Investment thesis
Following protracted wrangling over the transfer of shareholdings in Bashkir enterprises to charitable trusts, controlling stakes in enterprises comprising Bashkir Fuel and Energy Complex (FEC) subsequently passed into state ownership. However, given that the legality of this move has been contested, there is every chance that this ruling will be overturned.
In our view, the fate of Bashkir FEC, which was previously controlled by the regional authorities and is today an extremely valuable asset worth around $10 bn, will ultimately be decided at the highest level.
Needless to say, such a prized asset is being eyed by state-run outfits Gazprom and Rosneft, and there can be little doubt, therefore, that it will be specifically the interests of these companies and their political allies that will determine the future course of events.
On March 11, the Court of Appeal upheld the ruling handed down by the Court of Arbitration regarding the transfer of equity positions in Bashkir FEC, the third of four charitable trusts, into state ownership.
The most likely development scenario will see the ruling on the transfer of the equity stakes in Bashkir enterprises and Bashkir FEC to the state upheld, followed at a later date by the sale of these assets at auctions. FEC refineries and Bashkirnefteprodukt could be bought by Rosneft, and Bashneft by Gazprom. An ownership shakeup could act as an upside driver for the shares of the enterprises forming Bashkir FEC. If so, the Bashkir companies should be evaluated not on the basis of their financials, but in terms of the value they hold for potential buyers such as Gazprom and Rosneft.

Contents
Bashkir Fuel and Energy Complex.......................................................................................3
Investment thesis......................................................................................................................3
What is Bashkir FEC?..................................................................................................................5
Bashkir FEC: one ownership shakeup after another................................................................................6
State ownership: a stopgap measure before Gazprom and Rosneft take over? .................................................7
How much could Rosneft and Gazprom shell out?..................................................................................8
Bashneft ..............................................................................................................................12
UFA Refinery .......................................................................................................................17
Ufaneftekhim ......................................................................................................................19
Novoufimsky refinery (Novoil).............................................................................................21
Ufaorgsintez ........................................................................................................................23
Bashkirnefteprodukt ..........................................................................................................26