Topping Up the Metals Accounts
// The Official 2006 List of the Wealthiest Russians
The most important change that has taken place in our traditional rankings of official ruble billionaires is the vigorous surge in prosperity among all of the participants in the ratings.
Exponential Growth
A year ago, the number of Russians who officially owned shares in Russian companies worth more than one billion rubles was 58. Over the last year, that number grew to 60. Judging purely by the numbers, the increase is a small one. However, that does not fully reflect the fact that overall, the number of newly-minted billionaires on the list increased by many more than just two people, while a score of old-timers failed to make the cut this time around.
A definite qualitative jump is also noticeable. At the end of 2005, not a single person in our rankings could boast of shareholdings worth more than $10 billion. By the end of 2006, there were four such entrants on the list. In that year, the overall number of dollar billionaires increased from 11 to 15 people. The combined wealth of all of the people on the list in 2005 was approximately $42.5 billion, while in 2006 the 60 wealthiest Russians together were worth more than $85 billion. In addition, the plunging worth of the dollar against the ruble has upped the stakes for entry into the club of ruble billionaires: the "poorest" member of the club in 2005 was worth $38.9 million, while in 2006 the list ended at $55.4 million.
How the Steel Was Distributed
 |
| Photo: Valery Melnikov |
| Mikhail Prokhorov (left) and Vladimir Potanin (right) missed sharing the top spot in last year's rankings by less than $100 million. |
The top four spots in the official rankings of the wealthiest Russians are all occupied by representatives of the iron and steel industries. This is even better than their previous showing: in 2005, someone from the telecommunications industry briefly managed to wedge his way into their midst and seize the number two spot.
At the top of the heap is Vladimir Lisin, the general director of Novolipetsk Steel (NLMK). Over the last year, he increased his net worth by 1.6 times, and as of December 1, 2006, Mr. Lisin's shareholding interest in NLMK was worth $11.763 billion.
A long-awaited event in the history of NLMK took place in December 2005, when 7% of the global depository of shares in the steel works went public on the London Stock Exchange. Although the shares sold for slightly less than expected, NLMK attracted $609 million in investments, close to the original target of $700 million. In the wake of the sale, Novolipetsk Steel's worth on the market jumped significantly, and the price of the stake owned by Mr. Lisin rose with it. At the current moment, 8.24% of shares in NLMK are listed on the LSE.
Early in 2006, NLMK sold a 12% stake in the Lebedinsky ore mining and processing plant and acquired a controlling interest in the "Ruda" plant (a supplier of iron ore concentrate). In January 2006, NLMK swallowed up the Danish steel producer Dansteel AS, and in April it bought a controlling stake in the coal companies Altai Coke and Prokopyevskugol. In June, the company acquired VIZ Steel, the second-largest Russian producer of electrical-grade steel.
 |
| Photo: Valery Melnikov |
| Aleksey Mordashov, one of the four Russians whose total shareholding capital exceeds $10 billion. |
In compliance with the international standards of financial reporting, Novolipetsk Steel submitted its accounts for 2005 in April 2006. According to NLMK's books, the steel mill's profit margin on earnings before interest, taxes, depreciation, and amortization was 47%, which some analysts believe may be a worldwide record.
Another large packet of shares (3.85%) in NLMK is owned by the firm Costen Holding, the beneficiaries of which are board of directors members Vladimir Skorokhodov and Oleg Bagrin, general director Vladimir Nastich and his economic and finance deputy Galina Aglyamova, Stoilensky ore mining and processing plant board of directors chairman Alexander Saprykin, and NLMK trading house head Alexander Zarapin. Those shareholdings are worth approximately $544 million, but insofar as it is unclear how the shares are distributed between these six executives, we have not included them in our rankings.
