Russian firm proposes $1.2 bln aluminium smelter

MOSCOW, May 29 - Baltic Aluminium, a hitherto little-known Russian company, is planning a $1.2 billion smelter near St Petersburg to break United Company RUSAL's monopoly on output of the metal in Russia, a local government official said on Tuesday.

The smelter would have capacity to produce 360,000 tonnes a year of aluminium, said Alexander Butenin, press secretary for the Leningrad region's committee for economic development.

A first stage of 180,000 tonnes would go into production by September 2010 and capacity could be doubled by September 2013, he said, citing data from a proposal received by the committee in mid-May.

"In principle, the capacity of this enterprise could be increased to 540,000 tonnes after 2013," Butenin said.

Russian newspaper Vedomosti, citing another local government official, said Baltic Aluminium was connected with billionaire investor Mikhail Fridman's Alfa Group. Local newspaper Delovoi Peterburg said it was controlled by A1, the investment division of Alfa Group.

A1 officials declined to comment and the project was not listed on the company's Web site, www.a-1.com. Butenin did not confirm the ownership of Baltic Aluminium.      

He said a decision on whether to build the smelter in the Kingisepp locality within Leningrad region, near Russia's border with Estonia, would probably be taken by July.

Delovoi Peterburg quoted Baltic Aluminium CEO Ravil Musin as saying the smelter would use imported raw materials.

ALFA INTEREST?

Mikhail Fridman was ranked Russia's sixth-richest man in the May edition of Forbes magazine. He was one of only two men in the Forbes top 10 with no direct known investment in metals.

Alfa Group, Fridman's private equity vehicle, is better known for its interests in retail, telecomms, banking and oil.

The group controls Alfa Bank and X5 , Russia's largest food retailer, and holds stakes in mobile phone companies Vimpelcom and MegaFon as well as a minority stake in Anglo-Russian oil venture TNK-BP .

United Company RUSAL, formed this year by a merger of RUSAL, SUAL and assets of commodities trader Glencore, is Russia's only producer of aluminium and accounts for an eighth of world supply of the metal used in cars, construction and packaging.

Alcoa Inc. , which operates two aluminium fabricating plants in Russia, has expressed interest in building a smelter in the country's far east.

Hydro Aluminium, a unit of Norwegian energy and metals group Norsk Hydro , has also held discussions about building a smelter in Russia.