16 Nov 2010 18:31

FESCO eyes controlling stake in Transcontainer

HONG KONG. Nov 16 (Interfax) - The transport group FESCO is looking to get a controlling stock interest in OJSC Russian Railways (RZD) subsidiary OJSC Transcontainer in the course of the privatization of the Russian government's stake in the operator, FESCO's Vice President for corporate communications Stanislav Vartanyan said in Hong Kong on Tuesday.

The government, Vartanyan said, has not specified when that privatization process might take place, but it will likely be in three or four years.

Acquisition of a controlling stake "would strengthen FESCO's position in the container shipment segment and ensure a dominant position on the market in rail shipment of containers," Renaissance Capital analyst Ivan Kim said in a note to investors following a FESCO conference call concerning the company's recent purchase of a 12.5% stake.

Transcontainer may embark on further privatization sales "in the next one or two years," Kim said.

FESCO's purchase of the Transcontainer stake brings a host of benefits: it will receive one or two seats on Transcontainer nine-member board of directors, expand maritime container volumes (reducing costs and allowing it to offer more competitive rates to clients), enable more effective use of container rail platforms (reducing empty mileage), make it possible to send platforms where they are most needed and increase the frequency of shipments.

Even after it hands over the $138.9 million for the Transcontainer shares, FESCO will still have about $570 million in cash, with debt of $440 million.

The company plans to unveil its growth strategy before year-end. Asked about the possibility of purchasing shares in another RZD subsidiary, Freight One, Vartanyan said: "Freight One is not on FESCO's list of potential investments."

It was reported earlier this month that FESCO sold its stake in National Transport Company LLC, in which it shared ownership 50-50 with Vitaly Yuzhilin's First Quantum, for $900 million. It used the proceeds to pay down debt.

FESCO plans to invest in developing its stevedore business in Russia's Far East and has already begun consolidating 100% of shares in Vladivostok Sea Trade Port.

Consolidated revenue in the first half of the year totaled $387 million. EBITDA was $75 million and net profit declined to $28 million.

FESCO is an intermodal operator, offering shipping, rail, truck and stevedoring services at its own terminals in Russian and CIS ports. It has a fleet of 49 ships with 700,000 tonnes deadweight valued at $349 million. Sergei Generalov's Promyshelnnye Investory has a controlling interest.