Schroder, Shokhin Join TNK Board

Two powerful figures with close ties to the Russian government — former German Chancellor Gerhard Schroder and big business lobbyist Alexander Shokhin — will serve as independent directors at TNK-BP, BP announced Thursday.BP, caught for months in a dispute with its Russian shareholders in TNK-BP, expressed confidence that SchrЪder's involvement would be good for TNK-BP and Russia. Schroder said he would make TNK-BP a beacon for foreign investment in Russia.Industry watchers viewed the independent directors as capable of being impartial.Schroder developed close personal ties with Prime Minister Vladimir Putin when both were heads of state. He is also chairman of the shareholder committee of Gazprom-controlled Nord Stream AG, the company that is preparing to build a gas pipeline to connect Russia and Germany under the Baltic Sea.Shokhin is president of the Russian Union of Industrialists and Entrepreneurs. He sits on the boards of LUKoil, Russia's largest publicly traded oil company, and Russian Railways, the national rail monopoly.BP announced the names on Thursday after the oil major and its Russian billionaire partners in the 50-50 venture went through a bruising corporate dispute last year. They finally decided to bury the hatchet in September by moving to include three independent directors on the board and install a new chief executive.The third independent director on the 11-member board will be James Leng, board chairman of the mining giant Rio Tinto. BP chief executive Tony Hayward especially praised SchrЪder's decision to join the team.
The counsel of such a distinguished statesman, who brings both enormous geopolitical experience and a history of strong relationships with Russia, gives me particular confidence that the next chapter in the progress of TNK-BP will be good for all shareholders and for Russia," he said in a statement.SchrЪder said he would help make TNK-BP a model for foreign investors of what they can accomplish in Russia."I feel certain that, with the support and trust of both shareholder groups, I will be able to make a contribution to the company's success that will serve as an important example of Russia's cooperation with international investors, thereby providing a significant contribution to Russia's integration in the global economy," he said in the statement.Hayward said the new board "can achieve good business alignment between the shareholders of TNK-BP and safeguard the interests of all sides." Mikhail Fridman, one of the Russian shareholders, said the independent directors would allow the company to enter the global arena. "Their experience and wisdom will be invaluable as the company enters the next stage of its development and focuses on transforming itself into an independently managed international major with global ambitions," he said in a separate statement, from TNK-BP.Russian shareholders, known collectively as the AAR consortium, have said part of the reason for the feud with BP was the British company's reluctance to allow the joint venture to operate globally, which would sometimes make them competitors.The rest of the board will consist of four representatives from each of the two shareholder groups. BP has nominated its senior executives, while AAR has proposed its shareholders Fridman, Viktor Vekselberg, Len Blavatnik and Alex Knaster.BP said last week that it would announce a new TNK-BP chief in the "coming weeks." That person will need to have substantial Russian work experience and Russian language proficiency, the partners in the venture agreed when ending the dispute in September. The new chief is expected to be Denis Morozov, former head of miner Norilsk Nickel.Vekselberg has an interest in aluminum maker United Company RusAl, a rival of his likely fellow board member Leng's Rio Tinto.
Even the support of independent directors will not be able to force decisions on one of the sides in the venture when it comes to major deals. A clause in the new shareholder agreement, announced last week, said only unanimous votes would decide substantial acquisitions, divestments, contracts and any projects outside the business plan.By "substantial," the shareholders mean deals worth more than $1 billion, said BP spokesman Vladimir Buyanov. The board will have until March 31 of every year to endorse that year's business plan unanimously, Buyanov said. Afterward, a simple majority will do, he said.Under the new shareholder agreement, BP will continue to nominate TNK-BP chief executive, subject to the board approval, and AAR will continue to appoint the chairman, BP said last week.The track records of the new independent directors indicate that they will be quite independent, said Ilya Balabanovsky, an analyst at UniCredit Aton brokerage. "I wouldn't say that some of them would defend mostly Russian interests. They will look at the merits of the case," he said.Both Schroder and Shokhin "meet the requirement of being independent," said Denis Kulikov, director of the Investor Protection Association.But the independent directors would not be able to do much if another major spat erupts, said Alexander Nazarov, an analyst at Metropol. "The previous conflict showed that the board of directors — even if it's loyal to one of the sides — doesn't mean anything until the shareholders come to terms between themselves," he said.BP held a majority in the conflict-time board.

