Sibneft President Evgeny Shvidler does not like giving interviews. He made an exception for Vedomosti, telling for the first time how the owners of his company negotiated a deal with YUKOS and sold Aeroflot . Shvidler believes that the capitalization of the holding formed as a result of the merger of Sibneft and YUKOS will eventually reach $100 billion, and its final buyer could be one of the Western oil giants, ChevronTexaco.

Evgeny Shvidler: "It is no longer possible to terminate the deal."

- Why did the deal happen now and why did the owners of Sibneft decide to sell the company's shares to YUKOS?

- We did not sell Sibneft. The essence of the deal is different: two companies are combining assets into a new holding, in which the main owners of Sibneft will receive slightly more than 26%. We remain in the oil business.

- But why was YUKOS chosen as a partner? They say you had other offers - from Total and Shell.

- The market is good now - YUKOS, TNK, Sibneft had various options. We considered that the deal with YUKOS was the most correct in terms of price and feasibility. We have known the owners of YUKOS for a long time, we understand each other well and set ourselves approximately the same goals in business.

- How long did the negotiations with Yukos take?

- There were only two or three meetings. We worked closely together all these years, so it didn't take much time.

- And who initiated the deal?

- We once agreed with the owners of YUKOS that if someone was close to making a serious decision regarding the fate of their company, we would talk to each other again. And that's what happened.

- You have already attempted to create "YUKSI", which ended in failure. Why do you think that this time everything will work out?

- Because now the deal is at such a stage that it is no longer possible to terminate it.

- But the contract does provide for $1 billion in compensation in case one of the parties refuses the deal. So there is still some possibility of a breakup?

- The deal is completely closed, all the papers have been signed - the main agreement and a number of additional agreements. Of course, you can always go and take the shares from someone, even after all the formalities have been completed. In this sense, any deal is never closed. But this is not our case with YUKOS.

- When will the offer to buy out Sibneft's minority shareholders be made? And will they be able to receive dividends for 2002 at least until the end of this year?

- I cannot comment on the first part, since the offer to minority shareholders is a YUKOS matter. The terms of dividend payments for Sibneft are determined by the company's charter - until May 15, 2004.

- Will the owners of Sibneft be disclosed after the creation of the united company?

- We will be ready to do this if such disclosure is required by law or if disclosure leads to an increase in the value of the shares of the united company. I do not see any other reasons for naming the owners of Sibneft. Disclosure for the sake of disclosure is pointless.

- How true is the opinion that more than half of the Sibneft shares belong to Roman Abramovich, and the rest to the company's managers.

- Generally correct.

- What options for dividing Slavneft's assets are you discussing with your partner in this project, TNK?

- The fields and filling stations will be divided in half, Yaroslavnefteorgsintez (YANOS) will remain under joint management and will be loaded with oil from both companies under processing conditions.

- Is it possible that one of the partners will buy out YANOS shares or exchange them for a share in the Moscow Oil Refinery?

- We are not discussing anything like that yet. First we divide the assets, and only after that we can talk about various options.

- Sibneft's 2002 US GAAP report mentions a certain energy company in which the group owns 35%. Could you confirm that this is Irkutskenergo?

- No, I couldn't.

- Mikhail Khodorkovsky said that the subject of your deal is all of Sibneft's assets included in the US GAAP reporting. Does this mean that this energy company will be sold to YUKOS?

- No, Sibneft will not have any energy assets by the time of the merger.

- What other energy assets, including shares of RAO UES of Russia, do Sibneft and its owners have?

- Sibneft has none, I can’t say anything about the owners.

- Will Sibneft managers go to work at YUKOS?

- It will be a united company - "YukosSibneft". And that means that everyone who works here will also work in the new company.

- So the owners of YUKOS and Sibneft will jointly manage the company? Have you already agreed on how the positions will be distributed?

- There will not be a structure in which managers from Sibneft are responsible, for example, for sales, and from YUKOS - for finances. We tried to apply such a scheme in YUKSI, and it was a bad idea. Now one manager will be responsible for operational management, who will form a team of managers.

- Did I understand correctly that we are talking about some independent manager who will not be from YUKOS or Sibneft? That we are talking about some independent director who will be given executive functions, and Mikhail Khodorkovsky will remain the president of the merged company and will, as now, sign only external letters?

- Incorrect. Mikhail Khodorkovsky will be responsible for management, and strategic decisions will be made by the board of directors.