 |
| Photo: Vasily Shaposhnikov |
| Sistema head Vladimr Yevtushenkov, the richest Russian who is not involved in the iron and steel industries. |
Hot on Mr. Lisin's heels are two other businessmen from the iron and steel industries, Vladimir Potanin and Mikhail Prokhorov, who share the number two spot. Mr. Potanin and Mr. Prokhorov are the co-directors of the holding company Interros, which owns the companies Norilsk Nickel, Open Investments, Power Machines, Polyus Gold, and Rosbank. Both of them are poorer than Vladimir Lisin by a piddling $63 million – a mere fraction of a percent of the sums in question. Over the last year, the capital held by these two gentlemen has increased more than fourfold. At Norilsk Nickel's annual shareholders meeting, which took place in June, Mikhail Prokhorov himself modestly acknowledged that the company was demonstrating "impressive results," which he attributed to both the favorable global market for metals and successful management. Since January 1, 2006, Polyus Gold, a division of Norilsk Nickel, has been listed on the Moscow Interbank Currency Exchange and the Russian Stock Exchange. Naturally, the company's high returns on the stock market have significantly boosted the growth of the share capital of its owners.
The fourth spot on the list and the final person to earn the title of dollar decabillionaire is Severstal owner Aleksey Mordashov. In November 2006, Severstal floated additional regular shares on the London Stock Exchange. Analysts assessed the company's IPO as relatively successful, though it is likely that the results could have been more impressive if an asset merger between Severstal and steel giant Arcelor had not fallen through over the summer.
In the Top Ten
 |
| Photo: Vasily Deryugin |
TMK Steel board of directors chairman Dmitry Pumpyansky was the highest-ranked newcomer. Mr. Pumpyansky entered the list in 2006 at number six.
|
The fifth spot belongs to Sistema head Vladimir Yevtushenkov, who was in second place last year. His fall is not due to any turnaround in his fortunes – in fact, over the last year he added around one billion dollars to his net worth, which as of December 1, 2006 was more than $7.5 billion. His only misfortune is that the iron and steel magnates have been making money faster than his telecommunications holding company.
In sixth place is the most successful of our list's crop of new faces: TMK Steel majority shareholder Dmitry Pumpyansky. TMK Steel, which was founded in 2001, is the largest producer and exporter of steel pipe products in Russia. It owns four of the leading pipe factories in the country (the Volzhsky, Seversky, and Sinarsky pipe plants and the Taganrog iron and steel works), as well as two companies in Romania (TMK-ARTROM and TMK-Resita). Many of the world's leading oil and gas companies contract with TMK for their pipelines.
Dmitry Pumpyansky began his career as an executive in the iron and steel industry in 1991, working first at the Verkh-Isetsky factory and then at the Chelyabinsk iron and steel plant. In 1999 he was chosen as the chairman of the board of directors of the Sinarsky pipe plant, and he became the head of TMK in 2002. A year later, he bought a controlling stake (67%) in the company from MDM Group, a deal that was estimated at more than $300 million. Now, as can be seen from our rankings, Mr. Pumpyansky's shareholdings are worth a good deal more – $4.24 billion, to be exact. The precise sum became public knowledge in October 2006, when TMK floated its shares on the LSE in an IPO that was hailed by analysts as very successful (the demand for TMK's shares was 19 times greater than the number offered). The company's good future prospects depend directly on expected increases in the demand for its products and the excellent prospects for continued growth in the oil and gas sectors.
Seventh place is occupied by yet another first-timer, and one who is a representative of a business sector that is not usually found in our rankings: the chemical industry. Dmitry Rybolovlev is the chairman of the board of directors of the company Uralkaly, Russia's largest producer of mineral fertilizers. At the beginning of October, the company planned to float 20.84% of its shares on the LSE, but the IPO was cancelled at the last minute. The official reason was that "right now [the company] does not see sufficient interest from potential investors." October also saw another unpleasant incident befall the company: an accident forced Uralkaly to close one of its mines, which slashed the company's potash extraction productivity by 20%. However, these losses were wholly compensated by an overall increase in demand and prices for mineral fertilizers on the world market.
