Why get richer Mikhelson and Timchenko

The first production line of the “Yamal LNG”, despite sanctions, managed to launch at the end of last year. In the fourth quarter of 2019, is expected to start the final fourth. For 2023 is scheduled to launch the first line of “Arctic CNG-2” According to the analyst of Raiffeisenbank Andrey Polischuk, Yamal LNG can generate free cash flow, twice as much as NOVATEK itself. The launch of the project at full capacity doubles cash flow. “If “Arctic LNG 2” will work at the same level, “NOVATEK” and all will receive at least a tripling of the money flow,” says Polishchuk.

Path made by Mikhelson and Timchenko the steps of the ranking of billionaires, due to the growth of shares of “NOVATEK”. Technically we are talking about recovery. On 6 September the shares of the gas giant reached its historical maximum in 1167 rubles apiece – since the beginning of the year, the company has risen by 66% – and then collapsed for a week. The impetus for growth began just two good news. First, the “NOVATEK” has found additional gas deposits at the Morning mine, which should become resource base for the project “Arctic LNG 2”. Secondly, the company has agreed to increase supply of LNG to Asian countries with China national petroleum Corporation (CNPC). This news added optimism, says a senior analyst “BKS Capital” Sergey Suverov: “the Chinese are now increasing their consumption of LNG, and thus its prices are at high levels”.

Namely LNG projects – “Arctic LNG 2” and its predecessor the “Yamal LNG” can be called as the symbol of ten years of cooperation of Mikhelson and Timchenko and their wealth. The latter became a shareholder of “NOVATEK” in 2008. Michelson was already a rich man with a fortune of $5.9 billion, to build from scratch a major gas producer that has managed also to survive in the shadow of the monopolist “Gazprom”.

But it was the partnership with a close friend of the President, has enormous lobbying resource, brought Michelson and his company to a new level. Already in 2009, Mikhelson and Timchenko made one of the biggest deals in the history of NOVATEK, becoming the final link in a multi-step transaction on transfer of the companies “Yamal LNG” and “Tambeyneftegas”, who owned the license to develop the large South-Tambeyskoye gas field on the Yamal Peninsula, from businessman Nikolai Bogachev into new hands. A year later, the government decided to develop the Yamal LNG to build a plant worth about $27 billion began NOVATEK.

State of Mikhelson and Timchenko is growing not only due to the increase capitalization of OAO NOVATEK. The gas giant still pays its shareholders a very generous dividend of 29% in net profit. According to the calculations of Forbes, only in 2017, the partners had to obtain a minimum of $400 million.

Whether to expect the further growth of the state partners? Sergey Suverov believes that all the potential LNG projects and optimism about them has already been laid in quotes “NOVATEK”. “This is a rather expensive company with the coefficient P/E (the relation of capitalisation to profit – Forbes) 10, – says the analyst. – It is therefore possible that in the future we will see the transition of investors from shares in NOVATEK in the securities of “Gazprom”, which is multiples three times cheaper.” With the success of “Yamal LNG” has already been laid in quotes, I agree and Andrei Polishchuk. But there is another stimulus for growth.

“In the short term dynamics of the company’s shares has more to do with prices, explains Polishchuk. They were higher than was predicted earlier, long-term investors always look more conservative and provide more modest rates. So if prices will continue to grow in line with the current dynamics, will continue to grow quotes”. Additional support for the stock can be a transaction for the sale of shares in “Arctic LNG 2”, which are expected in the last year. 10% of the project already agreed to buy France’s Total, NOVATEK is looking for buyers for another 40-50%.

From Mikhelson and Timchenko, there is another mega-project that could make them the richest businessmen of Russia with the big separation from competitors by Forbes. Petrochemical giant SIBUR completes the construction of “Zapsibneftekhim” – plant for production of polymer products in Tobolsk. Its launch may coincide with the IPO of the “SIBUR”. The already known evaluation of the company’s capitalization is $20-26 billion According to Forbes, even if the placement will be at the lower end, as Michelson will grow by at least $3 billion, Timchenko, for $1 billion.

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