- And what do you personally plan to do besides becoming the Chairman of the Board of Directors of YukosSibneft?

- I will continue to manage Millhouse Capital. This is my main job.

- Under what brand will the oil products of the united company be sold? Will there be gas stations with the YukosSibneft logo in Russia?

- For now, both brands will remain - both "YUKOS" and "Sibneft". There is no point in simply repainting the gas stations - in certain regions, one or another brand is already well known and brings in profit. We also have a third brand - "Slavneft", but investments in it will cease.

- Could the configuration of the deal with YUKOS change if one of the companies acquires additional assets?

- No, all new assets will now be acquired in the name of the new company and will be added to the combined balance sheet. At the same time, we will look for optimal financing methods.

- Is it possible to sell Millhouse's share in YukosSibneft? Will this require approval from the current owners of Yukos?

- Of course, both we and the main owners of YUKOS can sell our shares. For this case, we have a symmetrical agreement that determines the mechanism of the sale.

- Does your agreement provide for a moratorium on sales for a certain period of time, as is stipulated in the deal between TNK and BP?

- The structure of our deal is completely different. TNK-BP is a non-public company, and our almost blocking stake will immediately be in free circulation. But there are certain conditions - how we should act if we want to sell our shares, because in this case our joint stake in YukosSibneft will be below the 75% or 51% limit. After all, whoever comes out, it will affect the second partner. At the same time, Millhouse will not necessarily sell its stake, various options are possible. Perhaps the owners of Yukos will retain a blocking stake, and we will retain 51%.

- Do the owners of YukosSibneft have plans to list the company's shares on Western markets or sell them to a strategic investor?

- Of course, both options are possible. Everything will depend on the specific situation on the market. For now, the company is undervalued, and we intend to fix this. Now YukosSibneft is worth $42 billion, we want it to be worth $100 billion. There are algorithms on how to do this: increase the size of the company, evaluate it not by Russian market coefficients, but by Western ones. Such a simple idea.

- Do you think that alliances similar to your alliance with Yukos are possible in the oil industry?

- Among Russian companies, I think it’s unlikely – the remaining companies are too different.

- To what extent has the interest of foreign companies in the Russian oil industry increased after the deal between TNK and BP?

- Any investor looks at what the neighbor is doing. But it seems to me that the herd mentality is not decisive for Western companies. When it comes time to pay, everyone counts the money. No one will make a deal just to keep up with BP. Nevertheless, I think that a deal with one of the Western giants - ExxonMobil, ChevronTexaco, Shell or Total - is quite possible. They always look at Russia, regardless of what BP does.

- Do you think a hostile takeover of Surgutneftegaz is possible?

- Vladimir Leonidovich Bogdanov is a good friend of mine, I don't want to comment on this. In any case, Millhouse won't be doing this.

- In what projects does Millhouse intend to invest the $3 billion it will receive from the sale of Sibneft shares?

- There is no special plan for where to spend this amount. Millhouse constantly receives proposals for various projects - through the company's managers, through shareholders, simply from the outside. They all end up on the same table and are assessed according to standard criteria. For example, the size of the project, its profitability, its long-term nature are important to us.

- What should be the project amount for Millhouse to take on it?

- There is no specific figure, I want everyone to come, with any proposals, without thinking that if the project costs less than $500 million, then there is nothing to do with it at Millhouse. Also, for making a decision, it is important what management resource we have at a given moment in time. But in general, there are no universal rules for selecting projects, everything is based on specific assessments and feelings.

- Is Millhouse interested in investing in retail?

- Retail is, in principle, a promising direction, but I believe that it is not the most attractive industry for us now. The fact is that there are already many specialized players on this market - Metro, Auchan, other well-known names that already have colossal experience in this business. We have no competitive advantage over them in business.

- Are you interested in the insurance business?

- Today this direction is not a priority for us.

- Then what projects does Millhouse want to invest in? And what industries will become attractive in the near future - gas, nuclear energy, etc.?

- I don't know what will be in fashion next. Any industry in which you can consolidate assets and create a company with a turnover of at least $1 billion is, in principle, interesting. There are many such industries. You can even do this in the production of matches or in hairdressing services.

- How are your relations with Mill-house partner in Russian Aluminum, Oleg Deripaska?

- Great.

- There are rumors that Millhouse wants to buy out his stake in Rusal?

- I hear this for the first time. We have no goal of remaining the sole shareholder of Russian Aluminum, although everything depends on the price. If Bazel sells its stake cheaply, then we will, of course, try to buy it. But so far there have been no such offers.

