«Сумма» растит капитал
Vedomosti, Aug. 18, 2011
Aleksandra Terentyeva
Summa Capital was thrust into the public eye last year, when it, along with Transneft, purchased a controlling stake in one of Russia’s biggest port operators, Novorossiysk Commercial Sea Port (NCSP). But Summa Capital does not intend to limit itself to logistics. A representative from the company told Vedomosti that the company has adopted a strategy that includes moving forward in many areas, such as logistics, construction, oil and gas, telecommunications, and mining. According to him, the company is changing its name, and the group will simply be called Summa.
Summa’s biggest investment in logistics has been its share in NCSP, which, as of yesterday, was valued at $451 million on the London Stock Exchange. But the group isn’t ready to stop there. In early August, sources from NCSP’s partner companies claimed that the Summa businesses had purchased a share in Russia’s second biggest grain terminal, the Novorossiysk Grain Terminal (with a capacity of 3.5 million tons of grain per year). But that’s not all. A representative from the group says that Summa is considering the possibility of getting involved in port projects in Europe, by purchasing shares and building terminals.
Konstanin Yuminov, an analyst from Raiffeisen, notes that it’s almost impossible to build terminals in European ports – it’s much simpler to buy them - but it costs a lot of money to get a foot in the door of the port business in Europe.
Summa’s oil and gas business consists of the Yakutsk Fuel and Energy Company (YATEK). According to Summa’s own informational materials, in 2010 YATEK produced 1.7 billion cubic meters of gas, 87,000 tons of gas condensate, 41,500 tons of fuel oil, 31,500 tons of A-80 gasoline, and 13,500 tons of A-92. Summa is already at work expanding this segment of its business. YATEK applied to bid on the tender for the Geofizicheskoye oil and gas field on the Yamal Peninsula, but permission was denied. Summa plans to increase its base of resources and its production of oil products and to also build a plant to produce motor fuels from natural gas.
Denis Borisov, an analyst from the Bank of Moscow, believes that YATEK could be valued at $500 million (excluding debt).
Summa owns licenses for huge deposits of zinc and lead: the Pavlovsk lead-zinc deposit in Novaya Zemlya (21.4 million tons of reserves and resources) and the Sardana polymetallic deposit in Yakutia (over 10 million tons of lead and zinc reserves). The Pavlovsk deposit is the subject of a dispute with Rosnedra. The office denied First Mining Company (part of the Summa group) the right to develop the deposit, but the court overturned this decision.
Kirill Chujko, an analyst at UBS, says that Summa’s deposits contain vast reserves, but adds that the value of a mining asset is dependent on what will need to be spent on the infrastructure, and that is very difficult to estimate in this case. Their deposits are located in areas with a forbidding climate and which are not easily accessible.
Summa’s infrastructure business consists of the Stroynovatsiya company, a contractor involved in the construction of the BPS-2, ESPO, and CTC pipelines, as well as the engineering company Inteks, which is helping to renovate the Bolshoi Theatre. Stroynovatsiya is the biggest contractor working on the project to expand the CPC pipeline, and it holds contracts worth 10 billion rubles.
Dmitry Kashaev, the head of the product development division at Broker Credit Service Financial Group, believes that the value of the assets under Summa’s control can be very roughly estimated at between $3-5 billion. It is unclear how much of this belongs to Magomedov, because neither he nor any partners he might have disclose the size of their share in Summa. This year, Forbes valued Magomedov at $750 million, while Finans put his worth at $3 billion.
Summa is not the largest Russian holding company. For example, according to the company’s website, the assets under the control of Interros are valued at about $20 billion. In early 2010, Renova estimated its assets at “almost $9.8 billion.”
A new director will be the one to carry out Summa’s strategy. A source close to Summa told Vedomosti that over time, it is likely that the current president, Marat Shaidaev, will concentrate more on developing the infrastructure and port side of the business and could become head of that division. According to the source, Aleksandr Vinokurov could begin leading the company in a few months. He began working as Summa’s first vice president a few days ago (this position did not previously exist at the company).
Neither Mr. Vinokurov nor Mr. Shaidaev will comment on personnel matters. Mr. Vinokurov told Vedomosti that he is responsible for the company’s strategy, investments, and operational management. According to Mr. Vinokurov, the current list of the company’s business operations is not exhaustive - the group is also considering investments in other industries. But he declined to say how much Summa is planning to invest in its development.
Much of Summa’s business is tied to Transneft. Steven Dashevsky, the managing partner at Dashevsky & Partners, is quick to point out that Summa shares 50% of the ownership of NCSP with Transneft, and that most of Stroinovatsiya’s orders come from that company. Mr. Dashevsky warns that any business that is closely tied to a single partner is putting itself at risk. And if that partner is a state monopoly, that risk is multiplied.
***
And telecoms to boot
Summa’s telecommunications division, Summa Telecom, provides broadband Internet access in 11 cities in western Russia (including St. Petersburg and Nizhny Novgorod). At the moment, this is only a small business - the company’s informational materials claim it has only 150,000 subscribers. The company owns 4,000 km. of fiber-optic lines.
Summa Telecom is pursuing the promising 4G frequency in the 2.5-2.7GHz band. In March, 2011, the Arbitration Court of Moscow ordered the State Commission for Radio Frequencies to consider its application, despite the moratorium on issuing such frequencies.