“Fishing” by Vladimir Yevtushenkov

Does the beneficiary of Sistema increase assets through loans and projects with state participation? The management company Kamchatka Project, which is part of AFK Sistema, bought out the Kamchatka company Loyd-Fish, which is engaged in the extraction and processing of red fish. The enterprise will be included in the structure of the Voskhod fishing group controlled by Sistema, which, thanks to the deal, has become one of the largest Russian holdings for catching Pacific salmon.

Also, the beneficiary of the corporation, Vladimir Yevtushenkov, is preparing to build the Moroznaya Mountain ski resort in Kamchatka: the government of the region signed a corresponding investment agreement worth more than 3 billion rubles with Cosmos Hotel Group, controlled by Sistema, last December. The project is not being implemented in an empty place: on the Moroznaya mountain in Kamchatka, a ski resort with the same name, built on budgetary funds, with several slopes and lifts, has long been operating, the maintenance of which is the responsibility of a children’s and youth sports school, which uses the infrastructure to train pupils. The authorities of the region do not explain how the commercial resort and the sports and educational institution will coexist in the future. Meanwhile, since the beginning of the economic crisis, Yevtushenkov has stepped up his activity in the mergers and acquisitions market: in less than a year, the Sistema structures entered into a number of major transactions, buying out, among other things, the promising fashion retailer Melon Fashion Group, a manufacturer of mineral water Arkhyz Original, by increasing its share in the Etalon construction holding, etc. But with billions in transactions, AFK Sistema does not shine with financial indicators and declares losses. Moreover, at the end of 2021, analysts noted the high debt burden of the corporation’s structures, whose obligations totaled almost 872 billion rubles. Thus, bank loans are spent on the purchase of new assets, while Sistema’s own funds could be withdrawn to foreign accounts through an affiliated offshore company, Rayson International Corporation. In addition, System Concessions, controlled by Sistema, is actively working towards the implementation of public-private partnership projects: it enters into billions of concession agreements with regional governments, while officially working in the red.

Yevtushenkov “runs” to Kamchatka

AFK “Sistema” of billionaire Vladimir Yevtushenkov began the year with another acquisition, having bought out the Kamchatka company “Loyd Fish” through the “subsidiary” of the management company “Kamchatka project”, specializing in the extraction and processing of red fish. According to the Expert publication, Loyd-Fish’s assets include nine fishing sites, 16 vessels, and two processing plants with a capacity of 440 tons per day.

Now the company will become part of the Voskhod fishing holding controlled by Sistema, which already includes the previously acquired profile structures Crystal Fish, Khangar and Zarya, whose annual production and processing of Pacific salmon reaches 45 thousand tons.

AFK Sistema plans to continue investing in the development of the fishing holding Voskhod to create an industry leader with a presence in key segments of the extraction of marine biological resources, as well as its own infrastructure and processing, ”Interfax quotes a commentary.

Previously, Loyd-Fish was associated with the family of the former Kamchatka vice-governor Irshat Shaykhov. At the end of 2021, the company declared revenue in the amount of 1.7 billion rubles, a profit of 877.1 million and an asset value of 2.9 billion. It should be noted that Loyd-Fish also demonstrated more solid financial performance. For example, in 2018, its revenue amounted to 2.2 billion rubles, profit exceeded 1.2 billion.

Be that as it may, but the prospects are obvious, and in Sistema, evaluating the deal, they emphasize that it allowed Voskhod to “expand the catch area and increase the stability of the annual catch”, since “Loyd-fish’s fishing grounds” are located in adjacent to the current assets of the commercial subzone of the western coast of Kamchatka. But most importantly, Voskhod acquired the status of one of the largest Russian holdings in catching Pacific salmon.

The “system” is being “mastered” on Mount Moroznaya

The fishing industry project is far from the only one that Yevtushenkov’s corporation intends to develop in Kamchatka. As recently as last December, the regional government entered into an agreement with Cosmos Hotel Group, a member of Sistema, on the implementation of a number of investment projects. In particular, we are talking about the creation of the Moroznaya Mountain ski resort with a total funding of more than 3 billion rubles. In addition to modern lifts and several specialized tracks, it is planned to build two hotels, a restaurant and a cafe here.

It is worth emphasizing that Sistema will not start work from scratch. According to the Kam 24 online publication, a ski resort of the same name with several slopes and lifts (including the only chair lift in Kamchatka) is already operating on Moroznaya Mountain. The maintenance of the infrastructure, built, by the way, at the expense of the budget, is the responsibility of the children’s and youth sports school of the Olympic reserve Moroznaya, which uses tracks for training young athletes.

Officials from the team of Governor Vladimir Solodov assure that a separate clause in the investment agreement stipulates the preservation of the infrastructure of the sports school and priority training opportunities for its students. Moreover, during the implementation of the project, the sports and training facilities should be improved. That’s just the details of how the school and the commercial resort will coexist are not specified. Allegedly, they will be worked out and secured by separate agreements.