- But many experts note that the co-owners of Rusal have different approaches to business. Millhouse is clearly aimed at making a profit in a short time, while Bazel may choose the project for other reasons.

- We are all different people. Rusal has independent management, not connected to any of the owners. At the board of directors, shareholders tell us what they want from the company, and management implements it. This is the lesson we learned from trying to create YUKSI: management consisting of two parts does not work, it must be united.

- But you must agree that if two shareholders have different approaches to business, then it is quite difficult for management to satisfy the demands of both.

- That's right, that's why the company management procedure is as formalized as possible. All disagreements between shareholders are discussed at the board level. Management receives clear directives on what indicators and in what timeframes must be achieved. That's why employees don't have to guess what the company owners want. If shareholders seriously disagree on a particular issue, then no decision is made.

- Why did Millhouse acquire a blocking stake in Aeroflot and why was the decision ultimately made to sell it?

- Millhouse initially collected a share in Aeroflot to resell it. We had a specific buyer, but for a number of reasons the deal with him did not take place. We tried to improve the company, and to some extent we succeeded. But our package was always on the market, and as soon as we saw a good offer, we accepted it. The deal amounted to $133 million.

- Why did Millhouse decide to sell its stake in Ruspromavto?

- This was said by [Basel representative] Konstantin Remchukov, we did not give him any authority to make this statement.

- But it's true.

- I have said many times that all our positions are always ready for sale. This is simply one of the principles of our business. The Ruspromavto package is no exception, and in the right situation we will, of course, sell it. For now, this is all I can say.

- Do you think that car production is a promising business?

- "Ruspromavto" is not only cars, there are many other productions: buses, road vehicles, engines, parts. Each of these parts is more or less promising. Of course, it is difficult to make a ready-made car like "Volga", the prospects of such a project are very relative. If we compare it with the oil industry, then I would personally prefer to work in oil, not cars. But this is a matter of taste. Today, the "Ruspromavto" project brings in money, and in the future that we see, it will continue to bring it. In relation to what was invested, the return is not bad, it absolutely meets our criteria.

- Do you have any agreements with Basel about not leaving the Ruspromavto project separately?

- We have common corporate principles that define how we should act towards each other if someone wants to leave the project.

- Are there such agreements regarding Rusal?

- Eat.

- Do the owners of Sibneft intend to openly support any candidates in the parliamentary or presidential elections?

- Of course, like all citizens, the company’s shareholders have a constitutional right to do so.

- Your partner Khodorkovsky openly says that he supports Yabloko and that our country needs such a party.

- This is his civil choice, which we certainly respect. But Mikhail Khodorkovsky's political position is not connected with the activities of the united company. The company can work hard and persistently, and the results of this work, we hope, will improve the overall climate in the country. Sibneft was the first Russian company to transfer its financial reporting to US GAAP standards, now almost everyone is doing this. We, together with YUKOS, were the first to decide that service companies should be attracted from outside on a tender basis. Nobody believed in this, but now it is common practice. We began to invest significant funds in science and education, because we are focused on developing long-term projects and forming intellectual resources. There are many other examples. So we need to work, work and work again, then life will gradually improve.

BIOGRAPHY: Evgeny Markovich Shvidler was born in 1964. He graduated from the Gubkin Moscow Institute of Petrochemical and Gas Industry, specializing in applied mathematics. After graduating in 1991, he received a Master of Business Administration degree in finance and international taxation from Fordham University. From 1992 to 1994, he worked in the international tax department of the New York office of Deloitte & Touche. Since 1996 - First Vice President of OAO Sibneft, from July 1998 to the present - President of OAO Sibneft. Member of the Board of Directors of OAO Sibneft since 1997.

ABOUT THE COMPANY: Sibneft was founded in 1995. 92% of the company's shares are controlled by Millhouse, which represents the interests of the Governor of Chukotka Roman Abramovich and the company's management. The remaining 8% of shares are traded on the market, including in the form of ADRs. At the beginning of this year, Sibneft announced record dividends for Russian business: it promised to give shareholders almost all of its profit for 2002 - $1.09 billion. According to Miller & Lents, at the end of 2002, Sibneft had reserves of 4.718 billion barrels of oil and gas equivalent according to the SPE method, or 2.197 billion barrels according to the SEC method.

INTERVIEW: Evgeny Shvidler, President of Sibneft