 |
| Evgeny Zapiskin |
| Uralkaly CEO Dmitry Rybolovlev is the most successful representative of the chemical industry. |
Dmitry Rybolovlev was born into a family of teachers at Perm Medical Institute, where he later completed his studies with honors in 1990. He soon discovered, however, that it was difficult to support his family on his salary, and he decided to enter the world of business. During the era of voucher privatization, he began to buy up shares in chemical companies, and by 1995 he had acquired a controlling stake in Uralkaly (a year earlier he had become a member of the company's board of directors). In 1996, he and a business partner of his named Vladimir Shevtsov were accused of organizing the contract killing of Evgeny Panteleimonov, the general director of the Perm-based company Neftekhimik, but they were both eventually cleared of all charges.
Mr. Rybolovlev is not a public figure. His family is currently living in Switzerland, where he spends much of his time.
 |
| PHOTOEXPRESS |
| The wealthiest Russian retailer is Sergei Galitsky, the owner of the discount food chain Magnit. |
The next man on the list is Alexander Abramov, who moved up to eighth position after spending the previous year at number ten. Mr. Abramov is the co-owner of Evraz Group, which is the number two company in Russia in volume of smelted steel. His position in the list's top ten improved despite the fact that last year he divested himself of a significant number of shares in Evraz, decreasing his stake in the company from 59.11% to 27.91%. Though his old controlling stake was worth $1.2 billion, his new, non-controlling stake is worth twice as much.
Over the last year, Evraz has primarily distinguished itself by a series of big purchases. During its global shopping spree in the iron alloy sector, the company acquired a controlling interest in the American Strategic Minerals Corporation and 24.9% plus an option to increase its stake up to 79% in the South African Highveld Steel and Vanadium Corporation. At the end of November 2006, Evraz made an offer to buy the American iron and steel corporation Oregon Steel Mills for $2.3 billion.
Our ranking's top ten ends with NOVATEK managing chairman Leonid Mikhelson. Mr. Mikhelson's shareholdings are also worth more than they were last year, despite the fact that he has since sold a significant chunk of them.
Millionaires and Billionaires
 |
| Photo: Vasily Shaposhnikov |
| LUKOil president Vagit Alekperov lead in our rankings in 2002. Now he is in 12th place, though he has never stopped making more money. |
Spots eleven to fifteen in the official rankings of the wealthiest people in Russia are also occupied by dollar billionaires, but of the more modest, "non-multibillionaire" type.
Yet another fresh face in the rankings appears at number eleven in the person of Magnit general director and controlling shareholder Sergei Galitsky, whose company owns the eponymous chain of 1,600 grocery stores found in more than 400 Russian cities and towns. Another shareholder in Magnit, former general director Vladimir Gordeychuk, is in 55th place in the rankings.
Mr. Galitsky took over from Mr. Gordeychuk as general director before the company's Russian IPO in spring 2006. The analysts' verdicts on the offering have been mixed. Some believe that the shares were floated at the maximum possible price, while others think that the price could have been higher.
Sergei Galitsky, an economist by training, is Russia's richest retailer. He entered the business world in 1994 by founding the distribution company Transasia with several partners. In 1998, he founded the discount grocery chain Magnit, Russia's first, in Krasnodar.
Below Sergei Galitsky are many well-known names: Vagit Alekperov (LUKOil), Alexander Frolov (Evraz), Andrei Melnichenko, and Sergei Popov (the list of companies in which Messrs. Melnichenko and Popov own shares was too long to fit into the table of rankings, so we were forced to limit ourselves to including just their largest holdings).
 |
| Photo: Valery Levitin |
| MDM Financial Group co-owners Andrei Melnichenko and Sergei Popov (pictured on top) own equal shares in the company, meaning that they always share a single spot in our rankings. |
As was the case last year, the rankings include large shareholders in companies such as Sedmoi Kontinent, LUKOil, Sistema, Lebedyansky, Wimm-Bill-Dann Foods, Kalina, and RBK Information Systems.
