Kiev May Take Over RusAl Plant

Ukraine may renationalize the Zaporozhsky aluminum plant, controlled by United Company RusAl, if it does not resume production and do more to modernize the facility, Fuel and Energy Minister Yury Prodan said Tuesday.

The Zaporozhsky plant, the only aluminum smelter in Ukraine, began suspending output this week, blaming the decision on unreasonably high electricity rates and falling aluminum prices.

"We demand that the owners of the plant efficiently manage the smelter, conduct the proper modernization and stick to its investment obligations instead of halting the production because of the lack of super profits," Prodan said in comments confirmed by spokesman Fent Di. "If the owners can't do it, they have to return the smelter to the state."

Di declined to comment on when the renationalization could take place or what legal mechanisms would be used.

No one at RusAl's office in Moscow was available for comment Tuesday, a state holiday, and company spokespeople did not answer their cell phones.

RusAl said Monday that it would lay off 130 workers at the plant, which produces 113,000 tons of aluminum per year and 265,000 tons of alumina.

"The local electricity tariffs are among the most expensive in the world and prohibitive for energy-intensive aluminum production," RusAl said in an e-mailed statement. "The unwillingness of the government to solve the issue of energy tariffs … as well as the slowing growth of global demand for aluminum are the main motives for the move."

Production at the plant will be suspended "until the tariffs issue is solved and the situation on global markets improves," the company said.

Electricity costs in Ukraine have increased greatly over the last two years and currently comprise 48 percent of the plant's costs, RusAl said. The smelter's debt for electricity supplies has reached 41 million hryvnas (around $7 million), Prodan said Tuesday.

The Zaporozhsky plant was privatized at the end of 2000. RusAl received a 97.5 percent stake last year after completing its merger with SUAL, which had previously controlled the smelter.