Kemerovo regional governor Aman Tuleyev reacts to news from the Ulyanovsk mine near Novokuznetsk, which was rocked by a methane gas blast on March 19, 2007. The blast, which killed 110 people, was post-Soviet Russia's deadliest mine disaster.
Photo: AP
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Yuzhkuzbassugol Buries Shares
// Mine Accident Leads to Leadership Turnover
As Kommersant predicted on May 25, the second of two large-scale disasters this year at mines owned by Yuzhkuzbassugol has led to a reshuffling of the company's owners. Evraz Group, which owns a 50% stake in Yuzhkuzbassugol, confirmed that it has begun talks aimed at acquiring the remaining 50% of shares from the coal company's management. Experts in the field believe that Evraz Group will first have to prevent Yuzhkuzbassugol's mining license from being revoked, a task in which Evraz can expect assistance from local authorities. A purge of Yuzhkuzbassugol personnel is also expected.
On Friday the governor of the Kemerovo region, Aman Tuleyev, and Georgy Lavrik, one of the co-owners and the general director of Yuzhkuzbassugol, announced that the company's managers have agreed to sell a 50% stake to Evraz Group. The deal will take at least a month to prepare. According to Yuzhkuzbassugol CFO Yury Kushnerov (who is listed on the share documents as a co-owner of Yuzhkuzbassugol, along with Mr. Lavrik and Alexander Govor), Evraz Group is an owner "who will work in the company's favor." Evraz Group, which already owns half of Yuzhkuzbassugol's shares, confirmed for Kommersant that it is prepared to follow through with the deal once it is approved by the appropriate regulatory agencies and the company's board of directors.
The deal follows two large-scale accidents this year at mines owned by Yuzhkuzbassugol. The more recent accident, which took place at the Yubileiny mine on May 24, killed 38 miners, and the first accident took an even more serious toll: 110 people were killed on March 19 in an explosion at the Ulyanovsk mine. After the second accident, Mr. Tuleyev officially demanded that the company's remaining shares be sold. Evraz Group, which has been partially owned by Roman Abramovich since 2006, has attempted several times in the past to buy up the remaining shares in Yuzhkuzbassugol, but until now the company's management has continually rebuffed its efforts.
On May 24, Evraz Group co-owner and board of directors chairman Alexander Abramov flew to Novokuznetsk, the town near the site of the disaster, to confirm the company's readiness to buy out Yuzhkuzbassugol's management. Mr. Abramov said that once Evraz Group has gained full control of Yuzhkuzbassugol, it intends to implement its own management standards, which "will entail organizational changes, including managerial changes." According to experts interviewed by Kommersant, under the current circumstances, the deal will undoubtedly include a hefty discount of 15-20% for Evraz Group. Finam investment company analyst Demis Gorev estimates that Evraz Group could snap up the remaining 50-percent share in Yuzhkuzbassugol for $650 million.
The open joint-stock United Coal Company Yuzhkuzbassugol was founded in 1999. The company runs 12 mines, which together make up 18.6% of the coking coal extracted annually in Russia. In 2007, the company plans to extract 19.5 million tons of coal and expects revenues of $750 million.
As the sole owner of Yuzhkuzbassugol, Evraz Group will have several problems to tackle. On Thursday, the federal mining oversight agency Rostekhnadzor refused to rule out the possibility that Yuzhkuzbassugol's mining license may be revoked, a move that could threaten all of the company's subsidiaries as well. According to an estimate by 2K Audit Business Consulting analyst Avi Roitman, a suspension of operations at Yuzhkuzbassugol even for two or three months could cost the company around 1.5 billion rubles in lost revenues.
When news of the deal became public on Friday, Mr. Tuleyev hurried to underline the purely natural causes of the accident and the lack of grounds for a revocation of the company's license. However, officially the question of the cause of the explosion at the mine and the possibility of the company's license being revoked lie in the hands of two federal oversight agencies, Rostekhnadzor and Rosprirodnadzor, who so far have yet to threaten Yuzhkuzbassugol with such a drastic step. "The question of the responsibility of the inspectors is still open," said Rosprinadzor deputy chief Oleg Mitvol on Friday. "The first to be punished should be the inspectors who signed off on a bunch of meaningless certifications," he said. He also pointed out that the new owners can have no assurance that a similar tragedy will not happen again.
Analysts in the field expressed certainty that work at the company will not be suspended. They say that a second important problem facing Evraz Group in its takeover of Yuzhkuzbassugol, however, will be the question of personnel. According to Antanta Kapital analyst Vladimir Popov, the change of ownership will be accompanied by a reshuffling of the company's top managers, and "so on down the chain, all of the people who have not gotten used to following strict rules at the coal face will be fired as well." Experts also believe that it should be time to start talking about significant wage increases for workers and foremen at the mines.
Igor Lavrenkov (Kemerovo), Dmitry Smirnov
All the Article in Russian as of May 28, 2007
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