Andrey Melnichenko (industrialist)

Andrey Igorevich Melnichenko (Russian: Андрей Игоревич Мельниченко Belarusian: Андрэй Мельнічэнка; born 8 March 1972) is a Russian billionaire industrialist and philanthropist.[1]

For the Russian cross country skier, see Andrey Melnichenko (skier).

Andrey Melnichenko
Born
Andrey Melnichenko

(1972-03-08) 8 March 1972
Gomel, Belarus, USSR
NationalityRussian
Alma materPlekhanov Russian Economic University
Net worthUS$15.8 billion (June 2020)[1]
Spouse(s)Aleksandra Melnichenko
Children2

He is the main beneficiary of fertilizer producer EuroChem Group and coal energy company SUEK.[2] He is a member of the Board of Directors (non-executive director) in both companies. With an estimated personal wealth of $15.8 billion, as of June 2020, he ranked 89th in the Forbes world's billionaires list, and 9th in Russia.[1] According to Bloomberg, as of June 2020, Melnichenko's net worth is estimated at $15.4 billion (84th in the world, 8th in Russia).[3]

Too young to gain from the 1990s privatizations that made many oligarchs fortunes, he began trading currency with two friends while a physics student at Moscow State University, taking advantage of the opportunities that opened up in a newly capitalist Russia.[4][5] After the Soviet Union fell, the trio registered a bank, before Melnichenko began buying assets including in thermal coal and fertilizers. Branching out at the turn of the millennium, he took an interest in the commodities markets with the acquisition of plants and mines, many of which were distressed, transforming them into modern enterprises. He sold his banking interests in 2007, just before the global financial crisis, allowing him to focus on those industrial investments. As Bloomberg reports,[6] Melnichenko "consolidated fragmented assets in risky and then-derelict industries and created leading international blue chips in new areas" noting that "these industries were not considered to be ‘strategic’ for Russia and were not subject to the political influence that dominated other sectors, like oil and gas, diamond and gold mining." Melnichenko turned EuroChem into Russia's largest manufacturer of nitrogen and phosphate fertilizers and one of largest fertilizers exporters globally, and SUEK into one of the world's largest coal energy companies that produces higher-quality thermal coal.[4][7][8] In the last 15 years, Melnichenko's companies reportedly invested more than $21 billion in the industrial sector.[9]

Melnichenko is one of the main social investors and philanthropists in Russia.[10] Apart from his companies' own charitable and social investment programs, the Andrey Melnichenko Foundation runs projects in science and education, supporting gifted children from the regions where his companies operate aiming to create social mobility in Russia.[2] Melnichenko's companies reportedly spent over $500 million on social and charitable projects in Russia.[9][10][11][12][13]

Early life and education

Melnichenko was born on 8 March 1972 in Gomel, Byelorussian SSR. His parents were teachers. As a gifted student, he attended the Advanced Education and Science Centre of the Lomonosov Moscow State University, and in 1989, became a student of the Faculty of Physics at Moscow State University. He then transferred to the Plekhanov Russian University of Economics, from which he graduated in finance.[5]

Career history

Banking and investments

While at university, Melnichenko began his entrepreneurial ventures opening a currency exchange booth on the campus.[1] Having made their first US$50,000 through a chain of the currency exchange booths, Melnichenko and his partners, two like-minded fellow students, received a banking licence from the Bank of Russia. In 1993, at the age of 21, Melnichenko co-founded the MDM Bank which grew to become one of Russia's largest private banks within ten years. The bank moved onto buying currency at the interbank foreign exchange, developing a derivatives market and debt instruments.[5] From 1993 to 1997, Melnichenko chaired the Board of Directors of MDM Bank.[14] From the late 1990s to the early 2000s, MDM Bank expanded through acquisition, integrating seven regional banks. MDM Bank did not participate in any post-Soviet privatization programs or the loans-for-shares auctions of the 1990s.[2][4][15] In 1997, Melnichenko bought out MDM Bank shares from his partners and became the sole shareholder of the Bank and the Chairman of the Management Board. It gradually became one of Russia's largest private banks, based on total assets, and the first in book running of Russian corporate Eurobonds.[15] Bloomberg reported that "unlike many bigger rivals, MDM came through the 1998 crisis nearly unscathed, thanks to a conservative credit policy, the lack of illiquid assets and no exposure to government bonds. As competitors went under, the lender snagged some of the biggest Russian companies as clients."[6] From 2001 to 2005, he chaired MDM Bank's Board of Directors.[14] MDM Bank was named the "Bank of the Year" by The Banker in 2002 and 2003. In 2003, Euromoney and, in 2004, Global Finance, named it the "Best Russian Bank".[15]

