A 34% Stake In Galychyna Refinery To Be Sold.

Minority shareholders who cumulatively own a 34% stake in Galychyna refinery are planning to sell. Concorde Capital: The refinery is controlled by the Kontinium group (~41% stake) associated with MP Igor Yeremeyev. In addition, a ~34% stake belongs to the companies related to Privat group. The state also owns 25%+1 share in the company. The seller of the 34% stake is most likely Privat group. Potential buyers appear to be Kontinium group and the state. However, we doubt that Kontinium group would have sufficient funds for the transaction. On the other hand, the state appears to be the most likely bidder for two reasons: firstly, this acquisition would be in line with the vertical integration strategy favored by Naftogaz Ukrainy and secondly, the state and Privat group have a history of being able to find compromises. One example was Ukrnafta, when Privat received huge dividends in exchange for a partial loss of operating control. We do not believe other oil market players would be interested in this asset because it requires massive modernization, with an estimated cost of USD 150 ? 300 mln. The Galychyna refinery?s throughput is 3.22 mln mt of crude oil.