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Rosneft $8-$13 bln IPO seen days before G8-bankers

Written by: Staff
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MOSCOW, June 5 (Reuters) The Kremlin will float a stake of - billion in state oil firm Rosneft just days before it hosts a Group of Eight summit, as it wants to present the IPO as its input to global energy security, bankers said on Monday.

''Rosneft will publish its intention to float on June 12-13. Then it will seek to float around mid-July. Doing this just before the G8 summit is not a wish, it is an order (from the Kremlin),'' one banker told Reuters.

Another banker said Rosneft was insisting on a valuation of -0 billion, a premium of up to 70 percent to Russian major LUKOIL, as it expects to grow quickly and soon acquire the remaining assets of stricken oil firm YUKOS.

''We agree that it will be a huge growth story, but will still seek a big discount to what they want,'' the banker said.

Russia hosts its first summit of the leaders of the world's most powerful nations in St Petersburg from July 15-17 and has put global energy security at the top of the agenda.

The gathering comes as Europe questions its dependence on Russia after gas exports were disrupted earlier this year due to a pricing dispute with Ukraine, which also prompted U.S. Vice President Dick Cheney to accuse Moscow of energy ''blackmail''.

The bankers said that, at a time when countries like Bolivia and Venezuela are nationalising oil and gas fields operated by foreign energy firms, the Rosneft IPO would send a signal that Russia still welcomes foreign investors.

''The ultimate task is to close the IPO just before the G8, which will allow them (the Kremlin) to say -- we have just made public our best energy company. Why are you complaining about energy security?'' said a second banker.

Rosneft needs proceeds from the IPO to pay back a .5 billion loan to the state, but is pushing to raise much more, close to billion, to fund its huge investment needs.

''There is lot of bargaining going on and we will see the final figures closer to the road show,'' one banker said.

PROMOTION DRIVE Announcement of its intention to float will mark the end to an information blackout during which neither Rosneft nor the banks involved are allowed to comment on the deal.

''You will see a much more positive coverage. There will be a huge number of reports,'' one banker said.

He said the number of Western banks involved in the IPO has expanded to around 20 plus another eight banks from Russia.

Rosneft grew from a mid-sized player into a heavyweight when it bought the key unit of YUKOS, Yugansk, in late 2004 to put itself on a par with LUKOIL and Anglo-Russian venture TNK-BP in terms of production.

The destruction of YUKOS and the rise of Rosneft are widely seen as a broader Kremlin plan to regain control over the strategic sectors of the economy lost in the mid-1990s.

Analysts expect Rosneft to take over the remaining assets of YUKOS, two production units and five refineries, as part of the ongoing bankruptcy procedure. This as well as major legal risks arising from former YUKOS's owners has prompted some analysts to suggest that the IPO might be delayed.

But bankers said Rosneft wanted to go ahead with the IPO amid supportive oil prices, which may not last in the future, favourable stock markets conditions, which have recovered after a recent slump, and political risks.

''The closer you get to December, the bigger becomes the elections factor,'' one banker said.

Russia holds a parliamentary election in December 2007 and a presidential poll in March 2008, when by law Vladimir Putin should step down to make way for a successor.

YUKOS has promised a lifetime of litigation against Russia and some funds have said they would stay clear of the IPO.

But others say it will be difficult to resist. ''Greed will take over as opposed to fear,'' one said.

He said some investors might find it difficult not to buy into a firm supported by the Kremlin and therefore having huge growth opportunities, after state-controlled gas monopoly Gazprom soared to join the top 10 global stocks this year.

REUTERS PV BD1600

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