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. Last Updated: 07/27/2016

SUAL Looks to Go Public Next Year

SUAL, the country's second-largest aluminum producer, aims to go public next year and is looking for financing for a $2 billion startup, company president Viktor Vekselberg said Wednesday.

"The question of an IPO [initial pubic offering] is not about how ready we are," Vekselberg said at an American Chamber of Commerce conference. "It is purely economic. It must be done at the right time, in the right place, with the right partner. I believe it would be optimal to do it next year, if there are no financial crises."

He did not say whether SUAL would target the domestic or foreign markets or the amount it wanted to raise.

SUAL has grand plans to improve its existing four aluminum smelters, moving to the latest, and cleaner, technology. The changeover at its Urals plant will come later this year, followed in 2003 by Kandalaksha, in the arctic Murmansk region, SUAL officials said. The company plans to invest $80 million in 2002 in mining, modernization and expansion.

SUAL also intends to build at its Irkutsk aluminum plant a new $460 million smelter that will be able to turn out 200,000 metric tons of primary metal. The project should take about five years.

In preparation for going public, SUAL moved its four main smelters to a single share in January 2001, as well as two of three silicon producers. The SUAL group includes 12 other cable, mining and aluminum product manufacturers. "We are working toward consolidating the company in a way that is understandable for foreigners," said SUAL spokesman Alexei Goncharov.

He said SUAL would offer a stake in the consolidated group, not in any one division. Depending on market conditions, SUAL may choose to place a stake with a strategic investor.

Vekselberg said that in addition to going public, SUAL is looking to raise financing for a planned $2 billion Komi Aluminum company. Komi Aluminum would be a fully integrated bauxite mining, alumina and aluminum production unit. SUAL expects Canada's Hatch to deliver a feasibility study for the project within the next two weeks.

SUAL has already invested $100 million and is ready to lay out another $250 million for the first half of the project, Vekselberg said in an interview.

SUAL would sell up to 70 percent in the Komi project if compatible strategic investors could be found, he said.

A large part of the startup bill will be financed with debt: Sberbank has agreed to provide loans, and SUAL has approached other domestic and international banks, he said. SUAL is also looking to tap the corporate bond market.

Komi Aluminum will be built up as a separate company "with no history," that is, only the latest technology, Goncharov said. "Alcoa, for example, doesn't invest in Soderberg technology. ... The project needs to meet the blue chips' demands."

The new company will have bauxite reserves of at least 250 million tons, or 50 years of mining. It would produce up to 1.5 million tons of alumina, the intermediate material, and 750,000 tons of aluminum, more than twice SUAL's output of 620,000 tons last year. SUAL posted revenues of $1.3 billion under Russian accounting standards in 2001.

No. 1 aluminum producer RusAl has also been considering an initial public offering. RusAl CEO Oleg Deripaska said in April that the company may float shares and issue bonds to finance new plants in two years.