Middle Eastern sovereign wealth funds become Transneft shareholders

Interfax, 18.07.2017

MOSCOW. July 18 (Interfax) - Middle Eastern sovereign wealth funds became shareholders of Transneft (MOEX: TRNF) alongside the Russian Direct Investment Fund (RDIF) and Russia-China Investment Fund (RCIF) in the deal that was carried out in the spring with a large block of preferred shares in the Russian oil pipeline monopoly.

Transneft's charter capital is split into 5,546,874 common shares and 1,554,875 preferred shares with par value of 1 ruble. The preferred shares, which amount to 21.9% of equity, are held by private investors, the largest of which until recently was Ilya Scherbovich's UCP. According to Transneft, UCP owned 71% of preferred shares.

At the end of March it emerged that such a stake was sold on the market for 169.7 billion rubles, according to data from the Moscow Exchange (MOEX: MOEX). UCP later confirmed the sale of a "significant" bundle of Transneft preferred shares, and at the end of April the Gazfond pension fund reported the purchase of shares in Transneft.

The fund also named Gazprombank Asset Management and the RCIF, which was formed by the RDIF and China Investment Corporation, as buyers of Transneft shares. Gazprombank Asset Management is the trust manager of the Gazprom Financial closed mutual fund, shareholders of which are Transneft-Invest, Gazprombank (MOEX: GZPR) and a number of financial investors, Gazfond said at the time.

A month later Gazprombank disclosed the ownership structure of Transneft preferred shares: about 53.6% or 833,000 shares are held in trust management by Gazprombank Financial (in which Transneft-Invest holds 57.4%, the Gazprombank group holds 37%, and "other financial investors" hold 5.5%), 14.85% are held by the Gazfond Pension Savings pension fund, 1.49% by the RCIF and 0.43% by the RDIF.

The sovereign wealth funds of Middle Eastern oil producing nations are traditional partners of the RDIF in deals in Russia and often make investments under an automatic co-investment mechanism. For example, the RDIF has such a mechanism with the Qatar Investment Authority, a shareholder of state oil major Rosneft (MOEX: ROSN). However, nothing had been reported about Arab funds participating in the deal with the Transneft shares until now.

"Transneft is a key infrastructure company that works throughout Russia and connects its oil fields to the markets of Europe and Asia. Joint investment of the resources of foreign sovereign wealth and Russian pension funds in such important investment cases as Transneft is very important," RDIF Chief Executive Kirill Dmitriev said in an interview with Interfax.

"Therefore, the RDIF with leading sovereign wealth funds of the Middle East, and the Russia-China Investment Fund, representing, among others, the interests of our Chinese partners were among these investors. The Gazfond Pension Savings nongovernmental pension fund, Gazprombank Asset Management and others also invested in the company's equity," Dmitriev said.

Exactly which Middle Eastern funds acquired shares in Transneft with RDIF, the number of shares they hold and whether these investments were made within the context of automatic co-investment has not been disclosed.

In future, Arab funds could get voting rights at Transneft if the RDIF's proposal to convert the company's preferred shares into common shares is carried out.