In 2000, Melnichenko, together with Sergei Popov, a former metals trader from Ural, co-founded the MDM Group for industrial investments into three areas: pipeline manufacturing, coal production and processing, production and processing of fertilizers.[1] It was done through the acquisition of more than 50 independently run and owned businesses: joint-stock companies, plants and mines, which enabled to form three separate companies: SUEK, EuroChem and TMK (which he exited in 2006 through an IPO at the London Stock Exchange).[16] These industries were derelict and risky and not subject to the political influence that dominated other sectors.[6][15] With the process of post-Soviet era privatizations having finished five years earlier, no more than 5% of the assets purchased were acquired from the state.[4][2] From 2001 to 2004, Melnichenko was the President of the MDM Group.[14]

From 2004 to 2007, Melnichenko sold shares of MDM Bank to his MDM Group partner Sergei Popov, and focused on the development of the industrial assets in fertilizers and coal.[1][17] In 2006, Global Finance named it the "Best Russian Bank" in four categories: corporate management, FOREX, the best organizer of Eurobond loans in the Russian market, and the best consultant in the Russian M&A market. Following Melnichenko's decision to step down from MDM Bank in 2007, the International Financial Corporation (IFC) purchased 5% of MDM Bank shares for US$185 million, valuing the bank at US$3.7 billion.[15] Having served its consolidating purpose, MDM Group ceased to exist.

EuroChem

Melnichenko became the chairman of the mineral and chemical company OJSC EuroChem in April 2004.[14] In 2007, he became EuroChem's majority shareholder.[3]

When EuroChem was founded, the purchased assets included several nitrogen plants and a phosphate mine with Soviet-era equipment. Melnichenko built EuroChem to become one of the world's largest high-tech fertilizer manufacturers.[18]

One of EuroChem's key enterprises, Novomoskovsky Azot, became the largest urea plant in Europe, where production of granulated urea began for the first time in Russia. New modern manufacturing facilities were built in Nevinnomyssk (including the first melamine production plant in Russia) and Kovdor (including an apatite and shtaffelite ores processing complex). Modern terminal was launched in Sillamae (Estonia), and Murmansk port was rebuilt. It acquired laboratories in Germany in 2011, which led to creation of similar facilities in Russia and other countries, which are working on the development of second-generation fertilizers, including advanced slow-release products that help reduce the environmental footprint of the agricultural sector.[19]

EuroChem bought licenses for potash deposits in Volgograd (2005) and Perm (2008), launching plans to develop two large potash industrial plants.[4]

In 2015, EuroChem moved its headquarters to Switzerland for access to the capital markets and international operations. It has manufacturing, logistic and distributing facilities in Russia, Belgium, Lithuania, Estonia, China, Germany, Kazakhstan, and the USA.[4] EuroChem products are sold in more than 100 countries. EuroChem Group has raised funds on the international capital markets. In 2016, EuroChem invested in biological crop nutrition company Agrinos to invest in research and development for a new generation of products. Elsewhere, EuroChem expanded its distribution network, buying operations in the US, Argentina, Brazil and Hungary. It is developing second-generation fertilizers, including advanced slow-release products that help reduce the environmental footprint of the agricultural sector. One EuroChem fertilizer, Entec 26, became the only such product to be recognized by a carbon exchange foundation in Switzerland, marking the first time that the contribution of advanced fertilizers to reducing agricultural emissions was acknowledged.[19][20][21]

EuroChem is Russia's largest manufacturer of nitrogen and phosphate fertilizers and one of largest fertilizers exporters globally.[4] It produces higher-value specialty fertilizers including inhibitor products that allow slow release of nutrients into crops, and is launching two Russian potash mines planning to produce 8 million metric tons of the fertilizer a year, a 10th of current world output, as well as eyeing an ammonia and urea plant in Louisiana. According to Melnichenko, EuroChem aims to transform itself "into a company that creates and promotes high-tech products".[4][19][22][23]

