The company is building a new aluminum smelter and expanding an NPP UC Rusal has chosen a construction site for the world's largest energy metallurgical complex worth USD 6 to 7 billion. An aluminum smelter with a production capacity of 1.05 million tons per annum will be constructed in the Saratov Region concurrently with two new units of Balakovo NPP having a total capacity of 2,000 MW. However, implementation of this project depends to a great extent on the ability of Russian mechanical engineers to expand their capacities. UC Rusal General Director Alexander Bulygin and Governor of the Saratov Region Pavel Ipatov signed yesterday an agreement on the world's largest energy metallurgical complex to be constructed in Balakovo by 2013. The complex will feature another world's largest facility, an aluminum smelter with a production capacity of 1.05 million tons per annum, and two new (fifth and sixth) units of Balakovo NPP having a total capacity of 2,000 MW. Bratsk Smelter (983,000 tons per year) and Krasnoyarsk Smelter (950,000 tons per year), the current world's top aluminum producers, are also owned by Rusal. Alexander Bulygin estimates that Rusal's investments in the project will amount from USD 6 to 7 billion. Other participants may include OJSC Russian Railways, OJSC Federal Grid Company and Rosatom. The figures of the total volume of investments will be released upon completion of the project's feasibility study in 2008, specified Mr. Bulygin. According to Rusal's forecasts, the project will break even in 15 years. Rusal has earlier spoken of plans to build an energy metallurgical complex based on a Far Eastern NPP (see Kommersant dated 10 April). Mr. Bulygin explained the choice of the Saratov Region by the fact that it has "a developed transport and energy infrastructure and industrial capacity for locating facilities to produce complete parts". He also mentioned among advantages of the region its closeness to Kazakhstan "with its sources of raw materials for aluminum production". The project will allow Rusal to increase its aluminum output by 25%. However, implementation of the company's plans depends on Rosatom, which is the authority to approve completion of Balakovo NPP. Pavel Ipatov admitted that there is no final solution to this issue yet. This NPP has not been included in the federal program for construction of new nuclear power units due to "power capacity surplus in the region". Besides, capabilities of Russia's energy mechanical engineering industry are quite limited, noted Pavel Ipatov, who had been the NPP's chief executive until 2005. "Only two power units per year can be built in the country," explained the official. "And those are already specified in the long-term program. Our task is to hold negotiations with Rosatom and to clearly substantiate our proposals in order to wedge ourselves in this program." Rosatom spokesman Sergei Novikov has told Kommersant that "negotiation process is currently under way" with regard to Balakovo NPP. A decision on completion of the plant will be taken in coordination with RAO UES of Russia and the Ministry of Industry and Energy. Mr. Novikov agrees that the problem lies in the capabilities of mechanical engineers, namely whether they will be able to produce the required volume of equipment "without detriment to the approved state-financed projects." OJSC United Engineering Works (OMZ) capable of making only two units per year is Russia's only nuclear reactor producer. But OMZ claims being able to expand its capacities provided there are orders. Atomenergomash capacities are also designed for production of two sets of boiler equipment per year, though the company promises to double its output "in the future". Analysts polled by Kommersant have displayed a cautious attitude to Rusal's plans. "This project is far from being the first one announced by Rusal, but many of them still remain uncompleted," says Dmitry Parfenov of Prospect Investment Company. "The company tries to fix up guaranteed supplies of the required energy volume at cheap tariffs, but it doesn't always succeed. This is why problems arose with the Komi-Aluminum project." Managing partner of ICG «2K Audit - Business Consulting» Ivan Andriebsky adds that Rusal's investment program is large-scale as it is. Apart from the new project the company has intended to invest in production USD 11 billion until 2013. Ivan Nuzhdin of Bank Zenit estimates that Rusal's EBITDA will amount to USD 3.2 billion in 2007 reaching USD 5.8 billion by 2013. "Rusal must spend some USD 2.8 billion annually on investments," notes the analyst. He believes that "such expenses are within the company's powers", and it will even be able to pay off its current debt of USD 7.7 by 2013. |
