Company news in July 2004 | |||
BP's CEO Considers Amendments to the Agreement with TNK-BP's Russian Owners as Technical Ones
BP's CEO Lord John Brown considers amendments made to the initial agreement with TNK-BP's Russian owners as technical ones and does not think that the plans to sell BP's shares received by them during the transaction pose any danger to the company. "The initial agreements for TNK-BP's establishment with Alfa Group, Access Industries and Renova (AAR) consortium envisaged asset exchange, cash payments and, at the final stage, in 2005/2007, payment of $3.75 billion as BP's shares at the rate applicable on the payment date. Amendments made to the agreement do not touch upon its essence but upon a technical aspect – specification of payment dates during the prescribed period," Sir Brown told to reporters. "I don't know what our partners are going to do with these shares, and I am not much interested in it. If you sold, say, a chair to someone, you are not concerned with what he or she is doing with that chair, are you?" Sir Brown added. When asked whether the potential sales of BP's stake transferred to Russian partners would influence the behavior of the British company's rate, Sir Brown said: "If concerns a very small amount of shares, taking into account our current capitalization. I don't think that any actions with this stake are likely to influence the share price." Early in June, BP and AAR announced their agreement to change the dates of payment by the British company of installments of $1.25 billion on account of payment of its stake in TNK-BP. The installment dates have been postponed from August 29, 2004, 2005, and 2006, to September 20, 2004, 2005, and 2006, respectively. As a result of the TNK-BP establishment transaction, AAR received an option for BP's shares worth of $ 3.75 billion, payable in three equal installments of $1.25 billion each. BP's shares will be assessed at the fair market value 30 days prior to each installment date. Not so long ago, Mr. Victor Vekselberg, Chairman of the Board of Directors of Renova Group of Companies and TNK-BP's Managing Director, Production and Technologies, said that AAR was going to select a bank to repurchase BP's debt instruments held by AAR. In his words, when TNK-BP was established, AAR and BP agreed that the British company would pay a portion of its 50% stake in TNK-BP in cash and the remaining portion, in its debt instruments convertible into BP's shares. However, according to Mr. Vekselberg, the banks they approached said it was necessary to amend documents on payment of BP's debt instruments, because they had doubts as to the possibility of cash collection under those documents. That's why, he said, AAR approached BP with a request to amend the documents. "As a result, we managed to agree upon everything. There is no problem – we will assign the indebtedness to the bank and will collect our cash," Mr. Vekselberg pointed out. Mr. Vekselberg noted that Renova needed money for two projects, one of which is the aluminum facility construction in Komi. "Our friends need money for other projects," he said. BP and TNK's shareholders owning 97% in the company accomplished the TNK-BP establishment transaction in August 2003. AAR contributed its stakes in TNK International and SIDANCO, stakes in RUSIA Petroleum (holds the license for development of the Kovykta gas and condensate field), and a gas field developed by Rospan in West Siberia to the new company. ÂÐ contributed its stake in SIDANCO, holdings in RUSIA Petroleum, and its stake in a Moscow-based chain of retail filling stations to the company. When entering into the agreement in February 2003, the idea was for BP to pay $3 billion in cash to AAR upon the transaction closing, and then, during three years, would pay $1.25 billion as treasury shares each year. Later on, the amount of BP's cash payments went down to $2.4 billion due to TNK's indebtedness of $600 million which resulted from purchase of 50% in Slavneft. Then the amount of BP's cash payments was increased to $2.6 billion in connection with exclusion of BP's Sakhalin projects from TNK-BP's assets. In August 2003, BP remitted $2.6 billion to AAR. In January 2004, BP paid $1.4 billion to AAR for inclusion of the latter's 50% stake in Slavneft into TNK-BP.
Source: INTERFAX