Что добавить к «Сумме»
Milana Chelpanova
Oksana Gavshina
Oksana Gavshina
Summa Group is one of Russia’s most secretive financial-industrial groups. It has never even disclosed its revenue. It is about $10 billion, says Magomedov. For comparison, Oleg Deripaska’s Basel earns $30 billion a year. Magomedov has no plans to take it public or consolidate any assets into it. Summa Group is preparing a strategy, but Magomedov told Vedomosti which businesses he considers strategic, and which ones he is prepared to sell.
Transport and Trading
Summa Group’s main line of business is transport and logistics. Its core asset is Novorossiysk Commercial Sea Port (NCSP), with turnover of 157 million metric tons in 2011 and which Summa controls jointly with Transneft. The group plans to develop this business. In particular, it intends to build one coal terminal and one grain terminal in Vostochny Port with capacities of 25 million and 5 million tons respectively. The group is also eyeing oil and petroleum product ports in Southeast Asia, as well as terminals for soft commodities, especially grain, in Latin America and Australia, says Magomedov, without disclosing any details.
Last year, a 75:25 joint venture between Summa Group and the Dutch company Vitol won a tender for the construction of an oil terminal in the port of Rotterdam. It is supposed to be built by 2015. By that time, Magomedov’s company may acquire its own fleet, which will carry oil along the Primorsk-Rotterdam route—the so-called floating pipeline. According to Magomedov, the project will require tankers with dead weight cargo capacity of up to 196,000 tons. They will need 6-8 “under a conservative scenario” or 12-13 under an optimistic one. Now is an opportune time to order ships, says Magomedov, as prices on them have dropped from $120 million to $70-80 million over the past few years.Summa Group has not yet decided whether to participate in the project, says Magomedov, but if the project goes forward, it is ready to bring in a partner such as Transneft, for example. Preliminary negotiations have taken place on participation in the project, says a source close to Transneft (a representative of Transneft declined to comment).
The idea is to allow oil companies to sell oil under FOB Rotterdam terms (transport costs are included in the price), says Magomedov. This will increase the amount of the Russian Urals blend going to Rotterdam and will help promote Urals oil as a standard. The company will not be required to use the floating pipeline, says the source, but the savings in freight costs could reach $0.20-0.50 per barrel.
The project may be of interest to oil companies, say employees of several holding companies. “Everything will depend on the economics of the project. Some companies have their own traders, but the oil companies may decline to deal with them if the floating oil pipeline is cheaper, says a source. But the participation of Transneft may damage the project, said a source close to one oil trader who works in both ports: “The market will perceive the floating pipeline as a continuation of the Transneft pipeline, which carries a political risk.”
Magomedov, who is involved in the logistics business, says he has plans to develop a trading business. He admits that he has been selling oil and petroleum products “with varying levels of intensity for 15 years.” For example, he once owned Europetroleum, which had sales of up to 800,000 tons per month, and he now owns Staroil, which trades Bashneft oil, and the trading company Souz Petrolium.
Summa Group is interested in more than oil. “We would like to get involved in commodities globally,” he says, especially grain. The terminals of the Novorossiysk hub have a combined capacity of 11 million tons of grain per year, and the company plans to increase it to 18-20 million tons by 2020 (for comparison, the grain export forecast for 2020 is 30-40 million tons). Summa Group also plans to participate in the privatization of United Grain Company (UGC), which, according to Alexei Uvarov, a department director at the Economic Development Ministry, is to be completed by mid-year.
Having cargo handling capacity guarantees success for Summa’s trading business, says Raiffeisenbank analyst Konstantin Yuminov. It’s what Vitol is doing, for example. And Glencore, the world’s largest trader, is betting on productive assets.
Telecommunications
Summa Group gained fame thanks to its telecommunications business. The company unexpectedly obtained a license to provide WiMax wireless internet access in 2006, but it wasn’t able to build the business due to frequency-use problems. “But it’s probably for the better, because the technology eventually yielded to LTE 4G,” he says. The company continues to work on a project to provide fixed-line broadband Internet in 12 Russian cities, he says. Summa Group Telecom has between 200,000 and 250,000 subscribers, and its goal is to increase this to 30 cities and 1.5-2 million subscribers. Its Ukrainian subsidiary Ukrtransseti has more than 70,000 subscribers.
Nevertheless, Summa Group may sell its telecommunications business, because it wouldn’t make sense to develop it as a strategic business without the mobile component, he says.
Summa Telecom’s Russian broadband business can be roughly estimated at $500 per user, i.e., $100-150 million, says Otkritie Capital analyst Alexander Vengranovich (Magomedov says Summa has invested $150-180 million in it). Theoretically, the assets may be of interest to Rostelecom, Megaphone or large regional providers such asEr-Telecom, says VTB Capital analyst Victor Klimovich.
Construction
Magomedov says his construction and engineering business is strategic. He plans to consolidate three assets: the pipeline builder Stroynovatsia (which won the tender for the construction of the Kyzyl-Kuragino railway), Globalelektroservis (a power infrastructure builder), Intex (a builder of cultural facilities), and is not ruling out the possibility of an IPO of the combined company. “We’re going to develop three competencies: the construction of oil-and-gas, energy and infrastructure projects, including water projects, railways, roads and bridges. We’re going to continue to build and reconstruct sports and cultural-heritage facilities,” he says. Magomedov acknowledges that the reconstruction of the Bolshoi did not earn him a profit. But the company plans to get involved in the reconstruction of Mariinsky Theater in St. Petersburg. “Our team has been working there for several months already,” says the entrepreneur.
