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BASIC YUKOS ASSET VALUED MERELY AT $10.4 BILLION

MOSCOW, October 12 (RIA Novosti) - Yuganskneftegaz valued at $10.4 has been selected with the purpose of guaranteed repayment of YUKOS tax arrears to the budget.

Part of the YUKOS property, that is a Yugansneftegaz share package, is to be marketed through the Russian federal property management fund, reports Alexander Buxman, chief of the justice ministry's Moscow department.

Asked by RIA Novosti about reasons for selling YUKOS property, he cited YUKOS indisputable arrears at $3.73 billion, of which merely $10 million have been repaid since mid-September.

"Neither we nor the tax services are satisfied with the pace of debt repayment. With merely $10 million having been settled since last September, the redemption term has been unjustifiably protracted and so the justice ministry's Moscow department has taken a legal decision to market part of the debtor's assets through the Russian federal property management fund," said Buxman, adding that the justice ministry was acting on the basis of court rulings and law.

When questioned about the grounds underlying the choice of the target for sale, Buxman said: "The examination of executive papers has revealed that the debtor, despite the assurances of the transparency of the company, lacked projects with a market-oriented appraisal. We had therefore to hire a special appraiser-the widely-recognized and highly-reputed Dresdner Kleinwort Wasserstein having quite a long record of operation on the Russian market.

He cited the appraiser's figures which approximate Yuganskneftegaz value at $10.4 billion. The sale of the minority package does not meet the debt due to Yugsnskneftegas financial dependence on YUKOS. "The greater part of profits from Yugansneftegaz oil are developed in other divisions of the holding. For instance, Yugansneftegaz profitability had reached merely one percent by 2003. In other words, the buyer of even the largest minority package will not be able either to participate in the administration of the company nor to gain any dividends," said Buxman.

"All this considered, we have opted for the YUKOS assets represented by Yugansneftegaz shares and ensuring the settlement of the arrears," said Buxman. The appraiser has determined the discount at up to 60 percent due to high risks on part of a potential buyer.

Buxman has also noted that the Plaintiff service has already recovered from YUKOS and transferred to the budget 72 billion roubles ($1 equals 29.22 roubles).

Dresdner Kleinwort Wasserstein has already submitted at the justice ministry the Yugansneftegaz appraisal results for the company's further sale by agreement with the justice ministry.

Despite the already reported figures in the bracket of $15 to $17 billion, the YUKOS subsidiary's value, according to DKW, may amount to merely $10.4 billion.

The YUKOS shares have decreased in value by more than seven percent while the Surgutneftegaz shares have grown by over one percent after reports on the completed appraisal of Yuganskneftegaz.