Belarus last week moved OAO Uralkali CEO Vladislav Baumgertner from a prison to an apartment. While officially still under house arrest with KGB supervision, this was seen as a positive development leading to his eventual return to Russia. Baumgertner was arrested Aug. 26 after visiting with Belarus Prime Minister Mikhail Myasnikovich. This followed Uralkali’s July 30 exit from its export joint marketing venture with Belarus in the company Belarusian Potash Co.
Belarus has indicated that it would consider extraditing Baumgartner to Russia for trial for “abuse of power” and that it might release him if Suleiman Kerimov, who owns 21.7 percent of Uralkali, would sell his stake. Kerimov has reportedly been in negotiations to do so.
On Sept. 24, Uralkali reported that Chengdong Investment Corp. (CIC) exercised an earlier option (GM Nov. 19, 2012, p. 10) to convert bonds into to a 12.5 percent stake in the company. CIC is China’s sovereign wealth fund. The shares were valued at US$2 billion. The bonds had been issued by Wadge Holdings Ltd., which is owned by Uralkali’s major shareholders, including Kerimov. Uralkali’s ownership is now Kerimov 21.75 percent, CIC 12.5 percent, Filaret Galtchev 7 percent, Anatoly Skurov 4.8 percent, and 53.95 percent free float.
While some headlines quickly heralded the CIC move as a boon to potash buyers and a “nail in the coffin” of the potash cartel, as it could give the Chinese leverage or insight in negotiating potash contracts going forward, others said there was nothing new as the optional bonds were issued almost a year ago. Potash Corp. of Saskatchewan Inc. Executive Vice President and CFO Wayne Brownlee said the CIC/Uralkali news was a “non-event.” He said PotashCorp fully assumed CIC would convert the bonds to stock. “I can’t imagine there would be any associated transactions with this thing that would impair the valuation of the remaining 85 percent.” He said it is clearly a passive investment at this stage. “I know there is some speculation that it might help them in future negotiations, but frankly I don’t think it is an issue and we are really not seeing it out there at this stage.” When the bond deal was initially struck, PotashCorp President and CEO Bill Doyle said it was a financial exercise. “I don’t think Mr. Putin is going to allow the Chinese to manage the Russian potash industry,” Doyle said at the time.
Ironically, PotashCorp owns 22 percent of China’s Sinofert Holdings Ltd., a major potash buyer and fertilizer distributor. PotashCorp sees the investment as a window into China and an opportunity should the government opt to sell a larger stake in the company.
Brownlee was speaking Sept. 24 at the Scotiabank Agriculture & Fertilizer Conference, and went on to say why people should not worry about excess world potash capacity. He said they need to remember whose hands that excess capacity is in, saying that some 42 percent of the new capacity coming on between 2012-2016 is in the hands of PotashCorp, with a significant component of the remainder being in the hands of its Canpotex Ltd. partners. “…the amount of incremental potash capacity that would really come onstream over the next ten years, is primarily in Canpotex hands and not a lot of other hands. So I know people get worried about when are we going to find supply/demand balance, but frankly it doesn’t need to be that long down the road for that to happen.”