Alert: Interros Secures over $2bn in Financing to Buy Out Norilsk Nickel from Rusal

Interros Holding Co., controlled by Russian businessman Vladimir Potanin, has reportedly secured the $2 billion-plus credit line from the Russian state banks, Sberbank and VTB, according to the source close to the banking community. The financing is likely to be used towards buying out Rusal's Norilsk Nickel stake. Rusal is owned by billionaire Oleg Deripaska.

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RUXX Report: Russian and Ukrainian Ammonia Prices Fluctuate Amid Demand Growth

New  York -- Russian and Ukrainian prices for ammonia can deviate from those in the US and Europe, making it difficult to establish long-term pricing structure for this fertilizer, according to the annual Ammonia Prices report published by RUXX, a Dow Jones-calculated index and a research group tracking Russian companies. Recent analysis of ammonia transactions in the Ukrainian port of Yuzhny, one of the largest ammonia exporters in the CIS countries, suggests the published market prices of this fertilizer are often inaccurate.

“Given the fluctuation in vessel sizes, port procedures, contracts and voyage destinations, Yuzhny’s ammonia freight price is extremely subjective and should be determined on a case by case basis,” said John Foley, research director for RUXX.

Because Nitrochem, Transammonia and Yara, Yuzhny’s top ammonia exporters, keep their long-term contracts with buyers confidential, the published numbers are unreliable, Foley said.  

Additional reasons Foley cited are Yuzhny’s high port expenses: the ammonia prices there are higher by about $3-5 per metric ton.

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Exclusive RUXX Report: Oleg Deripaska Fails To Win Support of the Kremlin in Norilsk Nickel Dispute

Russian and international investors follow the dispute of the two main stakeholders of the world’s largest nickel producer MMC Norilsk Nickel -- Rusal, controlled by Oleg Deripaska, and Interros, controlled by Vladimir Potanin, over the company’s new Board election.

Last week, after the Russian Miner Norilsk Nickel’s shareholders elected the new 13-member board, Oleg Deripaska, who controls 25 percent stake in the company and who was unhappy with the election outcome, surprised investors and media alike by erroneously claiming that the Russian government requested that the outgoing Norilsk Nickel’s Chairman Alexander Voloshin be reinstated as the head of the Board.

In a statement made today, Dmitry Peskov, the spokesperson for the Russian Prime Minister Vladimir Putin, said that “he is not aware of any such government request”. Furthermore, Mr. Voloshin, a powerful Kremlin power-broker and a former chief of staff for presidents Yeltsin and Putin, has been assigned to head the governmental think tank responsible for creating a global financial hub in Moscow, according to the official Kremlin website.

Michael Thompson, senior analyst for RUXX index, which tracks Russian companies traded on Western exchanges, says that Oleg Deripaska is trying to capitalize on his close ties with the Russian government to increase his presence in the Norilsk’s board, but the Kremlin is unlikely to interfere in the public company’s operations: “Stating that the government demands Alexander Voloshin to be reinstated as the Chairman of Norilsk Nickel is an understandable yet slightly desperate move to turn a corporate affair into political one - a move which might concern foreign investors. It’s highly unlikely that the Kremlin will choose to interfere with the dispute given that the incoming Chairman of the Board, Vasily Titov, also has strong government backing as the Vice Chairman of the state-controlled banking giant VTB,” says Thompson.

Oleg Deripaska stated that Rusal will attempt to reinstate Alexander Voloshin as the Chairman of the Board of Norilsk at the next shareholders meeting in July. Analysts polled by RUXX for this report said that they are following the situation and hope that it will be resolved soon, before the dispute affects the company’s day-to-day operations.

In a phone interview with RUXX, Interros representative called Oleg Deripaska’s statements about the government’s demands “an illusion”: “Rusal has to adjust its own interests to those of Norilsk Nickel. We think that Rusal’s actions damage Norilsk’s corporate reputation”. Interros, according to the spokesperson, will not support Rusal’s initiatives to elect the new Board of Directors, even if this subject comes up at the next shareholders’ meeting.

“Without Interros’s support, Rusal is unlikely to secure changes in the Board,” adds Michael Thompson.

RUXX Alert: Rusal Under Anti-Trust Body Review; Russian Aluminum Buyers Demand Price Decrease, Request Price-Fixing Investigation

New York - London -- Russia's big aluminum buyers filed a request for price-fixing investigation to the anti-monopoly service (FAS) against Rusal and other aluminum producers. 

Vikom, maker of wheels, that filed the request to FAS, said in a statement that they buy aluminum from Rusal, largest Russian producer controlled by Oleg Deripaska, at London Metals Exchange prices, which represents almost 30% mark-up from the production costs. Vikom states that domestic prices for aluminum should be lower because producers are not incurring transport costs (LME prices are usually FOB Rotterdam). 

"Rusal is the largest producer in the country", says Ivan Andrievsky, expert with K2 Capital. "Consumers don't have any bargaining power and have to pay whatever the producer decided to charge, even if the price is not fair and higher than it should be", adds Andrievsky. 

This is not the first clash of Rusal with the Russian anti-trust body. According to RBC, popular business newspaper, earlier this month, FAS opened an investigation of Rusal subsidiaries' possible manipulation of energy prices. THE Anti-monopoly service suspects Rusal in underpaying millions of rubles for energy by artificially lowering estimated demand for electricity and thus lowering its price. 

"Rusal's size and volume allow the company to demand best possible terms from suppliers," says Michael Thompson, analyst with RUXX Index, which tracks Russian public companies. "However, lately we can clearly see that the company loses the good will of the government, which demands Rusal to follow the rules. Should FAS, the influential government watchdog, succeed in its efforts against Rusal, the company's revenue might fall substantially. Also, a possible increase in energy costs for the company might lead to larger overhead and, consequently, might affect Rusal's performance on international markets," -- adds Thompson. 

Rusal's stock is down almost 20% off this year's high of $19.50

RUXX is an an index and research group tracking Russian companies and debt notes listed on US and UK exchanges. 

For more information on this alert, please contact the analyst, Michael Thompson, at michael.thompson@ruxxindex.com.

Russian Companies Prefer Ruble-based Stock Exchange

As the economic crisis softens in Russia, corporations increase their business activity and search for financing to expand operations. KAMAZ, one of the largest Russian automobile producers and part of Rostekhnologii, the State-owned meta-holding, has announced that it is moving its stock listing from RTS, the dollar-nominated stock exchange to the ruble-nominated MICEX. According to KAMAZ, the move is due to the increasing capitalization of MICEX and preferences of the financial community. The KAMAZ board has decided to de-list its shares from RTS and keep MICEX as the principle exchange platform.

Source: Kamaz