We next encounter unfamiliar names on the list only in the 28th position, which belongs jointly to the co-owners of the company Raspadskaya, Alexander Vagin and Gennady Kozovoy.
Raspadskaya is the number one company in Russia's coal sector and the world's largest extractor of coking coal: its holdings include the Raspadskaya mine; Mezhdyrechenskaya Coal Company 96 and the associated Raspadsky strip mine; the mine "Raspadskaya Coke," which is currently under construction; and the Raspadskaya enrichment plant, as well as several infrastructure companies. The company's shares appeared on the Russian Stock Exchange (RTS) and the Moscow Interbank Currency Exchange (MMVB) in November 2006. After its successful IPO, the company's capitalization was $1.76 billion, comfortably within the predicted range of $1.6-2.2 billion. The company plans to invest the proceeds in expanding its coal-mining operations (to 17 million tons in 2010, versus 10 million tons in 2006).
 |
| Photo: Dmitry Lebedev |
| In 2006, the capital controlled by the owners of Will-Bill-Dann Foods grew significantly. Sergei Plastinin (left) saw the value of his holdings double, while the value of David Yakobashvili's stake almost tripled. |
The general director of Raspadskaya is Gennady Kozovoy, and Alexander Vagin is his top deputy and the chairman of the board of directors. Both men have extensive backgrounds in mining. Mr. Kozovoy began working in the mining sector in 1978 as an electrical engineer in underground mines, and Mr. Vagin started in 1983 as an assistant to a mine chief. In December 1991, Raspadskaya was reincorporated as a joint-stock company, after which Gennady Kozovoy took the helm of the shareholders council.
 |
| Photo: ITAR-TASS |
Igor Potapenko, the president of the Russian agroindustry holding Razgulyai, was number 32 on the list in 2006 and number one in the sugar and grain sector.
|
In 32nd place in the rankings is Igor Potapenko, the owner of a controlling stake in the agroindustry holding Razgulyai and the president of Razgulyai Group, which was founded in 1992. The group consists of two divisions: grain and sugar. The Razulgyai grain company controls 24 subsidiary ventures (granaries and port elevators, mills, and grain enterprises), while the Razgulyai sugar company oversees 12 sugar mills and one milk-bottling plant. Shares in Razgulyai first appeared on the RTS and MMVB in June 2006. The company intends to invest the proceeds from its IPO in rice production assets in the Krasnodar region. Given that a ban on rice imports to Russia was introduced at the end of 2006, the company's prospects in the field appear rosy.
 |
| EXPRESS |
| Andrei Komarov made his money in a novel sector of the metals industry, zinc, with his holdings in the Chelyabink zinc plant. |
The 37th spot in our rankings goes to the Chelyabinsk region's representative in the Federation Council, Andrei Komarov, who also runs a company that owns a stake in the Chelyabinsk zinc plant. Before he became a senator, Mr. Komarov headed the ChPTZ Group, whose holdings included the zinc plant.
The Chelyabinsk zinc plant's IPO on the LSE, which took place in November, was extraordinarily successful. The volume of demand for shares was ten times the number offered, and the plant raked in $853 million. Among the factors that contributed to the offer's success, industry analysts listed the uniqueness of the shares (the plant is the lone publicly-traded zinc producer in Russia) and high demand and record prices for zinc on the world market.
 |
| Photo: Pavel Smertin |
| Four of the 60 wealthiest Russians are shareholders in the Cherkizovo Group. Of the four, the biggest shareholder is the group's founder, Igor Babaev. |
The final first-timers on the list are four representatives of the Cherkizovo Group who all have practically identical shareholdings: the group's founder, Igor Babaev, and members of his family. The Cherkizovo Group is one of the largest producers of meat products in Russia, controlling eight meat-processing plants, five poultry plants, four plants for processing pork, a poultry-processing factory, a feed factory, and nine trading houses.
According to some predictions, up to 150 Russian companies are planning to launch their initial public offerings in 2007. So keep an eye on next year's ratings for even more new names.
