Why Albert Avdolyan bought and sold Sibanthracite

The owner of A-Property, Albert Avdolyan, and his partner Alexander Isaev sold the Sibanthracite coal company. The buyer was Bashkir Industrial Holding (BPH). This was reported on November 15 by the press services of Elsie (manages the coal assets of A-Property) and Sibanthracite. The transaction amount is not disclosed.

Sibanthracite ranks first in the world in the production and export of UHG anthracite and is the largest producer of metallurgical (coking) coal in Russia. The group includes coal companies of the Novosibirsk region “Razrez Kolyvansky” and “Razrez Vostochny” (anthracite producers), large Kuzbass coal producers “Razrez Kiyzassky”, “Razrez Verkhneteshsky”. In 2023, licenses were acquired for two more sites in Kuzbass, “Razrez Kuznetsky Yuzhny” and “Razrez Malinovsky”. Sibanthracite’s production volume in 2022 amounted to 24.5 million tons. The company’s revenue according to IFRS for 2020 (latest available data) amounted to 113.9 billion rubles.

Sibanthracite is in a good position, despite the increased debt burden amid the development of new capacities, says Sergei Grishunin, managing director of the NRA rating service. Independent expert Kirill Rodionov notes that the company’s industrial production in 2022 was carried out at four assets, and its total volume is equivalent to 5.6% of all-Russian coal production (a total of 437 million tons, according to Rosstat). Grishunin estimates the value of the company at $1 billion. The deal was probably achieved through attracting bank financing, he believes.

In October 2021, A-Property bought Sibanthracite from the heirs of businessman Dmitry Bosov, who died in May 2020. The amount of the transaction was also not disclosed at that time; Kommersant’s sources estimated it at $1 billion. A-Property’s coal assets – Sibanthracite and Elgaugol – in August 2022 were merged on the basis of the Elsie company.

Initially, Avdolyan’s partner in Sibanthracite was businessman Maxim Barsky (30%). In October 2022, Avdolyan bought out Barsky’s share, and Sergey Adonyev (31.67%) and Alexander Isaev (31.66%) became his partners. In February 2023, Adonyev sold his stake in Sibanthracite, Avdolyan and Isaev began to own the company on a parity basis – 50 to 50.

The largest share in BPH (71%), according to SPARK-Interfax, belongs to Oleg Polyakov, co-owner of the engineering company NIPI NG Peton. Previously, this company participated as a contractor in several large Gazprom projects in the field of gas processing. Other co-owners of BPH are Vanik Vanunts (20%) and Alla Zotova (9%). At the same time, 100% of the BPH under the agreement dated November 10, 2023 are pledged to Mosoblbank, which is part of the PSB structure (it was purchased from Arkady and Boris Rotenberg in December 2022).

The Sibanthracite press release notes that BPH acts as a “long-term strategic investor interested in the intensive development of the group.” The management of the coal company will remain the same, it will be carried out by a team of top managers led by General Director Sergei Melnikov.

Elsie clarifies in the release that the company made the decision to sell the Siberian division in order to “focus all resources on the development of the Elga coal complex.” The report notes that the deal, in particular, will allow Elsie to concentrate on developing its own logistics capabilities.

The company notes that coal production and processing at the Elginskoye deposit in Yakutia will reach 50 million tons per year, and the carrying capacity of the Pacific Railway (a private line that Elsie is building from the deposit to the Elga port on the coast of the Sea of ​​Okhotsk) is planned to increase from 30 million to 50 million tons per year. The transshipment capacity of the Elga port in the area of ​​Cape Manorsky (Khabarovsk Territory) will also increase from 30 million to 50 million tons per year.

A-Property announced plans to build a non-public railway line from Elga to the village of Chumikan in the Udskaya Bay of the Sea of ​​Okhotsk, as well as its own port infrastructure for the removal of coking coal from the Elga deposit in July 2021.

According to the project passport, which the company submitted to the Ministry of Transport in August 2021, construction was to be carried out for five years (2023–2027), and commissioning was scheduled for 2028. The cost of the project is 97.1 billion rubles. The approximate length of the road is 500 km. In February 2022, a representative of A-Property told Vedomosti that the railway line and port could be launched by the end of 2024.

A representative for A-Property declined to comment further. It was not possible to contact the BPH press service at the time of publication.

Grishunin notes that A-Property is now primarily solving strategic problems of building a railway to the Sea of ​​Okhotsk and port facilities, as well as expanding production at the Elga field. In his opinion, it would be “quite difficult” for the company to simultaneously develop the Sibanthracite deposits.

Market conditions are now favorable, says leading expert of Finam Management Dmitry Baranov. Deputy Minister of Energy Sergei Mochalnikov noted on November 14 that the demand for Russian coal abroad is almost twice as high as the actual exported volumes. Grishunin adds that anthracite is traditionally in high demand both in the energy sector and in metallurgy. Prices for it, according to the NRA, are now at the level of $180-200/t.

According to Rodionov, in 2023 the coal market will return to the long-term price norm, which was disrupted due to a series of “supply shocks” in 2021-2022. (EU embargo on supplies from Russia, an unspoken ban on the import of Australian coal in China, etc. – Vedomosti). De facto, the market has already played out these shocks and the result has been a decline in prices: if in 2022 the average price of thermal coal in Newcastle, Australia, a key hub in the Asia-Pacific region, was $345/t, then in January-September of this year it dropped to $180 /t, he points out. In 2017-2021 the price was $94/t, Rodinov recalls. In his opinion, prices for energy coal will approach this level, adjusted for inflation, in 2024.