Giants’ engagement
Novorossiysk Commercial Sea Port Group (NCSP) has announced the acquisition transaction of a 100-percent equity stake in Primorsky Commercial Port LLC. The agreed terms of the transaction (acquisition of a 100-percent stake in Primorsky Commercial Port LLC) include the sale by the controlling beneficial owners of the NCSP's controlling stake to the beneficially owners of Primorsky Commercial Port’s stake (Transneft JSC and Investment Group Summa Capital).
There have been no final documents and terms of the deal disclosed as yet. The date of the transaction is also difficult to determine, since the creation of a huge stevedore company requires the approval of as well the stockholders of both companies, as the state regulatory agencies - the Federal Antimonopoly Service and the Government Commission for Control of Foreign Investments in the Russian Federation.
The public cost of Primorsky Port company handling 75 million tons of crude oil annually was estimated year ago at $ 5 billion. Before the Russian government’s ban on Russian grain exports the market capitalization of NCSP was slightly above the $3 billion with the company’s throughput at 86.5 million tons in 2009. The PCP company specializes in the transshipment of crude oil, which belongs to the low-margin commodities, while the NCSP is a diversified port, transshipping the high-margin containerized and grain cargoes.
Experts interviewed by PortNews believe that the public evaluation of the crude-handling port in Primorsk is somewhat overestimated. A year ago in an interview with PortNews IAA the head of Transneft Nikolay Tokarev estimated the cost of the Primorsky terminal at $ 5 billion. Today, the price may be lower, at about $ 4.3 billion. However, Promorsky port is aimed at implementation of major development projects, which might increase very soon the cost of the terminal.
From December 1st, the port plans to start operation a bunkering complex, designed for handling up to 60,000 tons of fuel oil a month. So far, the bunker market the port of Primorsk has not exceeded 30,000 tons a month, so the FOC will be using only a half of its capacity.
Currently, the petroleum products are delivered from St. Petersburg for bunkering in Primorsk by trucks and the small crude tanker Ophelia (7,000dwt). In the future, Promorsky port plans to build its own access railroad and to connect it to the main line railway in the vicinity of the Ermilovo station. The terminal local railroad issue is said to be resolved by the end of this year.
Having rail service, the port is ready to start a new project to establish an export fuel oil terminal. The project includes the construction of the tank farm and oil cargo piers for handling annually 20 million tons of exported petroleum products.
There have been no final documents and terms of the deal disclosed as yet. The date of the transaction is also difficult to determine, since the creation of a huge stevedore company requires the approval of as well the stockholders of both companies, as the state regulatory agencies - the Federal Antimonopoly Service and the Government Commission for Control of Foreign Investments in the Russian Federation.
The public cost of Primorsky Port company handling 75 million tons of crude oil annually was estimated year ago at $ 5 billion. Before the Russian government’s ban on Russian grain exports the market capitalization of NCSP was slightly above the $3 billion with the company’s throughput at 86.5 million tons in 2009. The PCP company specializes in the transshipment of crude oil, which belongs to the low-margin commodities, while the NCSP is a diversified port, transshipping the high-margin containerized and grain cargoes.
Experts interviewed by PortNews believe that the public evaluation of the crude-handling port in Primorsk is somewhat overestimated. A year ago in an interview with PortNews IAA the head of Transneft Nikolay Tokarev estimated the cost of the Primorsky terminal at $ 5 billion. Today, the price may be lower, at about $ 4.3 billion. However, Promorsky port is aimed at implementation of major development projects, which might increase very soon the cost of the terminal.
From December 1st, the port plans to start operation a bunkering complex, designed for handling up to 60,000 tons of fuel oil a month. So far, the bunker market the port of Primorsk has not exceeded 30,000 tons a month, so the FOC will be using only a half of its capacity.
