early as April, the report said.

But another source - an unnamed Rosneft manager - told the agency that a move to consolidate minority shares in Rosneft subsidiaries ahead of any IPO could take five or six more months after receiving board approval.

Rosneft has pinned its hopes on a successful IPO sometime next year as a means of financing the company's rising profile in the Russian oil sector.

Rosneftegaz agreed to a $7.5 billion syndicated loan in September to purchase a 10.7% stake in Russian natural gas monopoly OAO Gazprom (GSPBEX.RS).

Rosneftegaz's stake increased the Russian government's ownership of Gazprom above 50% and gave the state the confidence to remove a 20% cap on foreign ownership of Gazprom this month.

But the move also left Rosneftegaz with a hefty financial burden. Russian newspaper Vedomosti reported earlier Wednesday Rosneftegaz is looking to Rosneft for $400 million a year to cover the interest on the loan.

Rosneft is reportedly planning to take a $1 billion loan to cover recent acquisitions at Siberian production sites. The company has also recently decided to pay back $470 million to a consortium of Western banks led by Societe General SA (13080.FR), which originally lent the money to Russian oil company Yukos (YUKO.RS).

Rosneft decided to pay back the loan after acquiring Yukos' main production unit, OAO Yuganskneftegaz (YFGA.RS), last year - in a move some observers have called a way to improve the company's image in the West ahead of the IPO.

Copyright (c) 2005 Dow Jones & Company, Inc.