"OPK OBORONPROM"


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MAJORITY SHAREHOLDING OF OBORONPROM SHALL BE STATE-OWNED

RBC Daily, 02.03.2006

Though there are a few helicopter assets in Russia, the consolidation of the sector can be delayed, because not only the shareholders (acting management, mainly) of some enterprises are unwilling to sell their shares, but also the Oboronprom (the consolidating structure) does not want to overbuy these assets. This notwithstanding, the top-management of the company declares that it will receive the rest shares of the helicopter-building enterprises till 2007, and beginning from 2008 the IPO will be underway.  This was said to RBC daily correspondent, Sergey Starikov, by the General Director of “OPK”Oboronprom”, Denis Manturov.

– At what stage is the helicopter holding setup?

– It is nearly completed. All legal issues have been settled and now we are handling management issues. Along with, the Oboronprom increases its share in the authorized share capital of some enterprise to majority shareholding. The market is limited, as the management holds large packages of shares.  This can be illustrated by the examples of the Kazan and Rostov (Rostvertol) helicopter plants. The Oboronprom has agreed the share acquisition with the management of both companies, but exchange and purchase procedures are being negotiated. In any way, the share acquisition will be discussed with the management of companies. We have no contradictions with the management: we discuss prices of shares and terms of their sales. The same holds true for the Rostvertol. We plan to complete the process by the end of 2006. This year we will start to establish a 100%-affiliated managing company under a working name “Russian Helicopters”. The structure is scheduled to hold the entire shares of all consolidated helicopter-building enterprises. By the end of this year all management issues must have been settled. In 2007 after the rest helicopter assets are integrated into the holding, including FSUE “Kumertau Aircraft Production Enterprise” (KumAPE is the only co-axial helicopter producers in Russia – RBC daily), we are going to complete the integrated structure formation.

– Not long ago you have bought a share package of the Ulan-Ude aircraft plant from Mr. Sergei Nedoroslev. Could you reveal the package price? Was it sold cheap on condition that the holding was headed by the “Kaskol” management representatives?

– I am unwilling to discuss the details in terms of figures, as the information is a commercial secret. As for “Kaskol” management in the Oboronprom, I have already mentioned that we have been familiar with Mr.Viktor Grigoriev (ex-president of “Kaskol” group, present time – First Deputy General Director of “OPK”Oboronprom” - RBC daily) for a long time and his appointment has been discussed with him for several months.  At the same time this came as no surprise to Mr. Sergei Nedoroslev.  It is quite natural that Mr.Grigoriev brought his own team, but it is not a large one (he brought two men). I would like to underline that the helicopter assets acquisition has not any relation to the transition of the “Kaskol” management to the new helicopter holding.

– Now the Oboronprom has to solve recruitment issues for the established helicopter holding? How are they being solved?  When are new job appointments expected?

– As for the management structure of the helicopter holding it has been already formed. Now the personnel are being optimized with account of “Kamov-Holding” entering the Oboronprom. It is clear that the rotation of personnel is going on, the structure is being developed and new specialists enter the team. 

– What amount of shares is expected to be state-owned and privately-owned after establishment of the helicopter holding? How will the shares be divided? What are the proportions of conversion?

– For 2006 it is scheduled to acquire additionally 100% of the KumAPE shares, 49% of the “Kamov” shares, which are held by RAC “MiG”, 3.4% of the “Rostvertol” federal shares. The state “Strela” production association falls beyond our interests, as it is already included into a machine-building science and production enterprise. Moreover, the enterprise locates at 150 km from Kumertau and manufactures similar products. In this respect, the assets of the Arseniev aircraft company “Progress” are under discussion. We are unwilling to take responsibilities for the future of this asset: the enterprise locates in the Far East, it is unprofitable and needs to be recovered. One should not think that the Oboronprom needs production areas. Moreover, the “Progress” plant is now engaged in production of marine missiles rather than helicopters. If a political decision is made to deal with the plant, we will certainly do it. We are not going to decrease the state-owned shares, just on the contrary we plan to increase it. The structure like ours shall be primarily state-owned.

– What is known about the process of entering the holding by KAMOV? When will a permit for the deal be obtained from the Federal Antimonopoly Service?

– The deal has been already made and the shares are on the account of the Oboronprom. The corporation has already entered the management of “Kamov” and “Kamov-Holding”. Pursuant to Russian laws the Federal Antimonopoly was preliminary informed of the upcoming deal.  The late receipt of the approval is due to a large volume of documents that from all members of the holding should be handled by the FAS to approve the deal. We constantly cooperate with the Federal Antimonopoly Service and promptly submit all requested documents. I hope that in the near future the antimonopoly service will issue its permit for the deal.

– And what is your attitude to a new monopoly likely to emerge in Russia in the name of “Oboronprom” with acquiring the “Kamov” company?

