A major deal in Russian stevedoring business

Nakhodka port. Source: EVRAZ

EVRAZ, Russian steel producing giant with own coal and iron ore mining operations, is ready to sell its port asset in the Russian Far East – Nakhodka Sea Commercial Port, with the aim of reducing its debt load, writes Kommersant.

The Group owns 100% of the port and is searching for investors to buy either the whole lot or a controlling share with the buyer’s obligation to buy out the remaining stake at a later stage, alone or in partnership with another company.

The Nakhodka port handles coal and ferrous metallurgy products. It has 15 berths with the total length of 3.5km and 11m draft, the yard is over 30 hectares. The port is connected to the Trans-Siberian railway serving Asia-Europe trade routes. Its capacities allow unloading 450-500 railcars daily. The 2015 throughput reached 9.2 mln tons (6.2 mln tons of coal and 3 mln tons of metallurgy products). The port’s revenue in 2015 was RUR 5.9 bln (apprx. USD 82 mln), net profit – RUR 3.3 bln (apprx. USD 46 mln).

The port is a non-core asset for EVRAZ and the company has been looking for potential purchasers for several years, but up to now unsuccessfully, as it is not ready to sell it cheap. Moreover, with this disposal EVRAZ intends to lessen its debt load, which is USD 5.3 bln as of June, 2016. According to Kommersant’s sources, the negotiations on the sale have been resumed last summer. The port’s price is estimated by EVRAZ Group at 4,5–5 EBITDA, i.e. USD 275–300 mln. One of the potential investors considers USD 261 mln as a more real value, however the submitted offers are over USD 290 mln on average, according to him. Currently there are about 10 bidders, among them are Russian port operators Summa Group, Global Ports, Delo Group, ex-governor of Primorye region Sergey Darkin, Evraz ex-owner Alexander Katunin (his daughter Maria is the main owner of Vladivostok Fish Port) and companies from Kazakhstan and China.

The main attractive factor of the deal is that EVRAZ is ready to sign a long-term take-or-pay contract with the port to ship 5 mln ton of coal and 5 mln ton of metal products.

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