|
TNK-BP dispute (Russia vs. BP)
|
View this Thread in Original format
| Magnetonium |
Surprisingly this has been a relatively quiet story - maybe its because this time its not Putin who is trying to kick the Brits out of Russia. Its much more fun to blame things on Putin. But anyways, this TNK-BP dispute over a CEO is developing into another chapter of Russia vs. UK fight. Russian shareholders clearly dont want a British/American running their country's 3rd largest oil company (not owned by the government, btw). But this time, its not the Russian government who is trying to kick it ...
Do you think this is within the legal merits or has some other political factors? I cant figure it out.
http://www.theglobeandmail.com/serv...tory/TPBusiness
TNK-BP CEO leaves Russia amid dispute
| quote: |
July 25, 2008
Robert Dudley, the chief executive officer of BP PLC's Russian venture, left the country yesterday because of "sustained harassment" amid a shareholder dispute.
Mr. Dudley, a U.S. citizen, has no plans to step down and has a legal right to continue running TNK-BP from abroad, he said in an e-mailed statement. Mr. Dudley, who called his relocation temporary, had problems renewing his visa as TNK-BP's billionaire shareholders demanded his dismissal.
"In addition to the much-publicized dispute between shareholders, the company and I have faced unprecedented investigations, proceedings, inquiries and other burdens," he said.
BP's billionaire partners - Mikhail Fridman, German Khan, Viktor Vekselberg and Len Blavatnik - say the British company has stunted the 50-50 venture's growth through mismanagement. Earlier this month the shareholders, collectively known as AAR, demanded Mr. Dudley cut the capital spending budget by a quarter or "personally" face demands for compensation.
BP pledged to support Mr. Dudley as the head of the venture and may seek arbitration against AAR to recover losses, BP chief executive officer Tony Hayward said in a statement.
Mr. Dudley left Moscow unexpectedly on a commercial flight yesterday, TNK-BP spokesman Peter Henshaw said by telephone. He will not be working from BP's London headquarters, Mr. Henshaw said, without specifying where he will be.
AAR said its demands hadn't changed with Mr. Dudley's departure.
"TNK-BP is an independent oil company in which BP is not a controlling shareholder," Mr. Fridman said in a statement issued by AAR. "BP does not have a management contract to run TNK-BP. We continue to insist that BP nominate a new independent CEO who would be based in Moscow and manage TNK-BP in the interest of all shareholders.
"It's a ridiculous notion to suggest that the company can be run by remote control from London," he said, adding that it shows BP treats the venture as a subsidiary. "Robert Dudley has proposed a long-distance relationship that is doomed to fail."
Mr. Dudley isn't alone in facing bureaucratic hurdles. Of TNK- BP's 85 foreign employees, only 10 have had their visas renewed, chief operating officer Tim Summers told reporters yesterday. His own visa expires next week, Mr. Summers said.
A "core executive group" covers for the CEO when Mr. Dudley is on vacation, Mr. Summers said. The group includes Mr. Khan, TNK-BP's executive director; Mr. Vekselberg, executive director for natural gas; chief financial officer James Owen; and himself, Mr. Summers said. He declined to describe what would happen if both he and Mr. Dudley were forced to leave Russia.
The company may lose 6 per cent of production over the next year should AAR succeed in its attempt to cut capital spending to $3.5-billion (U.S.) from the planned $4.4-billion, Mr. Summers said.
BP said on July 22 it was removing the last 60 of 148 employees seconded to TNK-BP because of a pending legal suit challenging their right to work in Russia.
|
|
|
|
| Krypton |
| BP should sell its stake, and get the hell out of it. TNK-BP is not meant to be. |
|
|
| St_Andrew |
| Of course the Russian Government has something to do with this. They have been harassing BP for some time now! |
|
|
| Groundhog Boy |
Between this and Mechel, Russia may have very well screwed foreign investment in the short-to-mid term in the past week.
BTW, why would shareholder discontent have any bearing on whether the Russian government will renew their visas? If they want him gone, they could simply outvote him without any government intervention at all.
Dudley's was set to expire in days, so if he didn't get out now, he may never have been able to with any ease. |
|
|
| Magnetonium |
| quote: | Originally posted by Groundhog Boy
Between this and Mechel, Russia may have very well screwed foreign investment in the short-to-mid term in the past week.
