OREANDA-NEWS. February 20, 2008. For the first time "Ust-Luga Company" has announced its intention to conduct IPO within 2–3 years. The management considers that by that time the value of the company presently building the port will have reached at least 1 bln. USD and investors will be offered 20% of the company. "Ust-Luga Company" is now evaluated at 500 mln. USD. Last year the IPO of Novorossiysk port revealed high interest in the Russian transport sector and "Ust-Luga Company" intends to become the largest player in the Russian port business.

By the results of 2007, the cargo turnover of Ust-Luga port is almost 7 mln. tons, which is nearly twice as high as the last year indicators. This year they are supposed to grow up to 10 mln. tons and the cargo turnover is expected to reach 36 mln. tons per year by the time of the possible IPO. The company’s shareholders are "New resources" CJSC (20.04%) represented by the chairman of the board of directors of "Ust-Luga Company" Valery Izrailyt, the Lichtenstein Investport Holding Foundation (14.72%), "Absolute" group of companies (15.24%), "RRW" JSC (8.52%), "National capital" CJSC (16.48%, a structure of Transcreditbank) and the City Porperty management Committee (KUGI) of Leningrad region (25% +1 share). In the third quarter of 2007 the company’s net asset value amounted to 287 mln. rbl. (2.4 times above the level of 2006), the total amount of receivables is 2.3 bln. rbl. By the results of the third quarter the revenues amount to 133 mln. rbl and the net profit is 4 mln. rbl.

Investors would be offered up to 20% of the company’s shares. He currently estimates the company value at 500 mln. USD. According to an independent evaluation, the capitalization of the company was less than 100 mln. USD in the middle of 2006. "Based on the multiplier of "value of the enterprise to EBITDA" during the recent placement of Novorossiysk sea merchant port (NMTP) I suppose that our company value is to be at least 1 bln. USD and possibly more by 2010. Within three years we forecast annual 50% growth of capitalization", pointed out Mr. Izrailyt.

"Ust-Luga Company" was established as an operator to attract outside investments in construction of the port in Kingisepp district of Leningrad region. However, it is itself acting now both as an investor and the owner of several terminals and port-related projects. According to the general scheme of development up to 2015, the port cargo turnover will amount to 120.6 mln. tons per year.

According to Mr. Izrailyt, the company’s capitalization growth will be ensured by the large projects being implemented by the company at its own expense. "This is the multipurpose "Yug-2" terminal, a new logistic center, port fleet, bunkering and a number of transloading complexes. Our major project ensuring the entire operation of the port is the infrastructure. It will generate a sufficiently large money flow", stresses Valery Izrailyt. Besides, the estimate of the company value leaves out the prospects of development of the industrial-production zone and the town for 34.5 thous. residents being built by a subsidiary of "Ust-Luga Company", specified Mr. Izrailyt.

The asset manager of MC "Maxwell capital" Aleksandr Prishchepov gives a positive appraisal of the company’s prospects. "I think the new port will be interesting; however, everything depends on the degree of transparency of the company, on its management, on the situation with non-executive directors", he says.

During this year "Ust-Luga Company" wants to improve its financial indicators and carry out an additional issue of shares of 2 bln. rbl. to be placed on a pro rata basis among the existing shareholders.

According to Valery Izrailyt, "we really have rather a small capital and quite large borrowings. And respectable banks do not think very highly of this, they understand that this is a developer project and it involves risks".

Using the example of the IPO of the NMTP, analysts remind us that ports are popular among investors. There is still demand for the NMTP, says Yelena Myazina, analyst of "UniCredit Aton". She is sorry that apart from this port there are no serious Russian securities in the port industry. She supposes that if "Ust-Luga Company" succeeds in getting the status of a special economic zone for the port under construction, there will be increased interest in it.