Barsky Says Tycoons Good for Business

Maxim Barsky says having billionaires on the management team at TNK-BP may affect the value of the venture but getting rid of them would be a bad move.

The 35-year-old picked to run TNK-BP from 2011 has set his sights on overtaking privately owned peer LUKoil on key performance indicators but said new management could only achieve that with the billionaires’ lobbying power.

“They have colossal connections and it would be suicide for the company not to use them,” Barsky said. He also said BP and its billionaire partners would sacrifice dividends to find the cash needed to tap new deposits in the Arctic, a departure from previous strategy.

That shift signaled that hostilities between BP and the Russia-connected co-owners, which rocked investor confidence in Russia, have now been left behind, he said. “What I saw is that all shareholders are raising very ambitious goals. So the company grows, profit grows, dividends grow,” the former investment banker said.

“Today we are [Russian] industry leaders as we have a very high dividend yield. I think it will likely change, because the company has very ambitious projects ahead.”

Barsky has a three-year contract to serve as chief executive from 2011 when he will replace interim chief Mikhail Fridman, one of the four shareholders.

“Independent management is always a factor creating a premium to a company value. Direct participation of owners means a discount,” he said.

The last permanent head of the company, BP veteran Robert Dudley, left Russia with a number of other expatriate workers at the height of the shareholder conflict in summer 2008.

The billionaires said BP ignored their calls for expansion abroad and used too many BP secondees, thus damaging profit at TNK-BP which is responsible for a quarter of BP’s worldwide output and earns more than $5 billion a year.

BP said the oligarchs used state pressure to win the battle.

The dispute ended with BP ceding more operational control to the billionaires. Asked to comment on the widely held industry belief that executive director German Khan is the real power behind TNK-BP, Barsky said: “He is playing a significant role in the company.”

Barsky, chosen as an independent CEO, will tour BP’s offices to “better understand BP as a strategic investor.”

Proposed by the oligarchs then backed by BP, Barsky said he did not know any of the tycoons before April, when a headhunter contacted him a few months after he closed the merger of mid-sized oil firms Alliance Oil and West Siberian.

Barsky said he feels he can be a real leader and is rich enough to guarantee independence from both the oligarchs and BP. “I have, in principle, solved all personal financial issues in this life. I have a completely different motivation from other candidates,” Barsky said when asked whether he was a “Fridman man.” His motivation, he said, was to learn and realize potential.

BP and the oligarchs have received tens of billions of dollars by channeling almost all of the venture’s profit on dividends since TNK-BP was created in 2003.

While LUKoil has said it will cap growth to raise dividends, TNK-BP will likely go in the opposite direction to tap giant fields on the Yamal Peninsula and eastern Siberia.

“More and more will be invested in growth rather than in anything else,” said Barsky, adding that his long-term goal was to beat LUKoil on all enterprise value indicators.