Billionaire Alexander Nesis reveals why Polymetal is listing in London
In his first on-the-record interview with the Western media, ICT president and billionaire Alexander Nesis reveals why he is listing in London.
As the founder, major shareholder and president of ICT, the Russian investment group whose diverse industrial assets are believed to be worth in excess of $8bn, Mr Nesis is a man with considerable financial clout. By James Quinn, Deputy Business Editor, Sunday Telegraph
Standing on the back porch of Browns Hotel on Dover Street in London, Alexander Nesis looks uneasy. Shifting from left foot to right, the billionaire Russian businessman doesn't want to be there.
"He doesn't want to be seen to be like Lebedev, or the others," his handler whispers, with a nod to the way some of Nesis's countrymen court the Western media.
He half-smiles for the photographer, and then swiftly lights up a cigarette, pleased his ordeal is over. "Have you ever been to Russia?" he asks somewhat awkwardly in broken English as he continues to draw on his cigarette.
To passers-by, he is just another man in another suit on another street. But with a fortune estimated to be in excess of £1.5bn, Nesis is not just another ordinary man.
As the founder, major shareholder and president of ICT, the Russian investment group whose diverse industrial assets are believed to be worth in excess of $8bn, he is a man with considerable financial clout.
But for all his trappings – not least his entourage of four advisers – he is not an oligarch. Rather, he is part of a new breed of Russian businessmen, self-made and in control of his own destiny.
One of the secrets to his success, it would appear, has been keeping a polite distance from the Russian state. Rather than courting favours and running in elections, Nesis prefers to focus on business.
"If you are an independent business and if you don't get involved with government, no problem. If you keep out of the state's way, no problem," he repeats, as if it's a mantra he has articulated many times.
One of ICT's investments is TVSZ, a manufacturer of freight containers for the rail industry. Established in 2001 in the remote monastery town of Tikhvin, some 125 miles east of St Petersburg, the company now makes 13,000 freight "buggies" a year.
Crucially, Nesis points out that one of the elements of TVSZ's success – somewhat counter-intuiitively – has been its lack of government work.
"I don't want to work with locomotives," he says, referring to passenger trains, "as I would end up selling to state-owned companies."
Instead ICT chose a foreign partner to work with, in the form of US-based Standard Car Truck Company. Between them, they created a buggy "to increase periods needed between maintenance" three times longer than currently.
With one million freight buggies on the rails in Russia – 70pc of which Nesis says are on their last legs – the market is clearly sizeable. TVSZ – where Nesis built a company town of 2,000 flats because the location was so remote – currently makes 13,000 buggies a year with a staff of 5,000.
"If this were a state company, it would be 20,000," he says, another criticism exemplifying what he appears to see as being wrong with modern Russia.
ICT bought Standard Car Truck's share of the project last year: "We bought out the Americans to keep the IP [intellectual property] rights," he said.
The factory, which he boasts is the "most modern in all Russia" is one or two years away from full capacity, by which point it will be producing 20,000 buggies a year.
Safely within the comfortable confines of the hotel in London, Nesis, now eating an omelette, gives his opinion on the problems of working in Moscow.
Having flown in the night before, and due to leave that evening, he is clearly in many ways, more at home in London than his home country.
"Moscow? It is only possible to work. It is difficult to live in my opinion," he admits, having earlier discussed the merits of London as a city in which to reside.
But it is not just the Russian state and its capital city on which Nesis holds perhaps opposite views to those of his fellow state-proud billionaires from the eastern edges of Europe.
When it comes to corporate governance, he is equally concerned about the different standards in different countries.
Although he says the recent ENRC boardroom spat – in which the company's Kazkh shareholders dismissed two independent directors in a display of where the power really lay in the mining company – was big news back home in Moscow, it was in the West where the issue of corporate governance was writ large.
"If the mission is to create independent business, it is logical to create assets and give them the opportunity to be run independently," he says. "It is definitely something of an issue."
By way of example, he points to Polymetal, the gold and silver mining giant ICT established in 1998 in the far east of Russia.
ICT sold the business in 2005 to fellow countryman Suleyman Kerimov, who floated it in Moscow with a secondary listing of global depositary receipts in London in 2007. A year later, a consortium led by ICT and including Alexander Mamut and Czech investor Petr Kellner's PPF Group, bought the 70pc Kerimov still held.
"For almost five years Polymetal has been on the [London] stock exchange, and we don't even get small questions about the independence of members of the board," he says.
That independence will come into focus in the coming months after The Sunday Telegraph revealed last weekend that Polymetal is now seeking a primary listing in London, and has begun speaking to investment banks to advise it on the potential move.
Is that why he is London? "Meetings, business meetings," he replies when asked, remaining tight-lipped about the purpose of his visit or the pending Polymetal float.
His relative reluctance to step forward or speak out – this is his first on-the-record interview with the Western media – is in part perhaps related to his relatively humble background.
Born in Leningrad in 1962 in Khrushchev's Soviet Union, he studied physical chemistry at the Leningrad Lensoviet Institute of Technology before taking a job at the Baltic shipyards in 1985.
Five years later, as perestroika gripped eastern Europe and national assets began to crumble, Nesis left his job and joined a group of five friends to work for themselves rather than the state.
The six men – he does not detail the others but they are understood to include Nikolay Dobrinov, thought to be his right-hand man – first focused on uranium deposits. "We started out in Uzbekistan, in the desert," he says.
The deposits were cheap and unloved, and also hundreds of miles from civilisation of any kind. Using geological surveys from the crumbling Soviet Union, they were able to extract rare minerals from the unwanted mines and profited quickly.
Within three years, the six had formed ICT, the investment conglomerate in which the bulk of Nesis's wealth is understood to be held.
"The mission of ICT is to find ideas. To fulfil the mission, and create a management company to develop these ideas," he says.
He talks about ICT fondly, almost as if he sees it as an incubator which will hold on to investments when they are at the design or technical research stage, only being separately spun out when they have reached a critical mass.
One of the first businesses to be established following the inception of ICT was Nomos, a private bank to manage the men's assets.
It managed to survive the Russian banking crisis of 1997-98: "We were a real winner," he smiles.
Nomos developed into an independent bank, and then ICT, as is its preferred style, brought in an outside partner in 2007 in the form of PPF, Kellner's investment vehicle. Following its float on the LSE in April, Nomos now has a market capitalisation of $3.1bn (£1.9bn), with Nesis himself owning 17.54pc, according to company records.
The float was the first involving Russian commercial bank, and the fact it did so in London, where new issues hailing from Eastern Europe have struggled of late, sent a strong signal.
For Nesis, though, it is all part of the investment cycle. "We have projects at all stages," Nesis says, not wanting to divulge too much information about ICT's pipeline.
But he does admit that the "next step is fertilisers", which seems sensible given ICT already owns the world's second- largest potash company. It is also looking at manufacturing spare parts for the rail industry which could then be linked to TVSZ.
The company has also sold out of a number of projects –including a chrome business which was merged into London-listed Oriel Resources, which has since been sold to the Russian steel maker Mechel – which Nesis argues is part of the cycle of investment he wants to continue.
"If you only have finished projects, you've reached the end of the line," he says.
CV: Alexander Nesis
Education: Leningrad Lensoviet Institute of Technology
First job: Baltic shipyards
Current job President, ICT
Family: Divorced, two children
Source: The Telegraph