The 60 people on the official 2006 list of the wealthiest Russians
| Position in the rankings in 2006 (2005) |
Person |
Company name and personal shareholdings (%) |
Total shareholding capital (millions of $) as of December 1, 2006 (December 1, 2005) |
| 1 (1) | Lisin Vladimir | NLMK | 83, 16 | 11762.2 (7754.3) | | 2 (5) | Potanin Vladimir | Norilsk Nickel, Open Investments, Power Machines, Rosbank, Polyus Gold | 25; 25,25; 15.21; 34.9; 25 | 11699.0 (2583.1) | | 2 (4) | Prokhorov Mikhail | Norilsk Nickel, Open Investments, Power Machines, Rosbank, Polyus Gold, | 25; 25.25; 15.21; 34.9; 25 | 11699.0 (2583.1) | | 4 (3) | Mordashov Aleksey | Severstal, Severstal Avto | 90.085; 49.3 | 11070.1 (4615.7) | | 5 (2) | Yevtushenkov Vladimir | Sistema | 62.13 | 7584.2 (6579.4) | | 6 (--) | Pumpyansky Dmitry | TMK Steel | 67.00 | 4240.6 (--) | | 7 (--) | Rybolovlev Dmitry | Uralkaly | 80.00 | 2642.7 (--) | | 8 (10) | Abramov Alexander | Evraz Group S.A. | 27.91 | 2439.6 (1224.3) | | 9 (6) | Mikhelson Leonid | NOVATEK | 13.35 | 2431.3 (1990.3) | | 10 (7) | Zyuzin Igor | Mechel | 65.80 | 2307.7 (1669.6) | | 11 (--) | Galitsky Sergei | Magnit | 51.00 | 1254.0 (--) | | 12 (12) | Alekperov Vagit | LUKOil | 1.60 | 1217.3 (790.7) | | 13 (14) | Frolov Alexander | Evraz Group S.A. | 13.31 | 1163.1 (583.7) | | 14 (8) | Melnichenko Andrei | Azot (Novomoskovsk), Azot (Nevinnomyssk), Lenin Mine, Altaienergo, Chitaenergo, Buryatenergo, Khabarovskenergo, Amurenergo, Dalenergo, Yakutskenergo, Kuzbassenergo, and others. | 46.77; 46.85; 31.88; 8.195; 8.09; 14.03; 10.26; 11.66; 8.05; 12.66; 21.74; | 1013.5 (1316.8) | | 14 (8) | Popov Sergei | Azot (Novomoskovsk), Azot (Nevinnomyssk), Lenin Mine, Altaienergo, Chitaenergo, Buryatenergo, Khabarovskenergo, Amurenergo, Dalenergo, Yakutskenergo, Kuzbassenergo, and others. | 46.77; 46.85; 31.88; 8.195; 8.09; 14.03; 10.26; 11.66; 8.05; 12.66; 21.74 | 1013.5 (1316.8) | | 16 (13) | Zanadvorov Alexander | Sedmoi Kontinent | 37.41 | 743.4 (708.3) | | 17 (16) | Fedun Leonid | LUKOil | 0.93 | 707.6 (459.6) | | 18 (17) | Simanovsky Leonid | NOVATEK | 3.71 | 675.9 (420.9) | | 19 (15) | Gruzdev Vladimir | Sedmoi Kontinent | 26.40 | 524.7 (464.5) | | 20 (18) | Bortsov Nikolai | Lebedyansky | 30.00 | 491.4 (379.7) | | 21 (21) | Bortsov Yury | Lebedyansky | 25.13 | 411.6 (318) | | 22 (24) | Maganov Ravil | LUKOil | 0.50 | 380.4 (247.1) | | 23 (20) | Novitsky Evgeny | Sistema | 3.00 | 366.2 (332.5) | | 24 (47) | Shevtsov Vadim | Severstal Avto, Chelyabinsk zinc plant | 8.7; 