BTW, why would shareholder discontent have any bearing on whether the Russian government will renew their visas? If they want him gone, they could simply outvote him without any government intervention at all.
Dudley's was set to expire in days, so if he didn't get out now, he may never have been able to with any ease. |
Agreed. Russia is still plagued by bad politics! :disbelief |
|
|
| Groundhog Boy |
LOL, the whole country gets downgraded...
| quote: | JP Morgan downgrades Russia to underweight
2:18p ET July 29, 2008 (MarketWatch)
NEW YORK (MarketWatch) -- JP Morgan Chase & Co. analysts downgraded Russian equities to underweight from neutral Tuesday, citing the country's energy exposure, increased risk of unconventional policy measures to control inflation and slowing domestic activity.
In Moscow, the benchmark RTS stock index fell 1.7% Tuesday. It is down 17.2% year-to-date.
The Russian market has fallen sharply in recent days after Russian Prime Minister Vladimir Putin slammed the pricing policy of steel and coal mining company Mechel last Thursday, sending its shares tumbling 38% in one day. Read more.
Since last Thursday, Mechel's share price has lost about half its value. It was trading near $18 in New York on Tuesday.
"Prime Minister Putin's criticism of Mechel's pricing policy introduces the risk that non-conventional methods may be used to control inflation," wrote Adrian Mowat and Peter Westin of JP Morgan in a research reported Tuesday.
JP Morgan cut Russian equities to underweight and also lowered Russian energy stocks to underweight from neutral.
"The strategy call is based on a skewed risk reward profile for remaining long commodity and energy stocks; stocks are responding more to a decline than a rise in the underlying price commodity price," the analysts wrote.
Inflation in Russia rose 15.1% year-on-year in June, while there are downside risks to the gross domestic product growth forecast of 7.8% for this year. Wage growth continued to be strong at 28.6% year-on-year in June.
"High wage inflation poses a particular risk to sectors with a significant share of wages as part of their cost structure -- financials, retailers, and regional telecom operators," the JP Morgan analysts wrote. "While the wage bill is relatively low for energy names, higher cost of equipment is impacting future capex costs as well as margins."
In addition, JP Morgan said that a worsening global growth outlook and a removal of fuel subsidies in emerging markets remain a threat to oil prices.
Among JP Morgan's top picks in Russia is Sberbank , which is least exposed to wage inflation; telecommunications companies Comstar United Telesystems and Vimpel Communications ; Wimm-Bill-Dann Foods and oil giant Rosneft . |
|
|
|
| Krypton |
| I made like 180% on MTL before I decided to sell it. Glad I did. |
|
|
| Magnetonium |
| quote: | Originally posted by Groundhog Boy
LOL, the whole country gets downgraded... |
I must add that Mechel's shares fell before Putin's criticism that followed. Mechel attempted to sell its metals to a foreign contractor for prices lower than on the Russian internal markets, and this drew the bulk of the criticism.
But I am not defending their system, despite the many available resources, Russia is still plagued by bureaucracy and fear of foreign business getting too successful in the country. Of course some Western companies do abuse their privileges, bribe and pollute, but thats not exclusive to Russia, and I dont see other countries taking advantage of foreign investments to drive the companies out of the country and pocket the money. Thats not smart. At first I thought it was just BP getting ripped off for reasons that made some sense, but since it became obvious - since I left Russia as a 13-year-old in 1997 and now things have hardly changed in the country when it comes to bureaucracy and politics.
I talked to my uncle over the phone last week and he said that hardly anything has changed since we left - well, people's standards of living have gone up and luxuries are easier to attain, the politics of things are still the same. Its a shame. The government in Kremlin has little control or interest in setting the entire country to a transparent and consistent direction thats needed to win allies in the West and internal/political stability. |
|
|
| Groundhog Boy |
| quote: | Originally posted by Magnetonium
I must add that Mechel's shares fell before Putin's criticism that followed. Mechel attempted to sell its metals to a foreign contractor for prices lower than on the Russian internal markets, and this drew the bulk of the criticism. |
The whole steel sector had sold off pretty significantly, but while everyone else has been recovering over the past few days, MTL has been going through this. |
|
|
| Magnetonium |
So, it turns out that Russian government wasnt meddling in this at all. And in the end Gazprom didnt seize the company. And the issue got settled. :D :D :D
http://www.theglobeandmail.com/serv...BNStory/energy/
| quote: |
BP, Russian partners settle TNK dispute
LONDON/MOSCOW — — BP [BP-N] agreed a deal with the oligarch co-owners of TNK-BP on Thursday that overhauls the Russian oil major's management and sets a possible flotation of up to 20 per cent of the company, ending months of hostile dispute.
