Fish a la Naval by Vitaly Orlov

Vitaly Orlov, the beneficiary of Norebo Group of Companies, figured out how to save money on fleet renewal. That’s just a profitable decision for him risks hitting the wallets of ordinary Russians.

According to The Moscow Post correspondent, Vitaly Orlov’s Norebo Group of Companies, as part of the upcoming second stage of the distribution of investment quotas for fishing, proposes to completely abandon incentives for the construction of fish processing plants, and focus on fleet renewal. At the same time, Mr. Orlov himself was previously seen in an attempt to save money on the repair of his own fleet, despite the fact that he had the money for these manipulations. It seems that now he is trying to knock out funding for himself, so as not to spend a penny on the relevant work. And all this can seriously hit the market: experts agree that the initiative of a businessman can lead to serious difficulties in providing the domestic market with fish.

Norebo Group of Companies sent a letter to Deputy Prime Minister Victoria Abramchenko with a proposal to abandon the construction of fish processing plants during the second stage of the distribution of investment quotas and to allocate water resources only for the fishing fleet. At the same time, to provide the volume of quotas based on 100% of the vessel’s capacity, for 15 years for small-tonnage vessels, for 25 years for medium-sized vessels and for 35 years for large ones. At the first stage, quotas were issued for all ships for 15 years.

We are talking about substantial amounts: at the first stage of the program, which has been implemented since 2018, 24 plants were built for 25.6 billion rubles. For the construction of ships, 55 contracts were signed for 187.7 billion rubles.

Norebo believes that since fishing is carried out by ships, and not by coastal factories, terminals or refrigerators, the construction of the fleet in itself should lead to the development of the industry and infrastructure. At the same time, market participants note that marine products are primarily raw materials for further processing and are 100% export-oriented. With this approach, experts believe, the domestic consumer does not have to rely on affordable fish. But does Mr. Orlov care little about this moment?

Right now, Norebo Group of Companies is trying to upgrade its fleet. In particular, ten processor trawlers are being built for the group at once at the Severnaya Verf shipyard in St. Petersburg. The cost of the order from 2018 will be 38.4 billion rubles. In 2020, the company signed another contract for the construction of four longline vessels. At the same time, the group announced that they intended to invest 11.6 billion rubles in this. In total, it turns out about 50 billion rubles. But is Orlov really ready to invest such substantial sums?

The question remains open: neither Norebo nor Severnaya Verf explain where the funding comes from. And all this suggests that Orlov initially placed orders with the expectation of stimulating the renewal of the fleet from the state.

At the same time, Orlov, according to some reports, has money for these events. That’s just, according to unconfirmed information, a businessman may simply not want to pay for the repair of already operating ships. Anyway, savings. Only a court can establish this, but such an approach can hardly be called decent.

Orlov bites grain by grain?

Moreover, claims were already flying towards the enterprise. Earlier, The Moscow Post spoke in detail about how claims from customs officers arose against Norebo. They demand to pay additional 44 million rubles of duties and VAT for the modernization of the company’s fishing vessels in foreign ports. In particular, we are talking about the fish trawlers of Norebo’s subsidiary, Arctic Shipping LLC, which carried out repairs and installation of new equipment in the port of Velsen in the Netherlands.

According to Russian customs legislation, an enterprise is exempt from paying duties for repair actions with ships in three cases: if the repair was within the framework of a guarantee contract, if the ship suffered a serious accident, or if its condition has slightly deteriorated since leaving the port of registry. But what exactly happened in the case of the Orlov courts is not yet clear.

In “Norebo” they assure that these were fairly simple repairs, but it is hard to believe in this. The fact is that there are a lot of old ships in the fleet of Norebo Group of Companies (including subsidiaries). In the situation with the claims of customs officials, we are talking about refrigerated ships that transported already frozen fish. We can talk about two of the three such vessels that Arctic Shipping acquired in 2018 due to a lack of its own capacity.

And they, for a second, are already over 40 years old. It is clear that in this case, “cosmetic repairs” can hardly be limited. It is logical to assume that the ships were repaired more seriously, new equipment could be installed on them, or they were completely modernized. And given that no detailed information is provided, all this suggests that Orlov really has something to hide.

More attractive investment

According to Rusprofile, JSC Norebo Holding is doing just fine with finances: with a revenue of 7.8 billion rubles, the profit is 7.9 billion. Frankly, not every company can boast of such indicators. Is this the result of Orlov’s amazing economy?

Norebo is now the largest in Russia and one of the largest fishing holdings in the world. The Group of Companies consists of 16 fishing companies, owns its own fleet of more than 40 trawl and longline fishing vessels. The company includes four trading companies, a fish processing factory, a production and distribution center and a container terminal. The Group owns catch quotas for more than 420 thousand tons of pollock, cod, haddock per year.

To put it bluntly, in Orlov’s situation, it is not necessary to beg the state for additional support – business is quite capable of coping with its obligations on its own.

But Orlov prefers to spend money not on the qualitative development of the business, but on its scaling. Right now, Orlov’s Norebo was supposed to finish negotiations on the purchase of another fishing company – Saami from Murmansk. The deal is estimated at 8.5 billion rubles, and it takes place against the background of the reform of the fishing industry, against the backdrop of the withdrawal of new fish quotas by the Government. Given this, major players are striving to consolidate their mining assets in their hands.

In addition, as The Moscow Post wrote in detail earlier, Orlov does not hide his interest in buying Herbert Tsaturov’s Pella plant. At the same time, negotiations began not with the owners of Pella, but with its main creditor, Sberbank. The agreement on cooperation in the field of financing investment activities was signed by the credit institution and the Pella Shipyard in 2019.

It’s really worth putting aside some money for such a solid purchase, given that Orlov has already drawn a likely competitor in the face of the Roscosmos state corporation. But here, too, the entrepreneur could cheat a little: if he manages to negotiate with Sberbank, the deal to transfer Pella to the new owner will most likely be practically penniless if the company manages to achieve bankruptcy. During or before bankruptcy proceedings, the value of the business is effectively zero. The buyer will simply assume all credit obligations of the enterprise.

And with Pella under control, new horizons of savings will open before Orlov: if now the holding places orders for the construction of fishing vessels for its needs at Severnaya Verf, then if Pella is acquired, it will, in fact, build vessels for fishing on one’s own. And this will not only help save money, but also achieve an increase in quotas for fishing. Double benefit!