Russia Said to Plan Sales of VTB, Transneft Shares by 2020

(Bloomberg) -- Russia is looking to sell dozens of stakes in state companies ranging from its oil-pipeline monopoly to its second-largest lender over the next three years as the government struggles to cover its budget gap, according to a draft privatization program.

After years of delays, the government is reviving plans to offer shares in Transneft PJSC and VTB Bank PJSC, according to the plan prepared by the Federal Property Agency and viewed by Bloomberg. It’s stepping up the number offerings, while disappointing hopes for a broader retreat from its dominant role in business as it retains control of most major companies.

Russia is running its widest budget shortfall since 2010 after oil prices plunged two years ago, triggering the longest recession in two decades. The Finance Ministry raised its 2016 deficit forecast to 3.7 percent of gross domestic product from 3 percent at the start of the year, even as it aims to raise more than 1 trillion rubles ($17 billion) in three major stake sales this year. That amount is set to fall to 138 billion rubles in 2017 and 14 billion rubles in each of the following two years, according to Finance Minister Anton Siluanov.

The biggest asset on the Federal Property Agency’s list for 2017-2019 is 35 percent of VTB Bank, which would leave the government with a blocking stake by 2020. Siluanov said Friday that 11 percent of the lender may be sold in 2017. At current prices, that would account for about 70 percent of planned revenue from sales next year.

The government may offer 75 percent of Sovcomflot PJSC in the next three years, according to the draft, which is being debated among ministries and will soon be sent to the government. While Siluanov said an offering of shares in the shipping company will probably be held next year, he didn’t specify the amount.

Russian President Vladimir Putin said in an interview in September that he favors reducing government’s ownership. “The Russian government has no need to hold such large stakes and we are committed to carrying out our plans,” he said. “The state really is perhaps too big in the Russian economy now.”

Russia’s property agency is proposing to sell common shares of Transneft, cutting its stake to just over 75 percent of the oil-pipeline operator by 2020, and hold an initial public offering of 25 percent of the state monopoly Russian Railways JSC, according to the draft. A further 8 percent of Alrosa PJSC may be offered after 10.9 percent was sold for 52.2 billion rubles this year, it shows. Siluanov said the government isn’t considering a reduction of its stake in the precious gems miner next year.

The country’s three biggest companies -- Rosneft PJSC, Sberbank PJSC and Gazprom PJSC -- aren’t included in the preliminary program. Interfax reported earlier Friday that the government doesn’t rule out the sale of a further 10 percent of Rosneft after a planned 19.5 percent this year. Siluanov told reporters that the government hasn’t discussed the matter.

According to the draft plan, the government will also cut its stake in power utility RusHydro PJSC to just over 50 percent and divest its stakes in port operator Novorossiysk Commercial Seaport PJSC, telecommunications company Rostelecom PJSC and agriculture trader United Grain Co.

--With assistance from Olga Tanas To contact the reporter on this story: Andrey Biryukov in Moscow at abiryukov5@bloomberg.net. To contact the editors responsible for this story: Torrey Clark at tclark8@bloomberg.net, Balazs Penz at bpenz@bloomberg.net, Amy Teibel