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. Last Updated: 07/27/2016

Feuding Norilsk Delays Power Sale

Itar-TassNorilsk Nickel plants belching fumes into the air in the far northern city of Norilsk, where it is the main employer.
Shareholders blocked the spinoff of Norilsk Nickel's energy assets Friday in an anticipated move that casts a pall over the miner's development plans.

Mikhail Prokhorov's Onexim Group, which is in the process of selling its 25 percent plus one share stake in the palladium and nickel miner, abstained from voting at Friday's extraordinary shareholders meeting, said Alexei Rebinkin, a spokesman for Onexim.

Rebinkin said the new shareholder -- expected to be either Vladimir Potanin's Interros Group or Oleg Deripaska's United Company RusAl -- should make a decision about the future of EnergoPolyus, the proposed power company, not Onexim.

The decision was widely expected given Prokhorov's statements earlier in the day and previously that he would not approve the spinoff, which would have created a $7 billion power company, including its 65.2 percent stake in power generator OGK-3.

After the meeting, Norilsk chief executive Denis Morozov expressed his disappointment but said the management would review other options, including a strategic sale of the power unit. The spinoff could be reviewed within one or two months, he said.

Prokhorov and Potanin are currently embroiled in a protracted split of their assets after 15 years of working together. Prokhorov gave his former partner first right of refusal on the stake but has set a steep price of $15.7 billion, which Potanin must raise within 45 days. He has until Thursday to accept the offer.

Prokhorov has said he favors selling his stake to RusAl in return for cash and an 11 percent stake in the aluminum giant plus a seat on its board. The RusAl deal will go ahead if Potanin does not accept the offer first.

Morozov said the disagreements between Potanin and Prokhorov were starting to affect the company. "This is not positive," he said. "No one has given us any plans for development."

Plans to spin off Norilsk's noncore power assets were first announced in March, and it was envisioned that Prokhorov would focus on the energy side of the business, while Potanin would take control of the miner.

"Whilst it's clearly disappointing, it's a stalling tactic and we expect it to come back on the agenda once Onexim has sold its stake to RusAl," said Rob Edwards, a Renaissance Capital analyst.

He said RusAl had its own portfolio of power assets centered on its operations in Siberia and that EnergoPolyus' portfolio would not provide a good fit.

"I am firmly of the belief that RusAl will want to get rid of these as well," Edwards said.

Ahead of the meeting Friday, Prokhorov said in a statement that he would offer Potanin a formal deal to split their assets in KM-Invest, which includes an 8 percent stake in Norilsk. Prokhorov proposes either selling the assets and splitting the proceeds, or buying out Potanin's share or vice versa. If Potanin does not accept the offer, Prokhorov said he would consider legal proceedings to break up the holding.

Mandated lead arrangers ABN Amro, BNP Paribas, Credit Suisse and Merrill Lynch are leading a $4.5 billion syndicated loan backing RusAl's bid for Prokhorov's stake, banking sources said Friday, Reuters reported.