BP
and AAR sign Russian partnership agreement
Posted: 26 June 2003
BP, and the Alfa Group and Access-Renova (AAR) announced they
signed a sale and purchase agreement — a significant step
towards formal completion of the proposed combination of the companies'
Russian businesses.
The transaction, which was first announced in February, creates
a new joint venture company, TNK-BP, with BP and AAR each holding
50 per cent stakes.
When the transaction is completed, BP will become the world's second
largest private sector producer of oil and gas, and TNK-BP itself
will be the tenth largest.
Closing adjustments reflecting increased debt levels in TNK-BP,
partly due to TNK's financing of the Slavneft acquisition, mean
BP now expects to pay around $2.4bn for its equity interest in TNK-BP,
less than the $3 billion anticipated at the time of the announcement
in February.
In addition there will be three annual tranches of $1.25 billion,
payable in BP ordinary shares valued at market prices prior to each
annual payment.
BP's Chief Executive Lord Browne expressed satisfaction at the
pace of progress made since February and noted the increase in production
from the assets of the new joint venture company, which is up so
far this year by around 10 per cent year on year, as well as in
the level of exports. "This is one important element in the
process of strategic renewal within BP. On the basis of the progress
made to date I believe we can complete the transaction over the
summer and then begin to deliver the tremendous value potential
which we see."
More than 70 members of the management team for the new joint venture
company have already been appointed.
The agreement signed today finalizes all the commercial arrangements
for the formation of the TNK-BP joint venture company, which will
be effective from January 1, 2003, subject to the approval of regulatory
authorities including those at the European Union, in Ukraine and
in Russia.
Discussions continue between BP and AAR on whether the interest,
which TNK has taken in the Russian company Slavneft, should be included
in TNK-BP. Any such inclusion will result in additional consideration
being paid to AAR.
Note:
- As at December 31, 2002 the total net assets and profits after
tax of the combination of businesses, which are the subject of
this transaction, were $5,100 million and $1,551 million respectively.
- BP was advised in this transaction by Merrill Lynch International,
Morgan Stanley and Co. Limited and United Financial Group.
- The BP shares to be issued to AAR will not be registered under
the US Securities Act of 1933 and may not be offered or sold in
the United States absent registration or an applicable exemption
from the registration requirements.
For more information see http://www.bp.com.
Posted by Richard Price,
Editor Pipeline Magazine
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