The only public company currently building infrastructure in Russia is Mostotrest. It held an IPO in November 2010, in which it sold a 25% stake for $388 million. The entire company is valued at $1.5 billion. On the MICEX Friday it was worth RUR 55.6 billion ($1.8 billion). An IPO of Summa’s construction business could be quite attractive to investors, says a top manager of a competitor, since Magomedov’s companies are diverse and have plenty of orders in their order books.
Metals and hydrocarbons
Another business Magomedov considers strategice is mining. A company belonging to the group holds licenses to the Pavlovskoye lead-zinc deposit in Novaya Zemlya (with reserves and resources of 21.4 million tons, making it one of the world’s three largest), and the Sardana polymetal deposit in Yakutia (with lead and zinc reserves of more than 10 million tons). Summa Group is working on plans for both, but is not saying how much it plans to invest. Magomedov says he bought the company that held the license to the Pavlovskoye deposit in 2002-2003 from Kaha Bendukidze. Rosnedra tried to challenge Summa’s right to develop the field, but lost.
Another difficulty associated with the development of the deposit is that it borders Defense Ministry facilities, which means special rules apply to its use. Magomedov says the asset can only be developed under the terms of a public-private partnership (PPP). But the businessman has no intention to part with the Pavlovsky deposit. The state-owned holding company Atomredmetzoloto expressed interest in it, but the deposit is not for sale. Development of the Pavlovsk deposit under a public-private partnership is a sure way to diversify risk, says Metropol IFC analyst Sergei Filchenkov, but he warns that there won’t be a significant increase in the demand for zinc in the next few years.
Summa also plans to expand its oil and gas business, Yakutsk Fuel and Energy Company (YFPC), which produces 1.7 billion cubic meters of gas and 87,000 tons of condensate a year and owns small assets in the Republic of Kalmykia, which will be included in YFPC. Summa Group is negotiating for two oil and gas assets in Eastern Siberia, said the businessman, without going into details. He’s not ruling out the possibility of an IPO of YFPC in the future. The company is worth about $500 million (excluding debt), estimates Nomos Bank analyst Denis Borisov. He notes that Eastern Siberia has become an attractive region thanks to the launch of the Eastern Siberia - Pacific Ocean (ESPO) pipeline and tax breaks on mining. It’s known that Sberbank Capital wants to sell Dulisma Oil Company, which it acquired during the crisis, and it’s possible that small players such as Irkutsk Oil Company, for example, are prepared to sell some assets, says Borisov.
Summa Group’s structure is somewhat reminiscent of the financial-industrial groups of the Rotenberg brothers and Gennady Timchenko. They basically capitalize on their good relationship with the state, says Steven Dashevsky, Managing Partner of Dashevsky and Partners. But this very factor is also a major risk for the group, he said; if Magomedov manages to do something unique or, to the contrary, bound up with millions of customers, then the risk will be smoothed over.
Metals and hydrocarbons
Another business Magomedov considers strategice is mining. A company belonging to the group holds licenses to the Pavlovskoye lead-zinc deposit in Novaya Zemlya (with reserves and resources of 21.4 million tons, making it one of the world’s three largest), and the Sardana polymetal deposit in Yakutia (with lead and zinc reserves of more than 10 million tons). Summa Group is working on plans for both, but is not saying how much it plans to invest. Magomedov says he bought the company that held the license to the Pavlovskoye deposit in 2002-2003 from Kaha Bendukidze. Rosnedra tried to challenge Summa’s right to develop the field, but lost.
Another difficulty associated with the development of the deposit is that it borders Defense Ministry facilities, which means special rules apply to its use. Magomedov says the asset can only be developed under the terms of a public-private partnership (PPP). But the businessman has no intention to part with the Pavlovsky deposit. The state-owned holding company Atomredmetzoloto expressed interest in it, but the deposit is not for sale. Development of the Pavlovsk deposit under a public-private partnership is a sure way to diversify risk, says Metropol IFC analyst Sergei Filchenkov, but he warns that there won’t be a significant increase in the demand for zinc in the next few years.
Summa also plans to expand its oil and gas business, Yakutsk Fuel and Energy Company (YFPC), which produces 1.7 billion cubic meters of gas and 87,000 tons of condensate a year and owns small assets in the Republic of Kalmykia, which will be included in YFPC. Summa Group is negotiating for two oil and gas assets in Eastern Siberia, said the businessman, without going into details. He’s not ruling out the possibility of an IPO of YFPC in the future. The company is worth about $500 million (excluding debt), estimates Nomos Bank analyst Denis Borisov. He notes that Eastern Siberia has become an attractive region thanks to the launch of the Eastern Siberia - Pacific Ocean (ESPO) pipeline and tax breaks on mining. It’s known that Sberbank Capital wants to sell Dulisma Oil Company, which it acquired during the crisis, and it’s possible that small players such as Irkutsk Oil Company, for example, are prepared to sell some assets, says Borisov.
Summa Group’s structure is somewhat reminiscent of the financial-industrial groups of the Rotenberg brothers and Gennady Timchenko. They basically capitalize on their good relationship with the state, says Steven Dashevsky, Managing Partner of Dashevsky and Partners. But this very factor is also a major risk for the group, he said; if Magomedov manages to do something unique or, to the contrary, bound up with millions of customers, then the risk will be smoothed over.