Updated June 18, 2008

   Ministry of Economic Development and Trade (Minekonomrazvitie) has supported Federal Property Management Agency (Rosimushchestvo) offer about transfer of the largest gas transporter SG-Trans to Russian Railways JSC (RZD). However, the ministry suggests obliging the state-owned monopoly to sell SG-Trans non-core business of gas realization.

RZD will not protest against the sale of SG-Trans non-core business, and it will be relatively easy to find a buyer, as experts consider.

   Minekonomrazvitie representative reported that the ministry had supported the decree project developed by Rosimushchestvo about 100% stocks transfer of the largest Russia's liquefied gas transporter SG-Trans JSC to RZD

JSC. Moreover, the ministry representative marked that the department suggested obliging RZD to sever SG-Trans non-core business for the state-owned monopoly after the company transfer.

These are SG-Trans branches engaged in realization of liquefied gas and oil products, as well as the network of gas-filling stations owned by the company.

In RZD confirmed that SG-Trans would be transferred to the company by means of additional emission of stocks, but in SG-Trans refused to comment the possible business split.

   SG-Trans runs around 17 000 specialized tanks to transport liquefied gas, owns capacities to store gas and the network of 50 gas-filling stations.

In 2007 the company transported more than 5 million tons of gas and sold 425 000 tons of gas.

SG-Trans profit by Russian Accounting Standards totaled RUR 5,383 billion, net income was RUR 329 million.

Within privatization preparation the company was estimated at RUR 14,81 billion.

   As it is said in the explanatory note to the annual 2007 report of SG-Trans posted at the official company website (the report is not ready yet), last year the sale business has brought the company almost half of its revenues – RUR 2,378 billion.

However, the non-core business falls behind the main one by profitability: the company gross revenue from realization is less than from transportation – RUR 36 million against RUR 548 million.

   Capital Investment Group analyst Vitaly Kryukov names the offer to allocate the company by business areas "very correct", as transport (tanks and service stations) and gas (filling station and storages) components in SG-Trans are not related with each other and can be easily allocated. An expert estimates the company non-core assets at $70 million. According to his opinion, one of Gazprom Group structures can become the assets buyer, for instance, Gazenergoset or Sibur Holding.

Prospect Investment Company analyst Alexander Kuznetsov considers th at SG-Trans gas assets can be of high interest at the market. "Either one large company or some smaller can purchase them, if gas filling-station and storages are sold separately", he marks. Mr. Kuznetsov estimates SG-Trans at $200-300 million, and the company network of gas-filling stations – at $25-30 million.