Voloshin Named Norilsk Chairman

In a sign the Kremlin is continuing to enhance its holdings and role in the economy, former presidential administration head Alexander Voloshin was elected Friday as chairman of Norilsk Nickel, the country's biggest mining company.As major Russian companies have found themselves over-leveraged with foreign loans and dependent on commodities prices that have plummeted, they have been hit harder by the global financial crisis than their foreign peers. Norilsk, the world's biggest nickel and palladium producer, has seen 79 percent of its market capitalization evaporate since May, as a result of dropping metals prices, a lack of transparency for investors and conflicts among major shareholders. Voloshin was nominated to the Norilsk board by Vneshekonombank, or VEB, which received the right from billionaire Oleg Deripaska, whose RusAl holds a 25 percent stake in the miner. Deripaska used the stake to guarantee a $4.5 billion bailout loan disbursed by VEB as part of a huge financial aid package for business from the government.Voloshin's path to the post was made smoother by the withdrawal just hours before the extraordinary shareholders meeting of his chief competitor, Sergei Chemezov, the head of state corporation Russian Technologies. The entire process took about an hour.Chemezov said he withdrew because he was too busy managing the 426 companies that make up Russian Technologies, including VSPMO-Avisma, the world's biggest titanium producer, and the AvtoVAZ, the country's largest carmaker.Olga Kryshtanovskaya, head of the Center for Elite Studies at the Russian Academy of Sciences, said Voloshin had been President Dmitry Medvedev's choice for the post, while Chemezov, with stronger ties to defense and security structures, was the choice of Prime Minister Vladimir Putin. Voloshin, 52, who has no background in the metals industry, headed the presidential administration from 1999 to 2003, first under Boris Yeltsin, and then under Putin, and was chairman of Unified Energy System until July, when the state-run electricity monopoly ceased to exist."Voloshin was Medvedev's boss when they both worked in the presidential administration," Kryshtanovskaya said. "Voloshin also helped Medvedev organize his presidential campaign this year. So, if he is not the de jure state representative, de facto he is.""Voloshin is an authoritative, legendary figure, and we expect much from him," said Alexander Pukhayev, a metals analyst at VTB Capital. "The state is not the best manager, but a de facto state representative in the company improves the company's chances of survival in the times of crisis."Voloshin denied on Friday that he was representing the state, describing himself as "a private person who shared the state's interests."Mikhail Prokhorov, the billionaire president of Onexim Group who sold the 25 percent Norilsk stake to RusAl in April, said Friday that his interests were the ones being ignored. "I consider it a gross violation of the agreement signed between Onexim Group and United Company RusAl that guaranteed a representative of the group a place in the Norilsk board," Prokhorov said in an e-mailed statement.At the end of November, a source within Onexim Group said the agreement was part of the sale of the 25 percent package.A RusAl source said Friday that the company did not vote for Prokhorov because it wanted to avoid further conflicts between shareholders."The RusAl board decided that none of its shareholders would be on the Norilsk board," the source said. "In the current situation, it is extremely important to avoid any risks of conflict in the company. That is why Prokhorov was not elected to the board." Deripaska and Vladimir Potanin, who owns 30 percent of Norilsk, long battled over strategy and tactics at the miner but announced a truce at the end of November. At the time, they said that neither they nor Prokhorov would have spots on the new board.Prokhorov had also been at odds with Potanin over Norilsk and other shared assets since January 2007. Deripaska still owes Prokhorov $3 billion for the Norilsk shares, Vedomosti reported. The full price for the deal was never officially disclosed, although Prokhorov also received a 14 percent stake in RusAl for his Norilsk shares. Tatyana Gmyrova, a minority shareholder in Norilsk, said she voted for Prokhorov, who served as Norilsk CEO from 2001 to 2007."Prokhorov knows the company better than the others among the current management and board," said Gmyrova, who said she has lost about 100,000 rubles ($3,500) on the fall in Norilsk's share price.With a market capitalization of about $12.6 billion according to its London price Wednesday, Norilsk has said it will cut spending on domestic operations to $1.3 billion next year, 23.5 percent less than in 2007.UralSib and Renaissance Capital have both forecast losses at Norilsk next year."The loss comes on the back of a collapse in commodity prices," UralSib wrote in a note Dec. 18. "The poor financials combined with poor corporate governance leave us with no compelling reason to be positive on Norilsk Nickel."UralSib forecast a net loss of $530 million in 2009, while RenCap put the figure at $329 million. The company posted a profit of $2.68 billion for the first half of 2008, the latest data available. The analysts' estimates stipulated a nickel price of $12,000 to $12,500 per ton next year. Nickel, mostly used in making stainless steel, closed at $9,625 per ton on the London Metal Exchange on Wednesday. Norilsk chief executive Vladimir Strzhalkovsky, who was also elected to the new board, declined to comment on the loss forecasts at a briefing Friday."Norilsk is a stable company, a real world leader in the mining industry," he said. "It should be analysts who comment on what I say, not me on what they say."Strzhalkovsky, a former KGB officer considered close to Putin, resigned as chairman of the Federal Tourism Agency to join Norilsk in August. Voloshin's arrival has only buttressed fears that the state is gaining greater control over the miner.The state is "willing" to buy stakes in companies that are in need of help but will later sell them on fair terms, Putin said Dec. 4. "We are not starting nationalization."But worries persist. Vedomosti reported last week that Potanin had pledged 18 to 25 percent of his Norilsk shares as collateral for a more than $3 billion loan from the state-run VTB, and had already received a margin call. Potanin could lose the collateral within a year, the paper said, citing a source close to the Kremlin. Potanin's Interros holding declined to comment on the report.Norilsk minority shareholder Gmyrova opposes any nationalization."It will frighten off those investors who still believe in Norilsk, which will further decrease the company's capitalization," Gmyrova said.The Center for Elite Studies' Kryshtanovskaya, however, said the Norilsk case could be a sign of things to come."The process we see happening at Norilsk is an example of what will happen at other companies, too," she said.