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Russia wealth fund targets bigger Transneft stake, proposes share swap

[MOSCOW] Russia's sovereign wealth fund wants to increase its stake in Russian oil pipeline monopoly Transneft and is separately proposing a share swap, the head of the Russian Direct Investment Fund told Reuters.

Although the Russian government holds all of Transneft's ordinary shares it owns 78.1 per cent of the company as 21.9 per cent of its share capital is in preferred shares.

Only Transneft's preferred shares are traded and RDIF became a shareholder this year after United Capital Partners, a Russian private investment group, sold most of its preferred shares to a group of investors.

Gazprombank, which manages Transneft's investor relations, says RDIF directly owns 0.43 per cent of the preferred shares, while the Russia-China Investment Fund, RDIF's co-fund with China's CIC, owns another 1.49 per cent.

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RDIF head Kirill Dmitriev told Reuters in a telephone interview that some of its Middle East partners had also invested in Transneft preferred shares. He did not disclose the name of the funds or their stakes. "We see a chance to significantly increase the exposure - our partners from Asia and the Middle East are interested in this," Mr Dmitriev said, although he did not say from whom RDIF wants to buy.

According to Gazprombank, the bulk of the preferred Transneft shares, or 53.6 per cent, are owned by a fund, which, in turn, is owned by the Gazprombank group and a Transneft unit.

Mr Dmitriev, who is a Transneft board member in charge of the strategic, investment and innovation committee, said that RDIF had started talks with the government over the idea of converting Transneft preferred shares into ordinary ones. "This would allow shareholders to more actively take part in the company's business while the state would retain the control, holding 78 per cent (in the capital after conversion)," he said.

Mr Dmitriev declined to comment on how such a conversion might be linked to Moscow's long-running plan to privatise Transneft, which has stalled over low oil prices and the management's opposition to making the company more public.