Aluminum Sales Shut Out UES

The decision to sell three of Russia's largest aluminum producers to structures tied to tycoons-turned State Duma deputies Roman Abramovich and Boris Berezovsky looks to be a preemptive move to stop the smelters falling into the hands of Unified Energy Systems head Anatoly Chubais and Sibirsky Aluminum director Oleg Deripaska.

In separate statements Friday, it was announced that a group of shareholders in oil major Sibneft had acquired controlling stakes in the Krasnoyarsk and Bratsk aluminum plants from British-based metals trader Trans World Group, and that Novokuznetsk Aluminum had been sold to Russian car dealership LogoVAZ, a chain of car dealerships that Berezovsky set up that became the foundation stone for the tycoon's broad-ranging business empire.

Between them the three smelters account for more than 60 percent of Russia's aluminum production. Until 1998, the plants were held by Lev and Mikhail Chyorny and David Rubin, head of the British firm Trans World Metals, a member of the Trans World Group.

A quarrel two years ago between the Chyorny brothers led Mikhail Chyorny to withdraw from most of the family business. He and Sayansky Aluminum plant director Deripaska conducted a supplemental share emission of Sayansky stock and acquired the controlling share of the plant's stock. Sayansky became the main enterprise in the Sibirsky Aluminum Group with Oleg Deripaska as its president.

Sibirsky Aluminum thus gained control over a number of aluminum processing plants, but Chyorny and Deripaska had set their sights on other aluminum smelters. These ambitions sparked the war with their former partners, Lev Chyorny in particular. Until recently, the Chyorny-Deripaska team had been winning.

Lev Chyorny was deprived of Krasnoyarsk's biggest supply of alumina, used in the production of aluminum, in September 1999, when the plant's stockholders fumbled control of the Achinsky Alumina Plant to one of Sibirsky Aluminum's newest allies, the Alfa Group. Then, in December, Sibirsky Aluminum gained control over another major alumina supplier to Krasnoyarsk, the Nikolayev Alumina Plant in Ukraine.

Last year, Chubais gave his blessing to the merger of Sibirsky Aluminum's holdings with the Sayano-Shushenskaya Energo, which would have resulted in the creation of a single company, Energo-Metal Amalgamation. If that deal went through, Siberian would have gained a huge competitive advantage regarding its energy supply.

More significantly, though, all of the country's aluminum suppliers are in debt to UES' regional power suppliers, known as energos. In other words, these energos could easily bankrupt whomever they chose. And their first victim was Novokuznetsk.

When a court ruling required Krasnoyarsk to pay a debt of more than 3 billion rubles ($107 million) to Krasenergo at the end of 1999, it became clear that UES was more than willing to get involved in these ownership squabbles. At the beginning of 2000 the energos initiated bankruptcy proceedings against Novokuznetsk, which was then owned by MIKOM managers Mikhail and Yury Zhivilo.

The shareholders in the Krasnoyarsk, Bratsk and Novokuznetsk realized that an alliance as powerful as the one between Chubais and Deripaska could be withstood only by an equally strong or even stronger opponent. They found their champions in Abramovich and Berezovsky.

On Friday, Lev Chyorny said in a telephone interview he had sold his personal aluminum share holdings to the stockholders of oil major Sibneft.

Sibneft's ownership structure is opaque, but some 80 percent of the firm's shares are controlled by a series of front companies associated with both Abramovich and Berezovsky.

Chyorny held approximately 14 percent of Krasnoyarsk's shares and about 33 percent of Bratsk Aluminum. A further 28 percent share in Krasnoyarsk that belonged to businessman Vasily Anisimov was also sold to Abramovich, according to sources close to the deal.

Meanwhile, Trans World Metals boss Rubin announced that negotiations are under way "with interested parties" for the sale of his British-based metals trading firm's Russian aluminum holdings.

Abramovich is also set to acquire stocks in a number of other businesses owned by Lev Chyorny and Rubin, including the Achinsky Alumina Plant, the Chelyabinsk and Novosibirsk power plants, the Uzhnoural Creolite Plant, and the Krasnoyarsk Alumina Plant to name a few, a source said.

The immediate participants in the deal have declined all comment on the sales.