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. Last Updated: 07/27/2016

Siberian Aluminum Buys Bus Plant

Siberian Aluminum said Wednesday it was continuing its quest to monopolize Russia's once-mighty bus industry.

Having acquired Russia's two largest bus factories, LiAZ and PAZ, and a major parts supplier over the last year, Siberian Aluminum will complete the acquisition of the Kurgansky bus plant in southern Russia from gas giant Sibur by the end of June, said Sergei Zanozin, head of Siberian Aluminum's bus holding Rusavtobusprom.

The company is also in talks with the Ryazansky and Lugansky factories, and the final deal on acquiring the Moscow region's Golitsinsky plant will be signed by the end of the week, he said.

With the growing list of assets, Russian Aluminum now has to figure out how to turn a profit while keeping cash-strapped towns and cities across the country supplied with buses for their transportation systems.

The task is a big one — but so is the potential profit.

With some 80 percent of the nation's registered 627,000 buses so run down that they need to be scrapped for parts, municipal transport authorities are sitting on a time bomb.

That's where Siberian Aluminum comes in. It has already created Ruspromavto, the holding company for its car, bus, engine and parts subsidiaries, and created a division for its bus units, Rusavtobusprom. Now it is setting up Rusavtoprom, a subdivision that will handle all sales and finance issues exclusively for Rusavtobusprom.

The reason the company needs a special company to deal solely with sales is unique. Since the largest customers are municipal governments, and most municipal governments are broke, special financing has to be worked out to keep buses on the road.

"We can produce whatever you want, we have enough production capacity and financial resources," Zanozin said Wednesday.

"But who will buy it, this is the problem," he said.

Zanozin, who is also PAZ general director, said the sales target for the bus unit is $200 million this year and $250 million next year, but there are two major factors — how many more bus-related acquisitions Siberian Aluminum makes and how much help the government gives it.

"Without government support we won't be able to manage it," he said, adding that he was confident the government would help because "support is needed for consumers, not for Siberian Aluminum."

Rusavtoprom will be charged with figuring out how to create solvent demand. That is, getting major bus consumers — state-owned transport companies and municipal and regional administrations — to pay for what they buy.

Rusavtoprom general director Valery Stakheyev said he was preparing a variety of different financial instruments, including leasing and bank credits to entice consumers.

Asked about other acquisitions, Zanozin said, "We are interested in the whole Russian bus industry — every time we say we are interested in buying a company, the price of that company immediately doubles."