NEW PHASE – AND NEW RULES?

There is much talk in the market of late about the anticipated privatisation of over $29 billion of state assets to be carried out by the Russian Government over the next 3 years in order to plug budget deficits. Views differ as to whether this is simply the next phase of a process started in the early 90s, or a case of the Government sweeping the cupboard bare – assets expected to be going under the hammer include minority stakes in major state-owned companies such as Rosneft, Transneft, Sberbank, VTB Bank, SovComFlot and a few others, but may also include stakes in less desirable companies. However, what seems clear from recent changes to the privatisation legislation is that the process for this round of privatisation will be quite different from that followed in the past.

The relevant amendments (the "Amendments") to the Privatisation Law were adopted in May this year and came into force on 15 June, and have already attracted much interest from market participants, especially those such as investment banks who recall the lucrative opportunities afforded by earlier privatisations.

While the overall thrust of the Amendments seems to be the streamlining and modernisation of the privatisation process - their stated purpose is to modernise the privatisation process by making it more efficient and transparent, and less bureaucratic - this briefing focuses on two areas that will be of particular interest to investment banks: the right of the Government to engage an investment bank to arrange the privatisation of a particular asset; and the lifting of restrictions on the sale of Government stakes in open joint stock companies through a public offering.

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