16 May 2022 10:02

Renault signs agreements to transfer Avtovaz stake to NAMI, Moscow plant to city

MOSCOW. May 16 (Interfax) - Renault Group's assets in Russia, including the French automaker's stake in carmaker Avtovaz and Moscow plant CJSC Renault Russia, are being transferred to state ownership, Russia's Industry and Trade Ministry said on Monday.

The ministry said agreements have been signed to transfer these Renault assets to the Russian Federation and the government of Moscow. As a result, 100% of shares in Renault Russia will be owned by Moscow city hall, and the French company's 67.69% stake in Avtovaz will be transferred to Russian state company NAMI. State corporation Rostec will retain the remaining shares in Avtovaz.

Renault will have an option to buy back its stake in Avtovaz in the next six years.

Both transactions have been approved by Russia's Federal Antimonopoly Service (FAS), the ministry said.

"The transfer of Renault Group's stake to the state will make it possible to ensure the preservation of Avtovaz's manageability and continued operation of the business amid the restrictions of sanctions. We will thus preserve key competencies, the production cycle and jobs," Industry and Trade Minister Denis Manturov was quoted as saying by the ministry press service.

The minister welcomed the prospect of NAMI's involvement in managing Avtovaz. "NAMI has considerable experience in the automobile industry and has a modern research and development base that will make it possible to successfully solve problems in the area of research, design, construction, development and testing of vehicles, as well as manufacture of products in the field of automobile production. The competitiveness of NAMI's design and engineering team has been confirmed by the creation of the Aurus brand automobiles based on a common module platform," Manturov said.

Production of the whole Lada line of cars will continue at Avtovaz plants under existing licenses. The company will also provide servicing for Renault automobiles on the Russian market.

The website of Moscow Mayor Sergei Sobyanin, meanwhile, reported that the Renault Russia plant transferred to the city will produce Moskvitch cars in partnership with truck maker Kamaz .

"The foreign owner decided to close the Renault Moscow plant. That is their right, but we cannot allow the many thousands of employees to be left without jobs. Therefore, I decided to transfer the plant to the city's balance sheet and resume production of cars under the historic brand Moskvitch," Sobyanin said in a statement on the website.

He said efforts will be made to preserve the jobs of most staff who work directly at the plant and its related enterprises.

"The main technology partner of the revived Moscow automobile plant Moskvitch will be Kamaz. At the initial stage production of classic automobiles with internal combustion engines will be set up, and in future also electric vehicles. In addition, together with Kamaz and the Industry and Trade Ministry of Russia we are working on localizing production in Russia of the maximum number of auto components," the statement said.

The mayor's website recalled that the plant on Moscow's Volgogradsky Prospekt opened 100 years ago with production of Ford automobiles. It built domestic Moskvitch cars for decades, and began working with Renault in 1998. The plant assembled Duster, Kaptur, Arkana and Nissan Terrano cars until Renault suspended production in Russia in March 2022.

"In 2022 we will turn a new page in the history of Moskvitch," the website said.

Dmitry Pronin, Deputy Head of Moscow's Transport and Road Infrastructure Development Department, will head the plant, the department said. Pronin, 49, has held senior positions in the city's transport sector for ten years and has worked in the automobile industry.

Denis Pak, head of the Industry and Trade Ministry's Automotive and Railway Engineering Department, said he thought the Moscow government and the plant's management would soon let the ministry have their plans to develop the project. "We anticipate launching production this year," he said.

The city's Transport Department said the decision to transfer the plant to the city would enable the plant to retain its 3,800 employees and safeguard around 40,000 jobs in the supply chain.

Renault said in a statement that the closing of these transactions to transfer its Russian assets is not subject to any conditions, and all required approvals have been obtained.

"Today, we have taken a difficult but necessary decision; and we are making a responsible choice towards our 45,000 employees in Russia, while preserving the Group's performance and our ability to return to the country in the future, in a different context. I am confident in the Renault Group's ability to further accelerate its transformation and exceed its mid-term targets," Renault Group CEO Luca de Meo was quoted as saying in the company's press release.

Renault said a non-cash adjustment charge amounting to the accounting value of the consolidated intangible assets, property, plant and equipment and goodwill of the Group in Russia should be recorded in the 2022 first half results.

"As of December 31, 2021, this value amounted to 2,195 billion euros. Russian operations will consequently be deconsolidated in Renault Group consolidated financial statements for the six-month period ended on June 30, 2022 and will be accounted for as discontinued activities in application of IFRS 5 requirements," the company said.