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. Last Updated: 07/27/2016

RusAl Could Block Norilsk's Power Spinoff, Citigroup Says

United Company Rusal, which agreed to acquire a 25 percent stake in Norilsk Nickel, may block the spinoff of electricity assets planned by Russia's biggest miner, Citigroup said Monday.

"In the near future we see a decent probability of the utility assets spinoff falling apart, as we believe that RusAl may want to see the utility assets as part of the consolidated entity," Citigroup analysts Mikhail Seleznev and Daniel Yakub said in a note to investors.

Norilsk shareholders are scheduled to vote on the spinoff on Dec. 14.

RusAl, the world's second-largest aluminum maker, last week agreed with Norilsk shareholder Mikhail Prokhorov to acquire his blocking stake of 25 percent plus one share in the miner. The transaction relies on Prokhorov's partner and Norilsk shareholder Vladimir Potanin rejecting an earlier, $15.7 billion all-cash offer made to him for the shares.

A tie-up with Prokhorov, who would get 11 percent of an enlarged RusAl in return for his Norilsk shares, "paves the way to develop RusAl into a global, diversified metals, mining and energy group," RusAl chief executive Alexander Bulygin said Nov. 23.

Electricity accounts for about one-third of aluminum production costs. RusAl owns power stations in Russia. Norilsk holds power assets that are equivalent to 6 percent of Russia's electricity generation capacity. The Moscow-based miner plans to spin off the assets next year into a separate company, Energo Polyus. Citigroup is managing the spinoff.

Citigroup has a "hold" rating on Norilsk and said it was a "high-risk stock among its Russian peers" following Prokhorov's agreement. The bank's 12-month target price is $360 per share.

Prokhorov and Potanin control 53.5 percent of Norilsk. Rio Tinto Group is the world's largest aluminum producer.