State Officials to Claim Prime Spots at Norilsk

Itar-TassRusAl said Wednesday that the government appointments could "weaken" Potanin's influence at the company.
A squad of state officials will join the management and board of Norilsk Nickel to "ensure the interests" of Vneshekonombank, after the lender took a stake in the miner as collateral for a loan, United Company RusAl said Wednesday.

One government representative will be elected to the board, while two others will get posts in Norilsk's management, RusAl said in an e-mailed statement without identifying the people. A company spokeswoman said candidates had not yet been chosen.

RusAl, which holds 25 percent of Norilsk, also confirmed on Wednesday that it had used the stake to secure a $4.5 billion loan from VEB, also known as the Development Bank, to refinance a loan it received from a syndicate of foreign banks to buy the Norilsk shares in April.

"In order to ensure the interests of the creditor who is acting as the agent of the government ... a representative of the Russian government will become part of an enlarged board of directors at Norilsk Nickel," RusAl said.

An extraordinary shareholders meeting Dec. 26 will vote on the new board, which will be increased to 13 members from the current nine. "Each shareholder with more than 2 percent has a right to file its list of candidates to the board before Nov. 26," a Norilsk representative said, adding that none of the shareholders had filed lists so far.

RusAl said last month that it would nominate Fiat chairman Luca Cordero di Montezemolo, Kinross Gold chief executive Tye Burt and James Goodwin, the managing director of Half Moon investment company, as independent directors.

Spokespeople for Norilsk declined to say whether there were any openings in the company's management.

RusAl also said VEB had provided the credit at a rate of 5 percent over the London interbank offered rate for one year, with an optional extension. RusAl said it made an "early repayment" to the syndicate of foreign banks, although it was not immediately clear what the deadline for payment was.

Norilsk's shares soared as much as 32 percent on the MICEX after Kommersant reported Wednesday that 30 percent shareholder and Norilsk chairman Vladimir Potanin offered to buy the debt RusAl had owed to foreign banks for around $4 billion. Potanin's Interros holding company declined to comment on the report.

Norilsk shares, which closed up 6 percent Wednesday, have lost 60 percent of their value since May, as nickel prices have fallen to their lowest level in decades and the conflict between Potanin and Oleg Deripaska, who controls RusAl, has sharpened.

"The appointments will weaken [Potanin's] influence, encourage increased transparency in the company's decision-making process and provide improved oversight of Norilsk Nickel's operations, which will increase the value of the company in the interest of all shareholders," RusAl said.

Interros declined to comment on RusAl's statement.

Analysts were skeptical, however, about the state's decision to involve itself in Norilsk's management.

"As Russian companies become more state-controlled, they get less focused on profits and adding value for the minority shareholders," said Michael Kavanagh, metals analyst at UralSib. "We see Norilsk as a complete mess now, with management keeping mum about what happens in the company."

Kavanagh said he hoped that the government representatives entering Norilsk "will at least have something to do with the metals industry." The company's current CEO, Vladimir Strzhalkovsky, is the former head of the Federal Tourism Agency.

The state candidate to the board will most likely be elected, Kavanagh said, as the other shareholders "will not have anything against it."

n Norilsk said Wednesday in a statement on its web site that it had spent 26 billion rubles ($970 million) purchasing its own shares before the Krasnoyarsk Territorial Arbitration Court ordered the company to stop the buyback as part of an injunction in a lawsuit filed by RusAl.

A total of 110.5 million shares, or 58 percent, were tendered by investors from Sept. 29 to Oct. 28. The company started payments Oct. 29, hours before it received the court's order, a company representative said.

RusAl said in an e-mailed statement that it would file a request with the Federal Service for Financial Markets to open an investigation into "violations of the law by Norilsk Nickel and [buyback organizer] National Registration Company." RusAl alleged that the parties continued the buyback procedure despite its legal suspension by the court.

On Aug. 22, Norilsk offered to buy back up to 7.95 million shares, or 4 percent of its stock, at 6,167 rubles each.