– I am sure that should the fragmentation of the enterprises go on, should the Decree of the President not be signed, there will be nothing to consolidate; we would have to operate Sikorsky and Eurocopter helicopters! Russian helicopter business was practically at the point of collapse. The share of domestic helicopters at the world market was constantly decreasing: if in late 80s and early 90s we control 25% of the market, then now our share amounts only to 5-7%. As the experience of last 15 years shows, the free-standing enterprises can pay way but they are unable to develop, moreover, to break through. Therefore, we can call the helicopter holding a monopoly, but only to extent that there were no any independent domestic helicopter producers in Russia out of the holding structure. The establishment of the holding does not, however, restrict foreign helicopter producers from selling their products in our country, if they consider it interesting. In other words competition shall be sustained at the domestic market. The world experience as well as the experience of Soviet times show that such science-intensive branch as aircraft building can develop successfully if only proper financed. The majority of developed industrial countries have monopolies in the sphere of aircraft building: Boeing in the USA, Airbus in Europe. In this regard, advanced developments are as a rule financed from the state budget and the aircraft are promoted by lobbyist support of the entire government machine.

– Could consolidation of two design bureaus “Kamov” and “Mil” mean that one of the schools will be the winner or they will co-exist?

– Certainly, they will exist in a parallel way. Each design bureau has its own school. For instance, the Mil plant does not design shipborne helicopters, it is an executive privilege of the Kamov company. The Ka-32 helicopter gave a good account of itself in logging operations and now it is in high demand with forest sector.

– Does the “Oboronprom” plan to cooperate with leading global helicopter building corporations such as Eurocopter and Sikorsky?

– We already cooperate with such companies. For instance, our enterprises already produce some structural members for Sikorsky helicopters. The Mi-38 helicopter was initially designed jointly with Eurocopter, but its final version remains to be Russian-made. As for prospects for cooperation, we prefer not just produce some components, but fulfill joint global projects on designing new machines. The more especially as we are leading in most figures. For example, we have nor competitors in heating system for blades. In this way, we are ready to cooperate with western companies.

– Not so long ago the “Oboronprom” undertook a commitment to work out a development program for the Ulan-Ude aircraft plant. Can you tell us about it?

– We seriously address the issues of the plant’s capacity utilization proceeding from city-forming status of the enterprise and its contribution to the revenue side of Buryatia’s budget. One of the elements of our program is a launch of the Ka-60 production and its modifications Ka-62 and Ka-65. The “Oboronprom” and the enterprise management shall work hard in this direction. The program launch will be financed by both the enterprise and the state.

– What strategy will be chosen by the “Oboronprom” at the world arms market? What designs will be offered for foreign Customers? What   “breakthrough products” does the Russian helicopter industry have?

– We are going to offer an entire range of existing rotorcraft to our potential buyers. But it is evident that we will be unable to enter the market with these helicopters in five years. Any helicopter like any machine cannot be designed within a year or two years. If we are to design a helicopter from “scratch”, it will take 7 to 10 years. We shall use experience of Kamov and Mil design bureaus to develop advanced helicopters. Our human resources are not so high to “scatter” them while developing new helicopters. So, it is quite possible that some helicopter models will be designed by both design bureaus. But we can now say for sure that the Ka-62 project will be continued, the helicopter will be produced by the Ulan-Ude aircraft plant. Other priorities are the Mi-38 helicopter, Mi-28 combat helicopter and “Ansat” produced by the Kazan helicopter plant. We also take into consideration Ka-50 helicopter that can be called for by foreign customers in its present state. As a perspective, we plan to develop a brand new combat machine to replace Mi-28 and Mi-50. Most likely we will begin advanced development of heavy helicopters (11 – 13 tones of lifting capacity), this niche is still unoccupied at the world market. Within the framework of the holding, some programs are being developed to optimize a range of helicopter types and models. The issue is quite delicate, so we are not going speed up the process and we plan to complete it in two years.

– The helicopter-building industry is being integrated more actively than the aircraft-building industry was. Why?

– The fact is that the helicopter-building industry was initially more compact, the number of plants is considerably less than that of in the aircraft industry. The mechanisms of cooperation and interaction within the helicopter-building industry were also historically well-arranged.

– “Oboronprom” is a state-owned corporation. Do you plan IPO?

– We consider such possibility. But it can be fulfilled not earlier 2008. It is too early to talk of any scheme of this procedure. The newly-established “Russian Helicopters” company is likely to make an access to capital markets.  For our state-owned company it is more important that the procurement of capital would correspond with the state’s interests.

– What relations does “Oboronprom” maintain with its co-owner “Rosoboronexport”?

– We maintain good relations with the “Rosoboronexport”. We cooperate with the “Rosoboronexport” in the entire spectrum of the equipment (helicopters and air defense systems) produced by the integrated enterprises.  Along with the Decree of President we are obtaining a license for the right to deliver spare parts abroad, to repair and maintain the previously delivered equipment. In this connection we are working out a program for establishing a network of service centers abroad, also in cooperation with “Rosoboronexport”. 



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