BP has agreed to a number of its partners' demands, including the replacement of TNK-BP Chief Executive Bob Dudley with BP's choice of an experienced, Russian-speaking nominee and the appointment of independent directors.
The British oil company and its partners said in separate statements they had signed a memorandum of understanding which would be finalized in the coming months.
BP shares rose 3.6 per cent on news of the deal after the dispute, which threatened BP's interest in the Russian firm, had weighed on BP stock in recent months.
“We've retained the shareholder agreement that we agreed five years ago relatively intact,” BP chief executive Tony Hayward told Reuters in a telephone interview.
“We think this provides the platform for the next phase in its (TNK-BP's) development and we look forward to continuing to grow,” he added.
BP had accused its partners of orchestrating a campaign of state harassment against TNK-BP and its officers as a means of securing control of what is Russia's third-largest oil producer.
Russia's influential deputy prime minister, Igor Sechin, a close ally of Prime Minister Vladimir Putin and chairman of state-controlled Rosneft, was quoted in the Russian statement praising the partners for resolving their differences on their own.
“We support TNK-BP's development and believe this company has excellent long-term prospects,” Mr. Sechin said.
The Soviet-born billionaire co-owners, led by Mikhail Fridman, had accused BP of running TNK-BP like a subsidiary and Mr. Dudley of favouring the British shareholder.
The dispute, played out in banner copy in Western media, combined with a government attack on a blue-chip steel company and Russia's brief war in Georgia to make Russia one of the world's worst performing markets in the second half of 2008 so far despite booming commodities exports.
As the dispute grew increasingly shrill, TNK-BP management faced a host of lawsuits and Mr. Dudley fled Russia having failed to renew his visa, saying he was subject to a campaign of harassment.
“We hope that the issues that TNK-BP has been dealing with will become less (frequent) as we go forward,” Mr. Hayward said.
The CEO added that two of the four billionaires who own 50 per cent of TNK-BP, Viktor Vekselberg and German Kahn, may lose their senior management roles at TNK-BP following the deal.
“It's reasonable to expect that one or both of them will leave their positions, but it will be the decision of the new CEO,” he said.
The agreement “confirms what we have always said: That the dispute was commercial and not due to pressure that foreign investors experience in Russia,” said Alexander Branis, a director at Prosperity Capital Management.
Mr. Branis, whose $4.5-million fund holds a stake in TNK-BP's listed operating unit as one of its top investments, said, “We think this event will let investors focus on Russia's investment case rather than on the noise in the media.”
Shares in the operating unit, TNK-BP Holding rose 18 per cent. BP shares were up 3.71 per cent at 525 pence at 1025 GMT, outperforming a 1 per cent rise in the DJ Stoxx European oil and gas sector index.
Analysts said the end to the conflict meant TNK-BP, its management paralysed by infighting and its operations under threat from a mass exodus of foreign staff, should now be free to concentrate on running the business and adding value.
Mr. Dudley, who will leave by the end of the year, said in a statement from TNK-BP that the company will deliver its best financial results ever this year despite the conflict.
“A deal would be good for BP,” an analyst said following earlier reports a deal was imminent, adding BP investors had already discounted an almost total loss of its TNK-BP interest.
TNK-BP's board, where each side has half the seats, will be restructured. In future, each side will appoint four directors, and three independent directors will hold the balance.
“The key point of the potential resolution lies in the IPO proposal, which could increase TNK-BP Holding's free float by 20 per cent, making it a substantially more liquid and therefore attractive company,” UniCredit Aton analysts said.
“A back of the napkin estimate suggests a 10 per cent to 21 per cent effect on the company's valuation.”
Many analysts had believed the conflict would end only when a stake in the company was in the hands of a government energy giant such as Gazprom, an instrument of the state's drive to bring Russia's oil wealth under its control.
|
|
|
|
|
|
