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TNK-BP investors urge Rosneft CEO to resolve conflict

BY JAMES MARSON

MOSCOW -- International investors in TNK-BP appealed to the head of majority owner Rosneft to resolve a conflict that has caused the value of their shares to plunge by 50% in the past six months, highlighting worries about the rights of minority shareholders in the country.

But the investors got few assurances in a rare audience with Rosneft' s CEO Igor Sechin in Moscow, people close to the situation said.

Mr. Sechin, a security service veteran and longtime close confidant of President Vladimir Putin, has so far shown scant inclination to deal with the investors, who hold minority stakes in a traded unit of TNK-BP, which Rosneft bought last month from BP and a group of Russian tycoons in deals worth $60 billion.

Those acquisitions made Rosneft the largest listed oil producer in the world, and the minority shareholders are hoping Mr. Sechin will buy them out or fold them into the enlarged company. But Rosneft has so far refused, and sent their shares into a tailspin last month by announcing that Rosneft could draw billions of loans from TNK-BP units.

The conflict comes as Russia' s government is attempting to transform Moscow into an international financial center, attracting investors through greater transparency and better corporate governance.

In the meeting with Mr. Sechin, investors warned that apparent disregard for minority shareholders by one of Mr. Putin' s state-controlled national champions could damp interest in Russian stocks and the government' s planned sale of stakes in state companies, including Rosneft.

At the meeting, Mr. Sechin said the company wouldn' t make an offer to the minority shareholders in the immediate future, a person familiar with the talks said. Mr. Sechin indicated, however, that the shareholders may still receive dividends, the person said.

A Rosneft spokeswoman declined to comment on what was said at the meeting, but said the company is currently developing its dividend policy following integration.

TNK-BP Holding shares have halved in value since Rosneft last year announced the deal to acquire the company' s parent from BP and AAR, an investment vehicle of the Russian tycoon group. Mr. Sechin said at the time that Rosneft wouldn' t buy out minority holders, who have a 5% share of TNK-BP Holding, now worth around $1 billion.

"We aren' t responsible for minority shareholders" Mr. Sechin told state television last month. "That' s a question for the previous shareholders."

Some minority investors said they had hoped BP might help resolve the matter. But the CEO of BP, which took a nearly 20% stake in Rosneft as part of the deal to sell out of TNK-BP, has said it is a matter for Rosneft. Robert Dudley told reporters earlier this month that the situation is complicated by the complex ownership structure of TNK-BP subsidiaries. A spokesman for AAR, the other former owner, declined to comment.

Investors said Rosneft as well as other Russian companies could find it harder to tap foreign capital markets. "It' s not just a risk for Rosneft. There' s a bigger tail risk for the whole market" said Timo Rossi from Northern Star, a Finnish investment fund with shares in TNK-BP. "It' s a litmus test for sentiment. This is very negative."

A government spokesman declined to comment. But the deputy head of Russia' s central bank criticized Rosneft' s treatment of the minorities earlier this month.

"Is it rational behavior by the management? Yes. Is it legal? Yes. Is it good for the financial market? No" Sergei Shvetsov said in a conference.

Dow Jones Newswires

04/17/2013

 

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