Qatar Investment Authority Completes Largest Single Privatization Sale in Russian Federation History

January 6, 2017

In the largest single privatization sale in the history of the Russian Federation, Cleary Gottlieb represented the Qatar Investment Authority (QIA) in the sale by Rosneftegaz of a 19.5 percent stake in Rosneft, Russia’s largest oil company, for €10.2 billion.

The sale was announced by President Vladimir Putin in December 2016 and closed on January 3, 2017.

To carry out the purchase, QIA and Glencore, the global commodities producer and trader, established a 50:50 consortium. QIA committed €2.5 billion of shareholder funding and Glencore €300 million, with the remainder provided to the consortium by bank loan financing, principally by Intesa Sanpaolo S.p.A. under a €5.2 billion margin loan, with Russian banks providing additional financing and credit support, and Glencore itself providing a margin guarantee of up to €1.4 billion in turn indemnified by appropriate Russian banks.

In related arrangements: Rosneft entered into a strategic cooperation agreement with QIA and Glencore for upstream projects, logistics and global trading;  Rosneft entered into a five-year off-take agreement with Glencore for the sale of additional 220,000 barrels/day of oil; and Rosneft changed its dividend policy to increase its expected minimum payout ratio to 35 percent of IFRS net income.

As the proceeds of this privatization transaction went into the Russian budgetary funds at a time of fiscal deficit, this sale attracted attention from the highest officials in Russia, with President Putin publicly praising the deal in December 2016. The deal marked the second major investment by QIA in Russia in the past year, following its acquisition of a 24.99 percent stake in the St. Petersburg Pulkovo airport completed in October 2016, on which Cleary also advised.