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. Last Updated: 07/27/2016

Metals Giants Eye Role in Reactor Construction

The state nuclear lobby has struck its first agreements with private companies to attract investments into atomic reactor construction.

Aluminum giants Russian Aluminum and SUAL each signed cooperation memoranda with the Federal Atomic Energy Agency to jointly develop projects for constructing aluminum smelters and power stations, the companies said Wednesday.

Energy accounts for more than one-third of aluminum production costs, and participating in nuclear-power projects may help the expanding producers to ensure guaranteed, long-term electricity supplies at favorable rates.

RusAl, the country's No. 1 aluminum company, controlled by Oleg Deripaska, and the agency have agreed to form a working group that will "research and propose several sites for building new atomic power stations and aluminum plants," said Vera Kurochkina, a spokeswoman for the company.

SUAL's mirror-image agreement states the firm and the nuclear agency will "work on long-term energy projects." SUAL's spokesman, Alexei Prokhorov said that "above all, we are interested in projects in the Murmansk region." SUAL already operates the Kandalashsky aluminum smelter in the region and is planning a second plant, Prokhorov said.

RusAl and SUAL are two of several private companies to have held talks with the atomic agency about investments into nuclear power in return for fixed energy rates.

The Federal Atomic Energy Agency is slated to receive about $55 billion from the state budget between 2007 and 2015 to build up to 40 nuclear reactors over the next two decades. The budget funds, however, would cover only part of the construction costs, with a further $29 billion in financing needed for the program.

The bigger part of that money would come from "private investments in return for future energy contracts," Sergei Novikov, an agency spokesman, said last month.

Kurochkina said that RusAl "has the funds and is interested in increasing its aluminum production capacity." The company aims to double annual aluminum production to 5 million tons by 2013 as part of its plan to leapfrog Alcoa, the U.S.-based global leader.

SUAL, Russia's No. 2 aluminum producer, controlled by Viktor Vekselberg, also plans to double production to 2.1 million tons, in 5 to 7 years.

Unified Energy Systems electricity tariffs are set to rise as the power monopoly embarks on a major modernization plan.

In return for their investments in the nuclear industry -- raised through the companies' own funds, credit and project financing -- the aluminum producers can hope to receive discount energy tariffs for up to 30 years, Novikov said.

"The process of atomic sector reform is moving at a fast pace," said Alexander Kotikov, an analyst with UBS.