Currently, the petroleum products are delivered from St. Petersburg for bunkering in Primorsk by trucks and the small crude tanker Ophelia (7,000dwt). In the future, Promorsky port plans to build its own access railroad and to connect it to the main line railway in the vicinity of the Ermilovo station. The terminal local railroad issue is said to be resolved by the end of this year.
Having rail service, the port is ready to start a new project to establish an export fuel oil terminal. The project includes the construction of the tank farm and oil cargo piers for handling annually 20 million tons of exported petroleum products.
Transneft weighs the replacement of the volume of crude oil at the terminals by petroleum products. This was recently confirmed by President of Transneft, at the conference of Reuters. "Exports of Russian oil to Europe via the Black Sea ports may decline against the background of growing refineries’ output and increasing exports of petroleum products", said the head of Transneft. The launch of new oil and petroleum product pipelines will lead to reduced exports of raw materials from Novorossiysk, Tokarev said. After the oil transshipment complex has started operating (BTC-2 project) in Ust-Luga (Leningrad region), Transneft will cut supplies of Urals Crude to Novorossiysk, proportionally increasing shipments of petroleum products at the port with the construction of oil pipeline "Yug” (South), which will link Novorossiysk with oil refineries of the Volga and the country’s southern region. "We could give some facilities in Novorossiysk for petroleum products ... about 9 million tons. These volumes (of crude oil) can be safely removed from Novorossiysk and redirected to Ust-Luga", Mr. Tokarev said. In his view, the Baltic direction for Urals Crude exports is more profitable for exporters than the Black Sea route, and the reduction of oil shipments via the southern ports will not cause dissatisfaction of oil companies.
The threat for future profitability
The upcoming merger of the two largest Russian ports could adversely affect future profitability as well Primorsky Commercial Port as NCSP. Konstantin Romanov, an analyst of Finam agency believes Transneft, one of the future stockholders of NCSP, is interested in controlling the rates for handling one of the main types of cargo – crude oil. "We consider the news as negative for minority stockholders of NCSP, as, Transneft would gain control over the prices on crude oil transshipment that made up in 2009 51% of the NCSP’s freight turnover and 17% of its revenue, which could adversely affect profitability of the NCSP’s business.
Besides, in the absence of other parameters of the transaction, we see a significant risk that the merger will occur on less favorable terms for minority stockholders.
Nadezhda Malysheva, Vitaly Chernov
The upcoming merger of the two largest Russian ports could adversely affect future profitability as well Primorsky Commercial Port as NCSP. Konstantin Romanov, an analyst of Finam agency believes Transneft, one of the future stockholders of NCSP, is interested in controlling the rates for handling one of the main types of cargo – crude oil. "We consider the news as negative for minority stockholders of NCSP, as, Transneft would gain control over the prices on crude oil transshipment that made up in 2009 51% of the NCSP’s freight turnover and 17% of its revenue, which could adversely affect profitability of the NCSP’s business.
Besides, in the absence of other parameters of the transaction, we see a significant risk that the merger will occur on less favorable terms for minority stockholders.
Nadezhda Malysheva, Vitaly Chernov
Reference:
Novorossiysk Commercial Sea Port Group is the largest Russian port operator. The NCSP shares are listed on the Russ. RTS and MICEX (ticker NMTP), on the London Stock Exchange (in the form of GDR, ticker: NCSP). In 2009 the NCSP Group’s throughput amounted to 86.5 million tons. Consolidated revenues of the Group (IFRS) for 2009 totaled $675.1m, net income - $252,2m. The NCSP Group incorporates the following stevedore companies: Novorossiysk Commercial Sea Port OJSC, Novorossiysk Grain Terminal OJSC, Novorossiysk Shipyard OJSC, NCSP Fleet OJSC, NovorosLesExport OJSC, IPP OJSC and Baltic Stevedoring Company
Primorsky Commercial Port LLC is the largest stevedoring company in the North-West Federal District, providing cargo handling services to the oil companies, transshipping crude oil transported via the Baltic pipeline system. In 2009, the volume of crude oil handled by PCP reached 74,895,200 tons.