However, it is precisely this question that is of great interest to the residents of the region today, who are afraid that “another barrier” will soon appear on Moroznaya. In addition, it turns out that the “System” tritely comes “to the ready”, instead of developing a less developed territory. And even better – to implement the Kamchatka resort project from scratch. But in this case, we will talk about much larger amounts.

A debtor in the takeover market

Analysts have repeatedly drawn attention to the activation of Yevtushenkov in the mergers and acquisitions (M&A) market in various sectors of the economy. The Open Journal writes about six major investment deals concluded since February 2022 (that is, since the beginning of the economic crisis). In particular, Sistema bought for 15.8 billion rubles a 47.7% stake in Melon Fashion Group, one of the largest and fastest growing fashion retailers (Zarina, Befree, Love Republic, Sela stores), in addition to Russia, operating in Belarus, Kazakhstan and Armenia.

Among the corporation’s acquisitions are Arkhyz Original, a mineral water producer with a “subsidiary” trading house, Delta (transaction value is about 450 million rubles); increase to 48.8% of the share in the Etalon construction group for 4.8 billion, etc.

Sistema’s interest in the North Caucasian resort of Arkhyz, cosmetics manufacturer Natura Siberica, the Russian assets of the Czech bank Home Credit and the Finnish energy company Fortum were reported (Yevtushenkov had to abandon the last two purchases after the presidential decree banning transactions with the shares of these enterprises).

From the publication of the Open Journal, the conclusion follows: in 2023, the main drivers of Sistema’s growth will be dividend payments and M&A transactions, and the corporation can use the opportunity to buy out local assets at a reduced cost of foreign companies that did not have time to leave the Russian market in a timely manner.

Such a breadth of scope suggests the finances needed to expand Yevtushenkov’s business empire: it is precisely their availability that raises many questions. In particular, PJSC AFK Sistema can hardly boast of indicators: at the end of 2021, with a revenue of 24.3 billion rubles, its losses amounted to 82.6 billion. For comparison: a year earlier, revenue of 29.4 billion and profit of 140.8 billion rubles were declared. In addition, the Rusprofile portal points to the low efficiency of AFK, as well as the risks associated with its solvency and financial stability.

To complete the picture, we will cite the data of the FINAM portal, according to which, at the end of the same 2021, the consolidated debt of the investment company amounted to 871.9 billion rubles, of which 76% were long-term, 24% – short-term loans. Speaking about the profile structures, most of the debt fell on the mobile operator MTS – 481.1 billion rubles; liabilities directly to the corporate center amounted to 229.4 billion; the debts of the timber industry holding “Segezha Group” were estimated at 73.5 billion, the agricultural holding “Step” – at 34.3 billion rubles, etc.

“System concessions” enter the regions

But if “Sistema” continues to be active at the expense of loans and borrowings, then what happens to the corporation’s own funds? One can only make assumptions about this. It is known, for example, that until August 2021, the offshore company Rayson International Corporation, registered in the British Virgin Islands, was among the co-owners of AFK Sistema PJSC. Thus, it can be assumed that the AFK’s finances “settled” safely in foreign accounts.

To date, there is no information about its current founders in open sources. Perhaps the money still continues to be withdrawn abroad through other channels?

Meanwhile, Yevtushenkov’s plans are truly Napoleonic. In addition to the Kamchatka projects described above, Sistema structures are preparing to implement a number of others. For example, last November, System Concessions, a company controlled by the corporation, signed a concession agreement worth 3 billion rubles with the government of Bashkiria for the construction of the Shifa children’s health camp in Sibay. As part of the project implementation, the region will provide a capital grant in the amount of 756 million; in addition, engineering communications and roads leading to the facility will be paid from the republican budget.

By the way, System Concessions LLC clearly does not shine with financial indicators: in 2021, with a revenue of 2.9 million rubles, the company’s losses amounted to 40 million. Its beneficiaries plan to correct the situation by implementing turnkey public-private partnership projects. Last August, the company became a strategic partner of the government of the Tyumen region, where Governor Alexander Moor announced plans to build a “world-class” interuniversity campus in the regional center with a technopark, educational laboratories, a stage for cultural events, a football field, etc. It is significant that the local media immediately drew attention to the multimillion-dollar losses of the “strategic partner” of the regional leadership.

Shortly before that, in July, the investment project of the student campus called “Arctic Star” “System Concessions” was presented to the head of the Arkhangelsk region Alexander Tsybulsky. And in September, the Ministry of Education and Science of the Khabarovsk Territory signed a concession agreement for the construction of a children’s health camp with the Far Eastern Center for Children’s Recreation and Recreation affiliated with the company. The price of the issue is 4.45 billion rubles, of which 3.5 billion is the share of the state corporation VEB.

It turns out that in addition to loans for which new assets are acquired, Sistema may well rely on budgetary sources. And as we could already see, Yevtushenkov needs finances all the time.