Russian billionaire may acquire troubled shipbuilding assets

Both facilities are currently owned by the state giant United Shipbuilding Corporation and mainly specialise in production of commercial ships. At present both plants feature on USC’s list of troubled assets, which, according to the company’s plans, need investment in modernisation and further expansion.

According to sources close to USC, the company is currently unable to secure new orders for these plants, which bear huge losses. This has sparked critics from the Russian government and president Vladimir Putin, which have previously backed the idea of privatising both shipyards.

The sale of civil shipbuilding assets features in USC plans, in which the state-owned company intends to divest itself of loss-making merchant facilities in order to concentrate on its military activities. Similar plans are being implemented in the Far East shipbuilding cluster (where the construction of Zvezda shipyard has recently started), which will be controlled by a consortium including Rosneft and Gazprombank.

In the case of Red Sormovo, the shipyard is involved in both merchant and military orders. Commercial vessels built at the yard include river-sea tankers and bulk carriers. Several months ago the shipyard completed a large contract for 10 tankers for the Volga-Balt Tanker Company and has won no new major orders since, running at 40% capacity. The Proletarian factory specialises in producing various marine equipment as well as equipment for nuclear power plants and the oil and gas industry .

According to sources close to USC, the possibility of acquisition of both facilities by Mr Gutseriev has won the support of Russia’s Deputy Prime Minister Dmitry Rogozin. Among other potential investors considered is Vladimir Yevtushenko, the owner of Russian financial conglomerate AFK Sistema, as well as some foreign shipbuilding companies. Representatives of Russneft and AFC declined to comment.

Russian analysts believe that acquisition of the shipyards, and in particular Red Sormovo, may bring substantial benefits for potential investors. It is planned that after privatisation, the yard may increase the volume of oil tanker building. The St. Petersburg Proletarian factory is considered to offer potential, despite its production capacities being in acute need of modernisation.