UC RUSAL's statement in relation to the Bogoslovsk CHPP transaction

 

 

On 8 December 2011, the Governmental Commission chaired by Prime-minister Vladimir Putin approved a number of measures to be undertaken in order to ensure the stable operation of the Ural aluminium complex, which includes in particular, the Bogoslovsk aluminium smelter (BAS).

 

 

It was noted that the key prerequisite for the aluminium smelters’ stable operations is the power supply at tariffs enabling competitive production costs. Following joint consultations with Sverdlovsk Region administration, IES Holding, Federal Grid Company, IDGC Holding, Ministry of Industry and Trade, and Ministry of Energy, it was decided that RUSAL would acquire the Bogoslovsk CHPP from IES Holding with the obligation to fulfill the capacity allocation contract project of the Novobogoslovsk CHPP with 230MWt installed capacity that will allow the creation of a sound and efficient energy and metals complex in the Urals.

 

 

However, the CHPP transaction has not been completed, as the seller, IES Holding, values the Bogoslovsk CHPP at a level which could make it impossible to realize the decision of the Government to support the Bogoslovsk aluminium smelter’s operations.

 

 

We believe that the unprecedented overpricing of the transferred asset and, thus, the slowdown of the deal, shows the real motivation of Mr Victor Vekselberg, the IES Holding major owner, to maximise profit from the deal initially aimed at stabilizing the production at BAS based on overestimated consumers’ future payments. Further destructive actions in this direction could lead to failure of the multilateral agreement signed to fulfill the Government’s decision to keep the BAS operations.

 

 

It is also worth noting that the estimate of the capacity allocation contract project of the Novobogoslovsk CHPP by IES Holding includes not only a compensation for the expenses incurred, but also a full compensation for a 15-year period of future potential profits from the power plant that has not been built yet. It should be also noted that the capacity allocation contracts were introduced by the Government as an obligation of new power-producing companies, which acquired their assets during the reform of UES of Russia, to modernise and increase reliability of the Russian energy complex, but not to resell them for the purpose of receiving income.