ST. PETERSBURG - ICT, the St. Petersburg-based holding of Alexander Nesis, has sold control of the Baltic Plant, its principal maritime industry asset and St.Petersburg's leading civil shipbuilder, for less than $100 million. The move, which was not revealed during interviews last week with ICT spokesman, Anton Laptev, has been acknowledged by Igor Tsyplakov, one of Nesis's subordinates. The sale price that has been disclosed represents such a deep discount on Baltic's apparent financial condition, it suggests that Nesis was forced, in more ways than one, to leave his shipyard.

The buyer is Nesis's powerful St.Petersburg rival, Sergei Pugachyov, who owns Mezhprombank, and is a senator in the Federation Council. Over the past two years, Pugachyov out-manoeuvered Nesis in lobbying for Kremlin support of a single, consolidated shipyard in St. Petersburg, uniting Baltic and Northern Shipyard, which Pugachyov acquired from NPK, a company controlled by former Kremlin insider, Boris Kuzyk. Baltic specialize in civilian vessels; Northern in military ones. However, Northern's frigate and destroyer contracts with the Indian and Chinese navies, the biggest foreign shipbuilding orders in Russian history, depend on components built by Baltic.

The bitter and protracted conflict between the two shipyards appear to end in April, when the Kremlin announced a Solomonic decision by the Kremlin to allocate civilian shipbuilding to Baltic and military construction to Northern. Nesis, ICT's ocontrolling shareholder, reported that he had sold his 18-percent stake in Northern, ending the two-year bid to merge the two yards under his control. Without revealing the price received for that sale, Nesis's spokesman Anton Laptev claimed at the time that the two si des "have negotiated and reached agreement. The essential point is that the stage of war has changed to a stage of peace. Everybody is happy."

Two years before, Nesis announced his bid to acquire Northern from Kuzyk, saying "there are several players on the Russian market, who are not strong enough, and for whom it is difficult to compete with the main competitors - foreign companies. The weaker Russian producers should not compete against each other, but should concentrate their resources. This will help solve the problem of pre-financing in developing their products. We want to establish situation of an absolute technological advantage, when noone

else besides the holding will be able to fulfill the contract."

Nesis was able to master Kuzyk, and in order to stave off internal and external challenges, Kuzyk's group NPK Holding was forced into selling a controlling interest to Pugachyov and his Mezhprombank. Pugachyov appeared less hostile towards Nesis and the ICT group. This was not to last.

Tsyplakov told the Russian press on the weekend that the sale of Baltic " was completed last Thursday, and the money has been transferred to our accounts. We made the decision to sell [Baltiisky] because the price was attractive. We have always said that these two plants have to be in the hands of one company, but we never said whose hands." In fact, Nesis tried to take over Northern, and has been beaten by Pugachyov, who now becomes the owner of the two prime shipbuilding businesses in Russia.

Laptev told The Russia Journal that in 2004 Baltic's operations generated revenues of Rb 9,660 million ($345 million), and earned an after-tax prodit of Rb1,018.8 million ($36 million). Tsyplakov claims the sale price for the yard was "less than $100 million". The figure is surprisingly low, if Baltic's financial results are to be believed. Laptev told The Russia Journal last week that Baltic's order book to 2008 is $700 million, including $600 million for newbuilds and $100 million for components. It is unclear what will become of Baltic United Shipbuilding Corporation (BOSK), a holding Nesis announced two years ago to include, in addition to the Baltic Plant, Proletarsky Plant, which specializes in vessel equipment and engines; the special design bureau for boiler construction (SKBK); the icebreaker design bureau, Iceberg; and the Central Scientific and Research Institute for Shipbuilding Machinery Construction.