Interros look for export rights (793 words)

Published: 3/19/2001

It is proposed that there be a restructuring of the debts of OAO Perm Motors (PM) with the transfer of part of the holding in the company - currently held by Interros-controlled OAO Perm Motors Zahod (PMZ) - to the state. The transfer of stock, to be used to settle PM's debts to the State Pension Fund, has exposed the labyrinth of holding structures masking the ownership of the enterprises around the Perm engine-building enterprises and the political sensitivity of the proposed changes. The deal, proposed by financial holding company, Interros, in conjunction with the Russian Aerospace Agency (RAKA), is that the 37.2% currently held by PMZ - owned by Interros-controlled vehicles (49.9%), Gazprom-controlled vehicles (25.1%) and Pratt & Whitney (25%) - should be transferred to the government as payment for PM's outstanding pension debt. The combination of the State's 14.25%, with the PMZ stake, would give them control of not only PM, but also a number of associated companies where the PM's holdings, combined with existing state holdings, would give them control. The latter fact however, has somewhat been lost on the Federal Security Service (FSB), commissioned to review the deal, drafted by RAKA, in conjunction with Deputy Prime Minister Klebanov's office, in December/January of 2000/01. The FSB has argued that the proposed deal offers the State little in the way of real value, given the outstanding financial condition of PM, which is currently heavily indebted. There was also the traditional argument that the presence of P&W in PMZ gave foreigners access to Russian technology and the further leverage of a competitor. Interros however, argue that the consolidation of PM's minority interests could radically change PM's situation, as some of the companies within the group associated with PM are cash generative. The company's assets will also grow substantially from Rb42m to Rb890m, with the suggestion that PM, as the only part of the extended holdings worthy of investment, may attract investor interest. For PMZ, the offset of the deal is access to the right to export the PS-90 for aerospace and power generation markets. The design rights are currently owned and will remain the property of the State. Under the Interros deal, the State will licence PM to export, in turn giving permission to PMZ for what it sees as a 200-generation units market in North and South America. The State will also benefit from a profit-sharing scheme with PM offering the state 50% of future profits. The deal, apart from running up against the FSB's objections, is also being objected to by the State Pension Fund. One advisor to the Chairman of the Fund, Vladimir Vyunitsky has argued that the deal is illegal, given that the government cannot accept the holding on behalf of the fund. In order to be legal the State would be required to pay Rb491m to the fund. He also stated that the fund had not been involved in the discussions between the government, RAKA and Interros. The various objections to the deal have led to RAKA requesting additional time, on 6th March, to find a more workable solution. Klebanov is reported to have offered a two-week extension. In the event of the deal going through, the State will acquire 24.9% (in reality, Interros will transfer 25% plus 1 share to the State) in PMZ, by virtue of a shareholding in the company currently held by the State Property Fund as collateral against debts. The collateralised stock is the balance of the 49% of PMZ offered by PM as collateral against debts in 1998, which has been disposed of by PM to the Gazprom and Interros associated companies as the debts were repaid. In addition, according to the Vice President of Interros, Serguey Aleksashenko, Interros will sign an agreement on voting, with the State. The transfer has also gained another twist of late given the announcement of Rybinsk Motors having been involved in the PS-90 programme peripherally since the early 90s. Apparently, they intend to start building their own version of the engine for aerospace and generation applications. Whether they have the right to do so seems to pivot on the validity of documentation granted in connection with the development of the Yak-242 in the 1980s. The architect of the PS-90s revival, at Rybinsk, appears to be the former General Manager and Designer of Aviadvigatel, Mikhail Kuzmenko, who left the design house after Interros' involvement at PMZ, closely associated with Aviadvigatel, to become General Designer of Rybinsk. According to Aleksashenko, Rybinsk has equal rights of access to the PS-90, but is likely to focus on selling the engine domestically. Aleksashenko believes they are still some way from establishing serial production.

Article ID: 2429