FEATURE-Siberian power drives RUSAL ambitions


By Robin Paxton

SAYANOGORSK, Russia, Sept 25 (Reuters) - A modest photograph on the wall identifies Oleg Deripaska among the ex-presidents of the aluminium plant in this Siberian town. Russia's sixth-richest man is not as coy in his ambitions to transform his aluminium business into the world's largest. Another BHP Billiton within 10 years is how one close associate describes Deripaska's plans for RUSAL.

RUSAL, which already produces nine percent of the world's aluminium, plans to spend $16.7 billion by 2013 on energy, raw material and metal projects, nearly doubling output to surpass North American rivals Alcoa Inc. and Alcan Inc. .

But it could achieve this goal a lot sooner should it succeed in swallowing domestic rival SUAL to create a $30 billion company that would also include the alumina assets of Swiss trader Glencore.

Neither company is commenting on a merger sources said would give RUSAL 64.5 percent control, SUAL 21.5 percent and Glencore 14 percent and which may be followed by a London share listing.

The deal, should it go ahead, would complete a consolidation process in Russian aluminium that has its roots in a post-Soviet struggle for Siberian assets with access to hydroelectric power.

Sayanogorsk, four time-zones east of Moscow's boardrooms, was one of the main battlegrounds.


Deripaska headed Sayanogorsk Aluminium Plant in the second half of the 1990s and presided over its integration to the newly created RUSAL group in 2000.

The region's main asset is its energy, generated from the Yenisei, the world's fifth-longest river, in an area near where Vladimir Lenin married while in exile between 1897 and 1900.

"Our competitive advantage is that we're close to energy resources," said Pavel Ulyanov, RUSAL managing director for corporate strategy and development.

The 33-year-old executive said energy accounted for 30 percent of RUSAL's costs. Transport and raw materials take up 20 percent each.

Sayanogorsk has grown from a village of 3,000 people to a town of 64,000 in the 30 years since the original smelter was built to turn energy from the massive Sayano-Shushenskaya hydro power station into the metal used in drinks cans and cars.

Workers at the smelter earn an average $750-820 a month, compared with $560 elsewhere in the town. "Parks have been built. There are new houses and a hospital," said Natalya Petrova, a waitress in a downtown cafe serving imported Czech beer.

Other residents say more could be done to develop auxiliary industries. Concrete hulks on the edge of town betray the failure of grand Soviet plans to develop an automotive and aircraft-building industry to use the smelter's aluminium.


Andrei Kartavtsev, a senior manager with 13 years' experience at the Sayanogorsk smelter, says operations have improved since the creation of RUSAL.

"It's become simpler to work here. We have got rid of all the things we don't need," Kartavtsev, in blue overalls, shouted above the drone of the potlines where aluminium is smelted.

When RUSAL opens its Khakassia smelter on the same site in December, the company will be operating the first Russian aluminium smelter to be built since the Soviet Union crumbled. The company will use its own technology at the Khakassia smelter, named after the Russian republic -- a region about the size of the Republic of Ireland -- in which it is located.

RUSAL smelters in other parts of Siberia, such as Bratsk, are also powered by giant Soviet hydroelectric power plants.

The tradition continues in modern Russia. RUSAL says it will spend $5.2 billion on energy projects by 2013, a large proportion on the Boguchany project being jointly developed with state power monopoly Unified Energy System .

And with RUSAL having access to such resources, Moscow residents will be using aluminium foil from Sayanogorsk as the plant's former president brokers his next billion-dollar deal. To see a FACTBOX on RUSAL's expansion plans, click on [ID:nL21518316]



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