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Russia mulls creation of fertilizer giant – Ifax

  The Russian government is mulling the creation of a state-run holding from several fertilizer producers, sources told Interfax on Friday, indicating that the Kremlin could be preparing a move into another key sector.

Industry and government sources told the Russian news agency that the government may merge potash makers Uralkali and Silvinit and phosphate mineral apatite producer Apatit. “The idea under consideration is to buy controlling stakes (in three companies), merge them and appoint government officials,” Interfax quoted a government source as saying.

The report highlights the confusion surrounding Uralkali, which earlier Friday appeared close to resolving a dispute over a controversial mine flood that threatened its future. Uralkali said it had offered to pay about RUB 3 billion ($105.9 million) in additional compensation for damages stemming from the 2006 flood.

“Our company has offered voluntary compensation...related to clearing up the aftermath of the accident as well as costs to construct two railway by-pass routes,” Uralkali President Anatoly Lebedev said. Lebedev also said that his company has not been approached by anyone regarding a merger and that Uralkali has not sought any financial support from the government.

Renaissance Capital analyst Marina Alexeenkova said she saw no strong argument for such a consolidation. “These companies have good cash generation and they can survive without government help.” In a separate statement, Russia’s Natural Resources Ministry confirmed Uralkali’s offer and said that rival Silvinit, which uses the same rail line, repeated an earlier offer to pay RUB 1 billion.

Uralkali’s Mine-1 flooded more than two years ago, creating a sinkhole that forced Berezniki to relocate residents and move a railway line as well as power and heat supply systems. A 2006 investigation determined that the flooding was caused by “extraordinary and unavoidable events.”

However, in November, Deputy Prime Minister Igor Sechin ordered a new probe, causing investors to draw parallels with the tax investigations into Yukos that ultimately led to the sale of its assets to state firms. Uralkali’s shares closed off 17.5% on Russia’s MICEX. They have lost about 87% of their value since their June peak. (Reuters)