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Aeroflot PJSC

Reports out this morning that minister of Russian economic development Alexey Ulyukaev was arrested on charges of conspiracy to exert 2mn$ bribe from Russia’s most powerful man.
What are the events leading to the arrest?
In the 90ties and beginning of two thousands Bashneft was privatized in a series of murky deals and sold the strucutures associated with a family of Bashkir leadership of that time.
Bashneft stake was expropriated from the structures associated with Ural Rakhimov, son of the former Bashkir president Murtaza Rakhimov and sold to AFK Sistema for roughly USD 6bn$
That stake was exorted from AFK Sistema when its owner Vladimir Evtushenkov was arrested and was returned to the state.
Just last month Russia stake in Bashneft was put up for an auction and sold to the company of Russia’s most powerful man – Igor Sechin for 350bn Rub – roughly 5bn$ US in a deal sanctioned by Alexey Ulyukaev and Russian president. There was only one other bidder – another state owned company (but since there are only 2 such the identity is probably no secret). It offered lower price and lost in the auction.
Late last night ALexey Ulyukaev was arrested on charges of exerting 2mn$ from Rosneft for approving a favorable valuation of the company for the deal to go through. The valuation was prepared by another state owned company – VTB.
Following privatization of Bashneft – the stake in Rosneft was supposed to be put up on sale in December. Igor Sechin was planning to use the funds accumulated in the parent company which owned Rosneft – Rosneftegas to buy that stake.
What are the implications of Ulyukaev arrest?
-Bashneft Rosneft deal can be annulled.
-Sechin realized he paid too much given the latest oil price dynamics and wants out.
-Igor Sechin can be put in a spotlight when investigation gathers speed.
-Rosneft privatization can be put on hold.
-Rosneft privatization may go through and Rosneft stake can be sold to a Russian private company, and international oil major or Gazprom.
-Russia’s risk can be negatively affected in the aftermath of Ulyukaev arrest
-The siloviki are divided and are in a fierce competition with unexpected outcome.
-There could be more disturbing arrests to come as Russia sinks into a brawl reminiscent of 1928-1934 clean up ..
Analysis
If Bashneft deal is reversed and Ulyukaev released – it is probably positive for minorities as they are expected to lock into a stream of healthy dividends. Additionaly, if he is kept under arrest – Russia will be facing a significant downgrade in risk rating. The risk downgrade is likely to be exacerbated in the case if the deal is not reversed and Ulyukaev prosecuted, while Rosneftegas buys Rosneft stake.
The events can have positive outcome if Sechin loses some of his influence in the aftermath of the investigation and Rosneft is put up for a fair privatization with international investors bidding.
If Gazprom gets involved and buys into Rosneft, meanwhile reaching the compromise with investigators, the events will unfold in a usual Russian way when the strongest and more Byzantine fighter wins.
The chances of anything positive are quite dim however in a later day Russia.
Going into 2017 Russia was supposed to be in fireworks following Trump’s win in the US and facing significant risk upgrade. But there is no reason to wait in Russia for the Gandalf’s fireworks following Alexey Ulyukaev arrest as the Mordor is getting closer.
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Best last week among stocks was PJSC SPC Energia (RKKE:RM) +62.54%, Interregional Distribution Grid Co of Centrerand Volga Region PJSC (MRKP:RM) +9.22%, T Plus PJSC (VTGK:RM) +7.37%,

While worst last week among stocks was Transneft PJSC (TRNFP:RM) -8.14%, MegaFon PJSC (MFON:RM) -6.38%, Bashinformsvyaz PJSC (BISVP:RM) -4.07%,

Best last month among stocks was Bashinformsvyaz PJSC (BISV:RM)-3.99%, RAO Energy System of East PJSC (VRAO:RM)-3.99%, Irkut Corp PJSC (IRKT:RM)-4.20%,

While worst last month among stocks was Moscow Exchange MICEX-RTS PJSC (MOEX:RM) -14.85%, MegaFon PJSC (MFON:RM) -10.06%, Rosneft PJSC (ROSN:RM) -8.76%,

Best YTD among stocks was Federal Grid Co Unified Energy System PJSC (FEES:RM) +247.00%, Inter RAO UES PJSC (IRAO:RM) +240.16%, Mosenergo PJSC (MSNG:RM) +197.65%,

While worst YTD among stocks was MegaFon PJSC (MFON:RM) -18.51%, Transneft PJSC (TRNFP:RM) -9.24%, Surgutneftegas OJSC (SNGS:RM) -2.34%,

Companies Reported last month include:

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Companies that will go ex-Div next month include:

Russian State Companies