Melnichenko is the Chairman of the Nomination and Remuneration Committee, Member of the Strategy Committee, and Non-Executive Director of EuroChem Group AG.[24] As of 2020, Melnichenko is the beneficiary of 100 percent of EuroChem.[3]

In May 2018, EuroChem sold the Ukrainian subsidiary EuroChem-Ukraine after an embargo imposed by Ukraine on the import of Russian fertilizers. The EuroChem website noted that the sale was made to a company that was closely connected to the former management team.[25]

SUEK

Melnichenko became a director of SUEK JSC (Siberian Coal Energy Company) in February 2005, and the chairman in June 2011.[14] The same year, he created the Siberian Generating Company (SGC) on the basis of electricity assets of SUEK and became the chairman. In 2013, he became the primary shareholder of SUEK and SGC after he has bought his ex-partner's shares.[3]

The assets that formed SUEK were distressed – production capacity was less than 30 million tons per year, the enterprises employed 70,000 miners yet productivity was low, and virtually none of its output was exported. The average equipment depreciation was 90%. During the early years of the business, SUEK's assets were modernized, debts were repaid, wages and taxes were paid, and a modernization program was launched with new machinery. The old mines and worn-out equipment were transformed into modern enterprises. Several enrichment factories and modules were put into operation with the latest processing technologies that allowed SUEK to produce highly enriched coal with low impurity levels. SUEK built modern coal bulk terminals and upgraded seaports, and built Russia's first coal mine methane processing station to generate power within the framework of the Kyoto Protocol. Russia's first smart mining management control center was built to run all SUEK's operations, monitoring the location and well-being of miners working underground.[26][2]

After the consolidation of electric power assets, Melnichenko created the Siberian Generating Company (SGC) as a part of SUEK, and then spun it out as a separate company. SGC provides between 35% and 78% of electrical power in the Russian regions of its operation. It is the fourth largest heat producer in the world.[26][3] In 2018, SUEK took over SGC strengthening SUEK as one of the world's largest coal energy companies.[8]

Melnichenko led SUEK to become Russia's largest coal producer with operations in seven Russian regions, as well as the world's third largest coal exporter by reserves and sales with distribution in 38 countries worldwide, including the Asia Pacific where coal plays a key role in energy access. SUEK assets produce more than 100 million tons of coal annually, with assured coal reserves of 5.4 billion tons. SUEK is Russia's largest coal producer and a global leader in exporting higher-quality thermal coal. As reported in Financial Times in 2017, according to the International Energy Agency's Clean Coal Centre, "SUEK, Russia's main exporter of higher-quality thermal coal, has invested in modern high-capacity washing plants and has ash control technologies at all its coal ports".[7] According to Bloomberg, SUEK is Russia's largest producer of higher quality thermal coal which, according to Melnichenko, focusses on "high-quality and less-emitting coal".[4][27]

Melnichenko is the main beneficiary of SUEK (which now directly owns SGC). As of 2019, he owns 92.2 percent stake in SUEK.[3][28]

He is the Chairman of the Strategy Committee (Non-Executive Director) in SUEK OJSC since April 2015.[14]

Companies and boards

In 2020, he ranked 95th in the Forbes World's Billionaires list (#9 in Russia).[1]

Melnichenko's assets include:

  • EuroChem Group AG: one of the top world producers of mineral fertilizers and Russia's largest fertilizer producer. Melnichenko is the beneficiary of 100% of the company's shares.[29]
  • SUEK (Siberian Coal Energy Company) JSC: one of the largest coal energy companies in the world and the leading coal, heat and electricity producer in Russia. Andrey Melnichenko is the beneficiary of 92.2% of the company's shares.[30] (Siberian Generating Company LLC (SGC) is directly owned by SUEK).

