RUSAL considering production cuts on power concerns

RUSAL considering production cuts on power concerns

Posted:  Tuesday , 18 Aug 2009

Russia's UC RUSAL, the world's largest aluminium producer, is considering a possible output cut due to a fatal accident at a hydroelectric power station that feeds two of its Siberian smelters, the company said.

UC RUSAL's majority owner, billionaire Oleg Deripaska, took part in an emergency meeting chaired by Energy Minister Sergei Shmatko to discuss the use of back-up capacity to ensure energy supplies to RUSAL's smelters, the company said in a statement.

"One of the issues discussed was the possibility of reducing output at RUSAL's smelters to create additional reserves of energy required for the stable functioning of the region on the eve of the autumn-winter season, when the load on the energy system increases," the company said.

UC RUSAL did not give any details about how much capacity could potentially be cut.

Ten people died and more than 60 are missing after a turbine room flooded on Monday at the Sayano-Shushenskaya hydroelectric power station, Russia's largest.

UC RUSAL said production at its Khakassia and Sayanogorsk smelters -- which run on electricity from the damaged power plant -- was so far unaffected as they had switched to alternative suppliers. UC RUSAL, with debts of $16.8 billion, has already embarked on a cost reduction programme this year that led to a 10% reduction in aluminium output in the first six months of 2009.

The company produced 1.98 million tonnes of primary aluminium in the first half of the year. Cuts at its Siberian smelters totalled 4.5% in the period.

In 2008, the company produced 4.4 million tonnes of primary aluminium, up from 4.2 million tonnes in 2007.

Power for the Sayanogorsk and Khakassia plants is now being supplied from the neighbouring regions of Krasnoyarsk and Kemerovo, said Vladimir Shulekin, spokesman for the Sayanogorsk plant, located about 50 km (30 miles) from the dam. (Reporting by Robin Paxton; editing by Sue Thomas)

Renaissance Capital, Russia

Event: As a result of the accident at Sayano-Shushenksaya GES yesterday (17 Aug), Evraz's subsidiaries located in the Siberian energy zone (NKMK and ZSMK) may experience an electricity supply shortage due to the conservation of energy resources introduced in the region. Evraz confirmed that the aforementioned subsidiaries partially cover energy needs through supply from RusHydro assets including Sayano-Shushenksaya GES. The company will maintain operations on all major aggregates including coke batteries, blast furnaces and converters while production may be reduced in the downstream segment particularly at the ZSMK site. Evraz management did not provide official estimates of the potential impact of the accident on steel-mill operations so far.

Rationale: Evraz steel assets located in Western Siberia have 60-65% self-sufficiency in electric energy through on-site generation. Thus, we do not expect NKMK and ZSMK to experience a significant energy supply shortage. As for the temporary stoppage of downstream operations at ZSMK, excessive pig iron volumes may be redirected to the NKMK site. Evraz has previously commented on the high efficiency of supplying NKMK operations with pig iron from the low cost production platform of ZSMK. Another area which is potentially vulnerable to energy supply disruptions is electric-arc furnace (EAF) production at NKMK. However, we do not expect essential changes of Evraz production plans this quarter due to the accident at Sayano-Shushenksaya GES.

Evraz Sells Stake in Miner

http://www.themoscowtimes.com/article/1009/42/380895.htm

Evraz Group sold its stake in the Cape Lambert Iron Ore project in Western Australia, the Australian company said in a statement Monday.

Evraz sold 60 million shares in Cape Lambert Iron Ore to British  and Australian investors. Evraz spokesman Sergei Lavrinenko confirmed that the company exited the project. (Bloomberg)

Russia Severstal to issue 45 bln rbls in 5 bonds

MOSCOW, August 18 (Reuters) - Severstal (CHMF.MM: Quote, Profile, Research), Russia's largest steel producer, plans to issue five rouble-denominated bonds totalling 45 billion roubles ($1.42 billion), the company reported on Tuesday.

The company plans to sell a 15 billion rouble bond, two 10 billion rouble bonds and two 5 billion rouble bonds.

