Bloomberg News

Russian Rail Said to Seek 5% Stake Sale to State Funds in 2014

April 04, 2013

OAO Russian Railways is offering to sell a 5 percent stake to the country’s wealth and pension funds in 2014 in the first step toward cutting state ownership of the monopoly, according to two people with knowledge of the matter.

The sale of new shares in Russian Railways to the Wellbeing Fund and Pension Fund is part of the so-called privatization road map the transportation company had approved by the Federal Property Management Agency, the people said, asking not to be identified because the information is private. RZhD, as the railway owner is known, would use the sale proceeds for its investment program.

Management is proposing that 20 percent more of the company may be sold in an initial public offering only after 2016, the people said. Russian Railways may offer investors both new and existing shares.

Before an IPO, the government will have to change the structure of rail fees, decide what to do with the company’s unprofitable units and undertake other measures to make the rail monopoly more attractive to investors, according to sources.

Russian Railways Chief Executive Officer Vladimir Yakunin last year called on the government to slow plans for the state to bring in investors, and raise cash by selling shares to the pension fund managed by Vnesheconombank, the state development bank.

Russian Railways’ press service declined to comment on the proposals. VEB’s press service said such decisions are made by the supervisory board, which is headed by Prime Minister Dmitry Medvedev. The prime minister’s press service referred questions to the Finance and Economy ministries. The Finance Ministry, which oversees the Wellbeing Fund, didn’t immediately comment.

The road map submitted by Russian Railways, which includes private and public placements of stock, was approved, the Federal Property Management Agency, overseen by the Economy Ministry, said by e-mail today, without giving details.

To contact the reporter on this story: Ekaterina Shatalova in Moscow at eshatalova@bloomberg.net

To contact the editor responsible for this story: Denis Maternovsky at dmaternovsky@bloomberg.net


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