SISTEMA ACQUIRES STAKES IN SEVEN RUSSIAN ENERGY COMPANIES FOR US$502.9 MILLION
Sistema (LSE:SSA), the largest private sector consumer services company in
Russia and the CIS, announced today that it has acquired minority shareholdings
in seven energy companies in the Republic of Bashkortostan in the Ural
Mountains, for a total cash consideration of US$ 502.9 million.
Sistema has acquired 19.9% of the shares of each of OAO Novoil, OAO Ufimsky NPZ,
OAO Ufaneftekhim, OAO ANK Bashneft and OAO Ufaorgsintez; 18.57% of OAO
Bashnefteproduct; and 10.08% of OAO Bashkirenergo (the 'Companies'). All seven
Companies are listed on the Russian Trading System (RTS) stock exchange in
Russia. Sistema intends to increase its stakes in some of the Companies to
constitute blocking minorities in the near future.
The shares have been acquired from OOO Bashkir Capital, which owns majority
stakes in each of the Companies, with the exception of Bashkirenergo. Bashkir
Capital approached Sistema with a view to capitalise on Sistema's extensive
experience and expertise in business restructuring. Sistema and Bashkir Capital
intend to work together to build a modern, transparent and vertically integrated
holding company, in order to maximize the value of the Companies and the entire
holding through the implementation of best practice corporate governance,
business process engineering and corporate finance activities.
The Companies together comprise the majority of the energy sector in the region
and are engaged in oil exploration and extraction, oil refining, petrochemical
production and energy production and distribution. Taken as a whole, they are
Russia's third largest oil refiner. The Companies' results are reported under
Russian accounting standards and are not therefore comparable with Sistema's
consolidated accounts, which are reported according to US GAAP. The combined
market value of the acquired equity stakes is over US$ 610 million. The
acquisition price therefore represents a significant discount to the current
market value of these assets.
Vladimir Evtushenkov, Chief Executive Officer of Sistema, commented: 'These
acquisitions will enable us to maximise the return on shareholders' funds. This
by no means indicates a departure from Sistema's focus on our core consumer
services operations and outlined investment projects. However, in the
environment of uncertainty surrounding the Svyazinvest privatization, Sistema
considers it appropriate to use existing funds, which are currently held in bank
deposits, to finance this transaction. It is a purely financial investment and
the acquisition cost will be refinanced in an appropriate manner in the near
'Sistema's business experience lies in the area of growing and developing
companies. We have a long and successful track record of investing in companies
and generating substantial returns, which has historically included a number of
holdings in the oil and gas sector. Our ability to successfully consummate deals
in this industry is exemplified by the acquisition and subsequent sale of a
stake in Belkamneft in 2003. We intend to take an active advisory role in the
strategic development of these businesses and then seek to exit the investments
by selling the stakes to financial or strategic investors.'
OAO ANK Bashneft is an oil and gas exploration and extraction company. Based on
the Russian ABC classification system, the company's reserves in 2003 were
estimated at 330 million tons. Bashneft produced 12.1 million tons of oil in
2004 and reported a 45% year on year increase in net sales to RUR 57,449 million
(US$ 2,002 million) in 2004.
Ufaneftekhim is an oil refining company, which processed 6.2 million tons of
oil, or about 3.2% of the total Russian oil output in 2004, up 3.9% from 2003.
The total Company's production constituted, respectively, approximately 5% and
4.3% of total Russian gasoline and diesel production in 2004 or 1.241 million
tons and 2.655 million tons respectively. The Company reported revenues of RUR
10,711 million (US$ 373 million) for the twelve months ended December 31, 2004.
Ufimsky NPZ refined a further 6.3 million tons of oil in 2004, producing an
additional 4% of standard quality and 8% of high quality Russian gasoline, as
well as 6% of the country's diesel fuel. This comprised 2.511 million tons,
1.150 million tons and 1.422 million tons of diesel, heating oil and standard
quality gasoline respectively. The Company reported revenues of RUR 9,782
million (US$ 341 million) for the twelve months ended December 31, 2004.
Novoil is the third refining company and processed 5.8 million tons of oil, or
3% of the country's total output in 2004. It produced 4% of Russian gasoline, 6%
of high quality gasoline and 3% of Russia's diesel and heating oil during the
period, or 2.064 million tons, 1.183 million tons and 1.555 million tons of
diesel, heating oil and standard quality gasoline respectively. The Company
reported revenues of RUR 10,314 million (US$ 359 million) for the twelve months
ended December 31, 2004.
Bashkirnefteproduct is one of Russia's leading gasoline filling stations
construction and operation companies. The Company buys, stores, wholesales and
retails gasoline and other petroleum products. Bashkirnefteproduct reported
revenues of RUR 8,526 million (US$ 297 million) for the twelve months ended
December 31, 2004.
Bashkirenergo produces and distributes electricity and heating for petrochemical
manufacturers and oil refineries, chemical, agricultural and transportation
companies as well as residential customers, holding a 100% market share of local
electricity supply and 80% of the heating distribution market.
Ufaorgsintez is the second largest Russian producer of polyethylene, with a
market share of 10%, and controlling 40% of the Russian phenol market in 2004.
The Company reported revenues of RUR 5,346 million (US$ 186 million) for the
twelve months ended December 31, 2004.
Sistema's management firmly believes that these transactions represent an
effective use of its existing liquid funds and that it will be able to take
advantage of rising oil prices, as well as the application of Sistema's
management expertise to maximum effect.
For further information, please visit www.sistema.com or contact:
Sistema Investor Relations Shared Value Limited
Alexei Kurach Matthew Hooper
Tel: +7 095 229 2741 Tel. +44 (0) 20 7321 5023
Sistema is the largest private sector consumer services company in Russia and
the CIS, with over 45 million customers. Sistema develops and manages
market-leading businesses in selected service-based industries, including
telecommunications, technology, insurance, banking, real estate, retail and
media. Founded in 1993, the company reported revenues of US$ 5.7 billion for the
full year 2004, and total assets of US$ 8.8 billion as at December 31, 2004.
Sistema's shares are listed under the symbol 'SSA' on the London Stock Exchange,
under the symbol 'AFKS' on the Russian Trading System (RTS), and under the
symbol 'SIST' on the Moscow Stock Exchange (MSE).
Some of the information in this press release may contain projections or other
forward-looking statements regarding future events or the future financial
performance of Sistema. You can identify forward looking statements by terms
such as 'expect,' 'believe,' 'anticipate,' 'estimate,' 'intend,' 'will,'
'could,' 'may' or 'might' the negative of such terms or other similar
expressions. We wish to caution you that these statements are only predictions
and that actual events or results may differ materially. We do not intend to
update these statements to reflect events and circumstances occurring after the
date hereof or to reflect the occurrence of unanticipated events. Many factors
could cause the actual results to differ materially from those contained in our
projections or forward-looking statements, including, among others, general
economic conditions, our competitive environment, risks associated with
operating in Russia, rapid technological and market change in our industries, as
well as many other risks specifically related to Sistema and its operations.