Russian Metals Giant Faces Heat In Nigeria

MOSCOW (Business Day) -- A costly electricity failure at the Aluminium Smelter Company of Nigeria (Alscon) has paralysed operations there for several weeks, while a Nigerian Supreme Court challenge to the four-year-old Russian takeover of the plant is expected to be adjudicated before the end of next month. A Nigerian National Assembly report recommended recently that the privatisation agreement for Alscon be revoked for failure on the part of Deripaska’s company to meet investment spending conditions. In Guinea, a government move is under way to review the privatisation terms, according to which United Company Rusal, which is registered in Jersey and controlled from Moscow by Deripaska, took control over the Friguia alumina refinery, the Kindia bauxite mine, and other licences. Again, alleged failure to make good on capital spending and investment obligations is at issue. Responding to local protests, the Guinean government is also seeking higher wage, social welfare and infrastructure payments from Rusal. Deripaska — until recently reported to be Russia’s richest man — controls a 57% stake of Rusal, along with Basic Element, his wholly owned holding company, which controls both aluminium and other assets. But Rusal remains unlisted, and issues no financial reports. Over the past year, Rusal has twice proved unable to sell publicly listed shares on the London and Hong Kong Stock Exchanges. An attempt to attract private Chinese investors also failed just over a month ago. The Russian government has now dispatched auditors to check Rusal’s financial management. This follows a decision by the state development bank, Vnesheconombank, to issue a $4.5 billion loan to prevent the forfeit of a 25% shareholding stake in mining company Norilsk Nickel, which Rusal acquired in April. In Nigeria, the arrival in April 2007 of the new presidential administration of Umuru Musa Yar’Adua led to reviews of details of privatisation agreements signed by the former government. The U.S. embassy in Nigeria has told the Yar’Adua government that it was backing Reuben Jaja and his Los Angeles-based Bancorp Financial Investment Group (BFIG) in litigation to overturn Rusal’s takeover, on the grounds that BFIG had been the highest bidder, and that the award to Rusal was unlawful. The core of BFIG’s case, Jaja has told Business Day, is that Rusal conditioned its takeover bid with a series of demands that were illegal under Nigeria’s privatisation law, but were granted to enable Rusal to take over the plant without making the required payments to the government; relieved the Rusal of the obligation to pay Alscon’s debts, mostly for power; required the government to pay for dredging the river used to ship raw materials and products in and out of the plant; fixed the supply of gas to the plant at a concessional price; and allowed Rusal to export the metal free of tariffs. Rusal disputes BFIG’s claims. Two accidents have also caused environmental damage. Responding to the political challenge in Guinea, Rusal spokesman Vera Kurochkina said her company operated in “full conformity with the conditions of the agreement, with the legal co-ordination which has passed all stages with the government of Guinea, and in full conformity with the procedures in this country”