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. Last Updated: 07/27/2016

RusAl to Add $8Bln to Spending

Russian Aluminum, the world's No. 3 aluminum maker, has doubled its investment program through 2013 to $16.7 billion, to account for buys in the power sector and factory upgrades, a senior company official said Thursday.

RusAl will acquire stakes in hydroelectric, nuclear, and gas-fueled power plants to sustain its target of doubling aluminum production to 5 million tons per year by 2013, said Pavel Ulyanov, RusAl's managing director for corporate strategy and development.

"Our task is to get ownership of power generation assets in the region of 25 billion kilowatt-hours per year," Ulyanov told reporters.

By 2013, RusAl would have access to 17 billion kilowatt-hours of energy, he said, leaving the company about 8 billion kilowatt-hours short. In comparison, Moscow runs on about 60 billion kilowatts per hour.

Electricity is the single biggest factor in RusAl's aluminum production costs, accounting for 30 percent of its cash outlay, with transportation and raw materials taking a further 20 percent each, Ulyanov said.

As global energy prices rise, RusAl expects that, worldwide, facilities that produce around 1 million tons of aluminum per year, or 3 percent of annual output, will close within two years. Given the distance between RusAl's Siberian aluminum smelters and its customers, the company, which picks up transportation costs, will focus on closing its energy deficit.

"At present, we buy electricity at tariffs that are higher than the cost of production, and I think in this [area] we can still cut expenditures," Ulyanov said.

Within a decade, RusAl expects its electricity needs to be partly covered through investments in the Boguchanskaya hydro power plant, part of the $5 billion Boguchansk aluminum and power complex, as well as in the gas-powered power station in Novokuznetsk, the Ragunskaya hydro plant, and its Nigerian assets.

Of the total investment, RusAl plans to spend $5.2 billion on new power assets, Ulyanov said. A further $6.4 billion would go toward expanding and building new aluminum smelters, while $4.6 billion would be set aside for new alumina assets. Alumina is a raw material needed to produce aluminum.

"We can look at acquisitions or the construction of new [power] assets," Ulyanov said, adding that RusAl would bid for stakes in domestic power plants in which they would be guaranteed some kind of financial and operational control. Unified Energy Systems, the country's electricity monopoly, plans to sell stakes in domestic plants through listings and to strategic investors as part of a gradual privatization of the sector.

Last month, RusAl signed a memorandum of understanding with the Federal Atomic Energy Agency. It wants to build smelters with 600,000-ton to 750,000-ton capacity and power them with at least 1,150 megawatts from new nuclear reactors, Ulyanov said in an interview after the briefing.

"We would be an anchor tenant for the nuclear plants," Ulyanov said.