Melnichenko is a Member of the Board of Directors (Non-executive Director) at both EuroChem Group AG and SUEK JSC.[24][28]

According to media reports, in the last fifteen years, Melnichenko's companies invested more than $21 billion in Russia's new economy and industrial sector. His companies reportedly employ over 100,000 people.[9][31][32] In 2018, Andrey Melnichenko was recognized as the largest non-oil and gas private investor in Russia, according to the investment ranking of Expert magazine in 2018 (amounting to 20% of all investment by non-oil and gas companies made in Russia in 2012–2017).[33][34]

Melnichenko's companies reportedly spent over $500 million on social and charitable projects in Russia.[9][11][12][13][10]

Since 2007, Melnichenko has been Member of the Bureau of the Board of Directors of the Russian Union of Industrialists and Entrepreneurs (RSPP), where he is Chairman of the Mining Commission.[35][36]

Though Melnichenko was mentioned on the list of "Russian oligarchs" named in the CAATSA unclassified report to the U.S. Congress,[37] the report simply listed all businessmen with an estimated net worth over $1 billion, according to the Forbes list 2017.[38] The report states that inclusion on the list "does not constitute the determination by any agency that any of those individuals or entities meet the criteria for designation under any sanctions program" and "does not, in and of itself, imply, give rise to, or create any other restrictions, prohibitions, or limitations on dealings with such persons by either U.S. or foreign persons."[37][39] Melnichenko noted that he had seen no issues with banks and compliance, but that the situation was impossible to predict going forward.[40]

In 2019, Andrey Melnichenko was awarded with the honour of Commendatore of the Order of the Star of Italy "for encouraging dialogue and economic cooperation between Italy and Russia".[41][42]

Philanthropy

The Andrey Melnichenko Foundation supports talented children in science and education aiming at creating social mobility in Russia.[43] According to the Foundation, "in this way, Mr Melnichenko is "giving back" to the country that he believes made him who he is today".[2]

The Andrey Melnichenko Foundation launched a network of educational and scientific centres for gifted children across Russia and is to award scholarships for studying in higher education institutions to select students.[44] In February 2018, the Foundation organized the "Internet Olympiad in Physics and Mathematics" for high school students in Russia. The winners were given the opportunity to study at the Sirius Centre for Gifted Education.[45]

His companies have spent over $500 million on social and charitable programs, which have been recognized as leaders in Russia's annual "Leaders in Corporate Philanthropy" survey.[9][10]

According to media reports, he is one of the main social investors and philanthropists of Russia. In 2016, Melnichenko was given a special award for "good deeds" and charity works.[46]

JSC SUEK received the Grand Prix for "Contribution to the Social Development of Territories" at the 2018 "Leaders of Russian Business" awards, for annually carrying out approximately 150 social and charitable projects in its regions of operation.[47]

Personal life
M/Y A (2008)
S/Y A (2017)

In 2005, Melnichenko married former pop singer and model Aleksandra Melnichenko in the South of France.[48] They have two children.[1][3]

Melnichenko owns two high-tech yachts: Sailing Yacht A (2017)[49][50][51] and Motor Yacht A (2008).[49][52][53][54] Both were designed by Philippe Starck.

S/Y A was handed over to him in May 2017 in Monaco. Boat International called it "the boundary pushing superyacht"[50] and "a monument to invention".[55] In 2016, Bloomberg reported that "the swanky boat reflects the same eye for innovation and high-tech detail that Melnichenko, 44, is now focusing on the fertilizer business that’s helped make him one of Russia’s youngest billionaires."[4]

