24 November, 2005.
RAO UES of Russia (RTS: EESR) and Russian Aluminium have settled some of their differences over completion of Boguchansk Power Plant and construction of an aluminium plant that will consume its electric power, though they have failed to reach a full compromise on the project, an informed source has told Interfax.
According to the source, RAO and RusAl have defined the legal scheme of the project. Specifically, they have agreed that British Law will govern their relations under the transaction. The companies have also agreed upon the cost of completion of the power plant and construction of the aluminium plant but have failed to reach consensus on the cost of electric power supplies for the aluminium plant.
Meanwhile, according to another source close to one of the parties in the talks, RAO and RusAl have decided that the aluminium plant and the power facility will have equal profitability, yet the parties cannot agree on the capacity of the future plant: the metallurgists suggest that it should have a capacity of 600,000 tons of aluminium per year while the power company insists on a capacity of less than 500,000 tons.
The project of completion of Boguchansk Power Plant was discussed last Tuesday by RAO’s Strategy and Reform Committee, but the Committee members refuse to comment on this issue pleading its confidentiality.
The main shareholder (over 60%) of Boguchansk Power Plant is OJSC HydroWGC (a 100% subsidiary of RAO set up in the course of the reform). The plant has not been completed. In 2004 RusAl that had decided to build an aluminium plant in Krasnoyarsk Region offered its investments in return for a share in the power plant, but RAO was not satisfied with the conditions offered by the metallurgists.
Last summer RAO and RusAl agreed that they would finance completion of Boguchansk Power Plant and construction of the aluminium plant on a par basis. For that purpose they would establish a joint company that would own the assets. That agreement was fixed in a memorandum on cooperation. RAO and RusAl expected that they would settle their disputes and define details of the project within several months and subsequently sign a partnership agreement.
Early last September, RAO’s CEO, Anatoly Chubais, promised to resolve the issue. "It means that in November I will be able to say that we have made a corresponding decision and will start construction. Or that we have failed to make a decision – then (there will be) other scenarios", - he stated not specifying what other scenarios he had in mind.
The sources could not suggest any idea as to when all differences under the project might be settled by RAO and RusAl.
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