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Sunday Telegraph: Russian aluminium giant speeds up float plans

EXTRACT: Britain is the single biggest investor in Russia, but UK companies such as Royal Dutch Shell and Peter Hambro Mining have hit trouble recently as the Russian government has sought to wrest back control over key energy resources. Shell and ExxonMobil have fallen foul of government attacks on their environmental record, which are seen as thinly veiled attempts to revoke lucrative joint venture licences for commercial reasons.

THE ARTICLE

By Helen Power, Sunday Telegraph
Last Updated: 12:25am GMT 03/12/2006

United company Rusal, the Russian-based aluminium giant, is thought to have brought forward plans for a £30bn London Stock Exchange listing to next summer because of concerns that the country’s political situation could deteriorate in the run-up to the 2008 presidential elections.

The company, which is in the final stages of a three-way merger with Sual, its smaller compatriot, and Glencore, the European miner, will audition investment banks for the float in January. Morgan Stanley and HSBC, its existing advisers, will go head to head with JPMorgan Cazenove, Sual’s bank, and other bidders for a massive IPO worth hundreds of millions of pounds in professional fees.

One adviser already involved in the merger said the float had been brought forward because of concerns that possible presidential successors would be less supportive of the company than Vladimir Putin, who backed the Rusal-Sual merger because he wants national champions in strategic sectors.

President Putin is constitutionally obliged to step down in 2008 and the uncertainties surrounding the handover of power have made companies with interests in Russia less attractive. Britain is the single biggest investor in Russia, but UK companies such as Royal Dutch Shell and Peter Hambro Mining have hit trouble recently as the Russian government has sought to wrest back control over key energy resources.

Rusal, Sual and Glencore are not expected to complete their merger until April but the IPO process will start in January with the complex main market listing expected to take around six months.

A spokesperson for Rusal said: “No final decisions have been taken, but the company is aiming to list within 18 months.” The group is estimated to be worth around £30bn, but the size of the float is still up in the air.

Between them, Rusal and Sual control almost all of Russia’s aluminium production and, although the merged company says it has ambitions to secure further mergers in the Americas and Asia, it is heavily exposed to political developments on its home turf.

Putin may remain a powerful influence over business affairs after he steps down. Some experts believe he may move across to the prime minister’s job after amending the constitution to transfer the real power to that office, while backing a supporter such as Viktor Khristenko, the energy minister, in the presidential elections.

Such a switch in the balance of power would make next year’s parliamentary elections much more important than usual.

Russia’s economic performance has been impressive, with growth of 6.9 per cent forecast for this year, but foreign investors have struggled with an increasingly uncertain political climate as Putin approaches the end of his term. He has moved to take back national assets put into private hands in the 1980s. Shell and ExxonMobil have fallen foul of government attacks on their environmental record, which are seen as thinly veiled attempts to revoke lucrative joint venture licences for commercial reasons.

Last week a government official said he was pressing for exploration licences owned by Peter Hambro Mining, the gold mining company, to be revoked on environmental grounds. This wiped almost 14 per cent off the company’s share price.
 
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/12/03/cnrusal03.xml

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