30.9 | 345.0 (92.6) | | 25 (43) | Yushvaev Gavril | VBD Food Products | 19.45 | 340.2 (128.3) | | 26 (19) | Leiviman Alexander | Sistema | 2.73 | 333.3 (373.1) | | 27 (36) | Orlov Dmitry | Vozrozhdeniye | 36.66 | 327.1 (139.9) | | 28 (--) | Vagin Alexander | Raspadskaya | 20.00 | 308.1 (--) | | 28 (--) | Kozovoy Gennady | Raspadskaya | 20.00 | 308.1 (--) | | 30 (25) | Belyavtseva Olga | Lebedyansky | 18.40 | 301.4 (232.9) | | 31 (28) | Kukura Sergei | LUKOil | 0.39 | 296.7 (192.7) | | 32 (--) | Potapenko Igor | Razgulyai Group | 70.56 | 286.5 (--) | | 33 (31) | Khoba Lyubov | LUKOil | 0.34 | 258.7 (168) | | 34 (11) | Iorikh Vladimir | Mechel | 7.20 | 252.2 (1096.8) | | 35 (30) | Tsvetkov Nikolai | LUKOil, RITEK | 0.32; 0.28 | 246.9 (169.9) | | 36 (26) | Goncharuk Alexander | Sistema | 2.00 | 244.1 (208.4) | | 37 (--) | Komarov Andrei | Chelyabinsk zinc plant | 27.80 | 239.6 (--) | | 38 (33) | Matytsyn Alexander | LUKOil | 0.30 | 224.4 (145.8) | | 39 (--) | Gorbatovsky Alexander | Sistema | 1.78 | 217.3 (--) | | 40 (55) | Fileva Natalia | Sibir | 63.26 | 194.4 (44.6) | | 41 (39) | Bogdanov Vladimir | Surgutneftegaz | 0.37 | 181.2 (137.8) | | 42 (52) | Yakobashvili David | Wimm-Bill-Dann Foods | 10.12 | 177.0 (60.1) | | 43 (37) | Morgulchik Alexander | RBK Information Systems1 | 3.12 | 175.2 (138.9) | | 44 (46) | Kaplun German | RBK Information Systems | 12.91 | 172.4 (97.3) | | 45 (35) | Belik Dmitry | RBK Information Systems | 12.22 | 163.2 (140.3) | | 46 (34) | Zubov Dmitry | Sistema | 1.31 | 159.9 (144.9) | | 47 (48) | Plastinin Sergei | Wimm-Bill-Dann Foods | 9.01 | 157.6 (72) | | 48 (--) | Babaev Igor | Cherkizovo Group | 17.67 | 151.0 (--) | | 49 (--) | Mikhailov Sergei | Cherkizovo Group | 16.72 | 142.9 (--) | | 50 (--) | Mikhailova Lydia | Cherkizovo Group | 16.50 | 141.0 (--) | | 51 (--) | Mikhailov Evgeny | Cherkizovo Group | 16.37 | 139.9 (--) | | 52 (50) | Bektemirov Artyom | 36.6 Pharmacies | 33.45 | 136.5 (70.2) | | 52 (50) | Krivosheev Sergei | 36.6 Pharmacies | 33.45 | 136.5 (70.2) | | 54 (44) | Goryaev Timur | Kalina | 30.00 | 134.6 (110.6) | | 55 (--) | Gordeychuk Vladimir | Magnit | 4.33 | 106.5 (--) | | 56 (56) | Dubinin Mikhail | Wimm-Bill-Dann Foods | 5.17 | 90.4 (44.2) | | 57 (58) | Khoroshkovsky Valery | Evraz Group S.A. | 0.93 | 81.3 (38.9) | | 58 (53) | Cheloyants Jevan | LUKOil | 0.10 | 76.1 (49.4) | | 59 (57) | Barkov Anatoly | LUKOil | 0.08 | 59.3 (39.5) | | 60 (--) | Orlov Alexander | Wimm-Bill-Dann Foods | 3.17 | 55.4 (--) |
by
Vasily Panin
|
