Original of this material appeared on FT.com website.
By Courtney Weaver and Charles Clover in Moscow
After years of vicious shareholder infighting, lawsuits and mudslinging, Norilsk Nickel’s oligarch shareholders are scrambling to overhaul its investment strategy and management structure following the steep fall in metals prices.
In an interview, Vladimir Potanin, Norilsk Nickel’s single biggest shareholder with 30 per cent and chief executive, said the company had hired western consultants including McKinsey and BCG to advise the nickel, platinum and palladium producer, which has a market capitalisation of $20.6bn.
The company will cut 300,000 tons of capacity at inefficient facilities in European Russia
For the first time since 2008, Rusal reported an annual loss (US$55 million, compared to US$5.98 billion in 2008). In an attempt to increase prices and reduce the supply of aluminum, Rusal cut production by 300,000 tons (from largely inefficient facilities).
UC Rusal plans to direct dividends from its 25% stake in MMC Norilsk Nickel to pay off company’s debt, said CEO of the aluminum company Oleg Deripaska, in an interviewto Russian TV channel.
"We are one of the shareholders of Norilsk Nickel, and we do have obligations to the banks. Virtually all funds will go to pay off our old bank loans", said Deripaska. According to 9m2012 IFRS report, net debt of Rusal decreased by 3.1% to $10.710 billion from $11.049 billion at the end of 2011.
Russian billionaire Roman Abramovich agreed to buy 7.3 % stake in Norilsk Nickel as the two biggest owners of the world’s top supplier of the metal seek to end a four-year feud over control of the company. Abramovich’s Millhouse LLC investment company will acquire the stake in Moscow-based Norilsk as part of a settlement between shareholders United Co. Rusal and billionaire Vladimir Potanin, Hong Kong-listed Rusal said today in a statement. The purchase price wasn’t disclosed.
Bloomberg reports, that Vladimir Potanin, whose Interros Holding Co. owns 28 percent of Norilsk Nickel, will take over as chief executive officer, Rusal said. Rusal, controlled by billionaire Oleg Deripaska, owns 25.1 percent of Norilsk. Potanin and Deripaska have battled publicly and in the courts for control of Norilsk since May 2008.
Investment bankers, financial community and FT analysts all became very nervous after aluminium giant UC Rusal announced its 3Q2012 financial data. Rusal’s earnings before interest, tax, depreciation and amortisation fell four-fifths to $130m in the third quarter from a year ago, their lowest since its 2010 listing — discloses Financial Times analysis.
Reasons for concern are mainly connected with LME price for aluminium which slumped to the lowest ever minimum of $1,918. In such conditions cost control is critical for Rusal, same as the ability to trade at higher-than-LME prices. Rusal has done its best to beat itself a premium to LME of $226 per tone, what partly absorbed the losses.
Russian President Vladimir Putin said he hoped a long-running shareholder conflict at Norilsk Nickel, the world's largest nickel and palladium miner, would soon be resolved, signaling a possible new round of talks between its owners.
Putin gave no indication on Monday, however, of how billionaire shareholders Vladimir Potanin and Oleg Deripaska might end a battle for control of Norilsk, which has drained cash out of the business and sapped long-term investment.
Oleg Deripaska Fights Back Michael Cherney in London Court With Massive “Krysha” From “Russia” Defense
London courts know everything about how it was in Russia in the 1990‘s, and those in the world with an appetite for intricate court cases have already enjoyed a vintage year, with the lawsuit brought by the exiled Russian oligarch, Boris Berezovsky, against Roman Abramovich, owner of Chelsea Football Club. Even as the judgment in that case is awaited, though, we now have the metals billionaire, Michael Cherney, suing the aluminium magnate, Oleg Deripaska, in London's same brand-new commercial court.
Thanks to the British newspapers and international news agencies, not only the court becomes familiar with peculiarities of the Russian business after the collapse of the Soviet Union. Reuters reporting, that Oleg Deripaska is fighting a claim from Michael Cherney, an Israeli-based billionaire who says the two were partners and alleges he is owed a 13.2 percent stake in the now-listed UC Rusal, the world's largest aluminium producer, of which Deripaska controls the largest stake.
Tolling operations which were tremendously popular in Russia in the beginning of 1990’s still actively practiced by some of the Russian companies. For those, not familiar with the issue, tolling which is officially called as the procedure of processing of the foreign raw-materials on the territory of the country with its subsequent export to the country of its origin. Properly formalized tolling procedure allows the company to import raw-materials and export finished production without paying custom duties and taxes.
In Russia tolling operations are most actively used by aluminium and light industry companies, and all others whose business were tightly connected to rework of raw-materials with the purpose to release some type of final products. The tolling scheme purported that foreign agents, which were often affiliated with the owners of Russian plants, supply raw-materials and export finished production, while local plants formally do only processing works for the fixed income, which is the only thing taxable in Russia. Hereby, the following scheme allows to avoid application of any custom-duties and VAT on the imported raw-materials and products of its processing.
Russian Duma Is In Talks About Nationalization Of Megafactories Owned By ‘Oligarchs’ Aiming To Boost New Administration Budget
As the European crisis intensifies, troublesome economical and political situation spreads on other countries. Euro crisis moves toward a decisive moment, the European Central Bank is under renewed pressure to stabilize the troubled currency union. While Russian economy, perceived to be defended by a governmental economical regulations and stately owned corporations, is doing better on the international arena than some of the European countries, some signs of disturbance had already started to appear within the government and especially in the media.
The anxiety is explainable: Russian domestic currency "rouble" had significantly weakened, prices tends to go up and political situation in the country is highly unstable as opposition still very active on protest movements demanding to abolish results of the Duma and Presidential elections. These turbulent time became the fertile soil for radical political proposals, some of which had been already launched to the state Duma.
A publication by The Telegraph reporter Kamal Ahmed, named “Oleg Deripaska: Why I paid crime gangs for protection” has made the big buzz among international financial circles. Not that nobody knew, that Russian economy in the 1990’s was heavily criminalized and in order to survive those, who were attempting to build empires these days had to involve themselves into shady arrangements.
Oleg Deripaska, the billionaire and chief executive of aluminium producer UC Rusal, reveals why he was forced to pay crime gangs for protection, talks of threats to his life and explains why Russia is now a far cleaner economy . In his first in-depth interview Mr. Deripaska has disclosed for the first time his role in the infamous “aluminium wars” of the 90’s, when the Russian privatisation of state commodity assets led to a battle for control over plants and production worth billions of pounds of profit to those who succeeded.
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