Exclusive: Rosneft's state shareholder might help finance buyback of its shares - sources

Rosneftegaz [ROSNG.UL], the state holding company that controls Russian oil major Rosneft , is considering helping Rosneft finance the buyback of some of its shares in Rosneft, three sources with knowledge of the discussions said.

The Russian state is preparing to sell a 19.5 percent stake in Rosneft, the biggest Russian oil producer and one of the largest in the world, as part of a privatization scheme intended to plug holes in the budget this year.

Under the current plan outlined by government officials, Rosneft is expected to buy back the 19.5 percent stake from Rosneftegaz, which altogether owns 69.5 percent of Rosneft, with a view to reselling the shares to investors in the first quarter of next year.

The three sources, who are not directly involved in preparing the deal, said they understood that one of the options under consideration was that Rosneftegaz would provide all or some of the funds needed by Rosneft to pay for the buyback.

The state is seeking to raise about 700 billion rubles ($11 billion) from the sale of the 19.5 percent stake.

Under the scheme outlined by the sources, who are in the banking and energy sectors and spoke on condition of anonymity, Rosneft would then pay the money back to Rosneftegaz in exchange for the stake, and in turn Rosneftegaz would transfer about 700 billion rubles to the state in the form of a special dividend payment.

In that way, one of the sources said, the state budget would benefit from the privatization.

Two further sources, one in the banking sector and another close to the government, said Rosneftegaz does not have the full 700 billion rubles available, so it might possibly finance only a portion of the buyback.

Rosneft's spokesman Mikhail Leontyev denied that there was such a plan. "This is delirium. For those who are unwell, we can explain: Rosneftegaz is a seller, not a buyer," he said.

According to a research note released by Raiffeisenbank on Tuesday, Rosneftegaz held the equivalent of 472 billion rubles in cash at the end of 2015, split between rubles and foreign currency, from dividends paid by state-controlled firms in which it has stakes, including Gazprom and InterRAO.

(additional reporting by Darya Korsunskaya, Vladimir Soldatkin, Denis Pinchuk and Olga Popova; editing by Christian Lowe, Greg Mahlich)