Samara’s regional department of Investigative Committee of Russian Federation, a state watchdog inspecting into economic crime in the country, issued a statement informing that Eugeny Korolev, General Director of ZAO “Togliattiazot” has been put in the wanted list. Investigative Committee probes into the Togliattiazot’s activity in 2008-2011 when, according to the investigators, several economical crimes of the large scale were commenced. Prosecutors were not able to identify Eugeny Korolev’s location since January 2013, while Russian media citing Togliattiazot lawyer Sergey Zamoshkin reported that Korolev is probably in London in an extended business trip.
According to the investigators, Togliattiazot executives developed the export scheme for their production — ammonia and urea. The plant’s production was initially sold at knock-down prices to the Swiss companies affiliated with Togliattiazot majority shareholders – Ameropa AG and Nitrochem Distribution AG led by Andreas Zivy and Beat Ruprecht. Afterwards they were selling the production at market prices. Profit taxes in this case were paid in Switzerland, where the tax rate is just 2% while in Russia it is as high as 20%. Thus, a large part of Togliattiazot’s profit never really made it to the company’s budget and stayed offshore.
We have been tremendously bored reporting on Togliattiazot conflict, but the new facts are coming in the Russian media every day and we simply cannot ignore them. Apparently Russian business review magazine Expert had a chance to talk in length with lawyers of Uralchem, and came to the conclusion that the conflict which flurries world fertilizer market may come to an end. Togliattiazot may change ownership, says Expert magazine in its article.
Togliattiazot is the world’s largest producer of ammonia (capacity of 3.5 million tons per annum) and a kind of unique asset to own or to cooperate with — it is one of the few producers of ammonia who didn’t expand vertically into production of fertilizers and sells ammonia on the global market instead. Ammonia is a precious component for fertilizers production which is in a high demand, according to Argus Report. The price is skyrocketing while Indian producers are desperate to get the component necessary to fill the gaps from own lack of resources. Togliattiazot has another advantage — the combine created a unique ammonia pipeline to supply its production to the port of Odessa, hence it is independent from ever changing railroad tariffs.
Uralchem Accuses Togliattiazot Shareholders of Fraud Over a Sale of Assets at Price 100 Times Lower Than the Market Value
Not everyone knows that Russia is the world's largest producer and exporter of ammonia — it ships this indispensable fertilizer component all over the world, while international giants like Yara, CF Industries and PotashCorp rely on Russian export volumes when budget their production costs. All these enormous volumes of ammonia produced in Russia mainly by three dominant producers, including EuroChem, Togliattiazot and Uralchem. We already reported before, that the usually quite and calm world of mining and natural resources development in Russia looks like a desert storm, mainly because of the conflict around Togliattiazot, which starts to remind us by the level of action some similar cases happened before with Norilsk Nickel (conflict of Deripaska and Potanin over the asset) and TNK-BP (conflict of Abramovich and Berezovsky over Sibneft assets which brought them to the UK court). Russians do get aggressive sometimes, when huge piles of money at stake and in case of Togliattiazot the piles of ammonia are very big.
Russia is the world's largest producer and exporter of ammonia with two dominant producers, EuroChem (19% of the market) and Togliattiazot (18% of the market). Tilde Finance experts have analyzed basic production statistics for all largest domestic producers, performed an analysis of exports and imports, carried out an analysis of factors affecting the development of the market and performed an in-depth analysis of the market situation and trends which can be classified as potential risks to worldwide supplies. The report is based on data collected from the world’s largest ammonia consumers and their assessment of the current situation.
The Russian market, which produced 13.9 million tons of ammonia in 2011, is very important globally and can have a significant affect on a variety of world trading factors. Any uncertainty in supplies may be qualified as potential risks for large consumers, as it will be hard for them to re-orientate their supply chains in order to compensate for the shortages. In addition, potential supply shortages could trigger price volatility on the global markets.
Today newspaper Vedomosti has reported that Dmitry Mazepin is looking to sell his Uralchem holding. There was no actual plan discussed, as well as there is no information whether the company will be sold as a whole, or in parts.
Uralchem is in serious financial difficulties (its 2011E net debt/EBITDA exceeds 4 and capex needs for 2011-2017 are close to $2 billion) reports Uralsib analyst Anna Kupriyanova. It is clear that the company’s IPO in May 2010 turned out to be unsuccessful.
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