See also

References
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  2. "About the Foundation: Andrey Melnichenko". aimfoundation.info. Archived from the original on 26 February 2018. Retrieved 25 February 2018.
  3. "Andrey Melnichenko". Bloomberg. Retrieved 6 June 2020.
  4. "A Young Russian Billionaire Plants the Seeds of Future Success". Bloomberg.com. 29 September 2016. Retrieved 26 February 2018.
  5. "Andrey Melnichenko Didn't Miss His Once-in-a-Lifetime Opportunity". The Motley Fool. Retrieved 3 December 2015.
  6. "The Rise of the East European Billionaires". Bloomberg. 21 December 2019. Retrieved 28 December 2019.
  7. "Clean coal is part of the answer to the Paris Agreement". Financial Times. Retrieved 26 February 2018.
  8. "Russian coal producer SUEK to take over Siberian Generating Company". Reuters. 31 August 2018. Retrieved 21 February 2019.
  9. "Andrey Melnichenko". aimfoundation.info. Retrieved 6 April 2019.
  10. "Winners 2016 / Leaders of Corporate Philanthropy".
  11. "Reports & results – EuroChem". www.eurochemgroup.com. Retrieved 3 November 2017.
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  13. "Социальная ответственность". sibgenco.ru. Retrieved 3 November 2017.
  14. "Andrey Igorevich Melnichenko: Executive Profile & Biography - Bloomberg". www.bloomberg.com. Retrieved 25 February 2018.
  15. Euro am Sonntag, 26 April 2008
  16. TMK-Group "Archived copy". Archived from the original on 24 February 2009. Retrieved 2009-03-26.CS1 maint: archived copy as title (link)
  17. "Russia: Interview with SUEK owner, Mr. Andrey Melnichenko". IEA News Centre. Archived from the original on 12 May 2016. Retrieved 6 May 2016.
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  21. "Global Fertilizer Day – EuroChem". www.eurochemgroup.com. Retrieved 11 March 2018.
  22. "At a glance – EuroChem". www.eurochemgroup.com. Retrieved 11 March 2018.
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  29. "Russians in the Forbes list". RBC (in Russian). 7 April 2020. Retrieved 18 April 2020.
  30. "Consolidated statement of comprehensive income". SUEK. p. 48.
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  32. "Melnichenko's companies invested 16 billion in the industrial sector". Currently News. Retrieved 23 June 2017.
  33. "Beyond Oil and Gas Horizon". expert.ru. Retrieved 14 June 2019.
  34. "Investment ranking: Russia's top-10 non-oil and gas private investors". expert.ru. Retrieved 14 June 2019.
  35. "Russian Union of Industrialists and Entrepreneurs". Russian Union of Industrialists and Entrepreneurs. Archived from the original on 5 December 2016. Retrieved 7 May 2016.
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  37. "Report to Congress Pursuant to Section 241 of the Countering America's Adversaries Through Sanctions Act of 2017 Regarding Senior Foreign Political Figures and Oligarchs in the Russian Federation and Russian Parastatal Entities" (PDF). 29 January 2018.
  38. Bosilkovski, Igor. "Treasury Department's Russia Oligarchs List Is Copied From Forbes". Forbes. Retrieved 20 July 2019.
  39. "OFAC FAQs: Other Sanctions Programs". www.treasury.gov. Retrieved 20 July 2019.
  40. "Russia's Melnichenko: issues with banks possible due to U.S..." Reuters. 9 February 2018. Retrieved 21 April 2019.
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  42. "Neo commendatore (e magnate) Melnichenko punta su Made with Italy". Il Sole 24 ORE (in Italian). Retrieved 14 June 2019.
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  44. "Media about us". aimfoundation.info. Archived from the original on 10 March 2018. Retrieved 10 March 2018.
  45. "СУЭК Андрея Мельниченко организовала Интернет-Олимпиаду для школьников 8-11 классов". Novostiplaneti. Retrieved 20 February 2018.
  46. "SUEK Chairman awarded for "good deeds"". RIA Novosti. Retrieved 30 June 2016.
  47. "SUEK Andrei Melnichenko's grand prix at the Leaders of Russian Business competition". Imenno. Retrieved 5 July 2019.
  48. Derek Blasberg, Smooth sailing: Aleksandra Melnichenko, Harper's Bazaar, 16 November 2011
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  50. Amanda McCracken. "Nobiskrug shipyard visit report". Boat International. No. November 2015 issue. pp. 128–138.
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  52. Robert Franck, Baccarat Meets Bomb-Proof Glass on the High Seas, The Wall Street Journal, 28 July 2009
  53. $300 million yacht sails Hawaiian Islands, Hawaii News Now, 28 July 2014
  54. "The full story of the A fleet". Yacht Harbour magazine. Retrieved 26 February 2018.
  55. Low, Valentine (27 August 2015). "Russian billionaire builds world's largest sailing yacht". The Times. ISSN 0140-0460. Retrieved 26 February 2018.
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