State Corporation to take off with capital of 1 billion USD

October 26, 2007 15:41

In the first half year of its existence the State Corporation, which is being established under the initiative of the recently reborn State Fisheries Committee, will bring under one umbrella the bulk of the government-owned vessels and other assets with the resulting capital to amount to 1 billion USD. At the second stage planned to take about three years, the Committee projects that the corporation's assets will grow twice-fold, head of Russia's fishery industry Andrey Krainy told Kommersant.

The State Corporation (Rosrybflot is its working name) will be based on 100% state-owned OAO Arkhangelsk Trawl Fleet (plc) and 27 vessels built under the guarantees of the Russian Government. Now these boats are operated by such private interests as ZAO Akros (closed JSC) and ZAO Sakhalinleasingflot (closed JSC) under charter deals with other companies. As a result of such manipulations, the government has stopped getting the charter charges for exploitation of such vessels, Krainy said. So, the State Fisheries Committee plans to withdraw them from the debtors and hand them over to the State Corporation.

Arkhangelsk Trawl Fleet with the annual harvest of about 100,000 metric tonnes, which will form the backbone of the new enterprise, is one of the nation's ten largest fishing companies, thus to contribute stable shares of capture quotas into the State Corporation's fishing rights.

Andrey Krainy says that probably the corporation will operate a larger number of vessels. Along with the fishing vessels, it will also operate rescue boats.

With a fleet of 27 modern vessels the State Corporation is supposed to revive Russia's former position of a country operating in the open waters of the World Ocean (beyond national EEZs and inshore zones). Towards that end Russia has stepped up scientific research on the distant grounds. For instance, in 2003 Atlantida owned by AtlantNIRO worked in the southern part of the Pacific Ocean beyond the economic zones of Peru and Chile. That time the scientists discovered 4 million tonnes of horse mackerel which could be potentially harvested in the area. At present the coastal states and countries participating in distant fisheries have been drawing up the necessary documents in order to establish an international fishery organization to regulate fisheries in the area beyond the 200-mile zones. The same situation is observed in the Antarctic falling under the jurisdiction of the Convention for the Conservation of Marine Live Resources of the Antarctic (ANTCOM). Now it is possible to harvest ca.4 million tonnes of krill in the area where the Russian fleets used to harvest the resource in the past. Should Russia make more delays to return to the grounds, the country could lose its historic rights to exploit the resources, Krainy warned.

Head of the State Fisheries Committee says that they are also going to attract private companies to distant fisheries. However, due to the high costs of sending vessels far away overseas and the need of sending several dozen vessels, private companies will hardly be able to afford such investments by themselves. It will be practical for the state to take the risk first and give a good example for private companies to follow, Andrey Krainy thinks.

Fleet renewal

At the second stage of the project the State Corporation will order new vessels. Now there is a need in jiggers for dedicated squid fishery in the Russian Far East. The potential catches of the hardly exploited Pacific squid are estimated at ca.200,000 tonnes. Besides, the new vessels can also target deepwater crab species which are now harvested by the only vessel Vostok-1 with the fishery therefore not regulated by quotas.

Russia should have an up-to-date fleet. However, according to Krainy, historically large vessels have not been built in Russia. The only shipyard capable of building large vessels is located in the city of Nikolayev in the Ukraine. In the recent years all the new vessels have been ordered at foreign yards. The price of one vessel amounts to 25-30 million USD. The State Corporation plans to build about ten vessels. The building process will take some time because the domestic yards can build only the hulls. Thus the corporation will have to order the vessels' modern design, technologies and equipment. Now the State Fisheries Committee is collecting consents for exemption of the import duty for shipbuilding equipment from the nation's Ministry of Finance and Ministry of Economy according to President's commission at the meeting of the State Council in Astrakhan on 31 August 2007.

Private capital

The State Corporation will have audited IFRS accounts (International Financial Reporting Standards). According to Andrey Krainy, a pack of the corporation's shares will probably be sold on the open market. Now the project's organizers discuss variants of selling from 25% to 49% of the corporation's shares to private investors. Andrey Krainy says that they should start from selling a blocking pack of shares and later when the company's capitalization increases another 24% can be sold. At the same, Krainy has made it a point that the state should certainly have the gold share in order to secure additional guarantees when selling such a big pack of shares, Andrey Krainy noted.

The money to be received from sale of shares is supposed to partly cover the costs of refurbishment of the worn-out equipment of the state-owned ports. In particular, large investments are needed to change carnage and expand the area for containers. For instance, modernization of Sakhalin-based Nevelsk Port which has suffered from a recent earthquake will cost RUB3.5 billion in order to increase the port's capacities of cargo transshipment from 300,000 tonnes per year to 1 million tonnes. Actually, Nevelsk Port is a fairly small port as for instance Novorossiisk Port in the Black Sea transships up to 70 million tonnes of cargoes per year.

Ports

Though the State Corporation will major in fishing activities, in the longterm outlook some of the state-owned ports will probably enter the corporation, Andrey Krainy surmised.

Today, none of the ports can remain economically-viable by rendering fish transshipment services only. For instance, more than 60% of the profit of Murmansk Marine Fish Port is contributed by its oil handling department engaged in oil transshipment. According to the Russian fishery industry head, Moscow authorities are quite aware of the situation and they are not going to change the current scheme of the ports' services, though they think of streamlining their activities towards better yield.

Andrey Krainy says that they will examine each of the state-owned ports and return the property which has been leased as the state has been bearing large losses from such lease. Moreover, there are cases when a port is deliberately led to bankruptcy by means of burdening it with numerous debts. The government now sets itself to fight such cases and to establish order in those ports.

Now, the state owns OAO Murmansk Marine Fish Port (plc), GUP Okhotsk Marine Fish Port (GUP stands for state unitary enterprise), GUP Nevelsk Marine Fish Port, GUP Kaliningrad Marine Fish Port, GUP Novorossiisk Port and GUP Taganrog Port. Andrey Krainy says that all of them will remain the property of the state.

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