All have a maturity of 3 years.

(Reporting by Yelena Fabrichnaya, writing by Dmitry Sergeyev)

Vekselberg Company Orders Solar Modules Worth $277M

Oerlikon won a Russian solar order that analysts say may be worth more than 300 million Swiss francs ($277 million) from a business partly owned by the Swiss company’s biggest investor, billionaire Viktor Vekselberg, Oerlikon said Monday.

Nano Solar Technology, a joint venture between Vekselberg’s Renova Group and Rusnano, ordered a 120-megawatt production line for thin-film solar modules, Oerlikon said in an e-mailed statement.

“With the envisaged production capacity of 1 million solar modules annually, this is the largest equipment order in the worldwide thin-film silicon photovoltaic market in 2009,” the company said.

The order may be worth more than 300 million Swiss francs, according to Helvea analyst Reto Amstalden. Vontobel analyst Michael Foeth estimates it to be at least 200 million francs. Renova spokesman Daniel Grotzky said the parties agreed not to disclose details of the contract. He said the whole project has a “volume” of 20.1 billion rubles ($620 million).

The contract is “absolutely” necessary for Oerlikon, as order intake at the solar unit probably won’t meet Helvea’s expectations for the first half, Amstalden said in a research note. Oerlikon also makes machinery for the textile industry and drive systems for cars.

“This order may show that the business for large project financing is opening up again, although we would like to see Oerlikon Solar also receive big orders from other customers that are not linked to Renova,” he added.

AvtoVAZ extends losses

http://www.businessneweurope.eu/dispatch_text9540

Renaissance Capital, Russia

Yesterday (17 Aug) AvtoVAZ reported 2Q09 non-consolidated RAS financials. Although sales grew 37%, financial performance deteriorated further: AvtoVAZ once again posted losses even on the gross profit level, with a negative gross profit margin, widening to a negative 5%. AvtoVAZ's 1H09 net loss was almost RUB17bn. The non-consolidated RAS accounts do not include a significant amount of operating expenses (eg administrative) and this is the reason we think that on a consolidated IFRS basis AvtoVAZ figures would look significantly worse. AvtoVAZ car sales in Russia in 2Q09 rebounded slightly (+2.8% to 91,200 cars), but still are far below the breakeven point, which, according to CFO Oleg Lobanov (cited by Vedomosti) is currently at 600,000 cars a year, or 50% higher than the company's current sales level.

According to AvtoVAZ management, the company is not expected to return to profit on the operating level by the end of the year. AvtoVAZ's bonds are indicatively quoted around 20%, and if there are still market investors in the bonds, it is better to exit in our vie, because we think the state could finally limit its support to the loss-generating company.

AFI Development reports $201m second quarter loss

http://www.globes.co.il/serveen/globes/docview.asp?did=1000490793&fid=942
The company, controlled by Lev Leviev, wrote $297 million off the value of investment properties in the quarter.

Ouriel Herman18 Aug 09 09:40

AFI Development PLC, the Russia and CIS real estate arm of Africa-Israel Investments (TASE: AFIL), controlled by Lev Leviev, published its results for the second quarter and first half of 2009 this morning.

The company made a net loss was of $201.7 million in the second quarter, compared with a net profit of $28.5 million in the second quarter of 2008. The gross loss for the quarter was $245.4 million, compared with a gross profit of $40.3 million for the second quarter of 2008.

For the first half, the company made a net profit of $215.1 million, compared with $97.3 million for the first half of 2008.

At the end of June, AFI had $132.5 million in cash and cash equivalents.

The company said that the second quarter loss stemmed from the decrease in the value of some of investment properties under development since the first quarter, which led to an impairment recorded to their book value totaling $297 million. After the end of the reporting period, AFI sold its Kossinskaya project for $195 million, reflecting a premium of $44.2 million over its book value. The cumulative effect of the impairment and of the sale after the tax was $211.6 million

AFI also mentioned that it had made further progress in leasing activity for the Mall of Russia development, with lease agreements reflecting a total take-up of about 30%, with an additional 30-35% covered by non-binding letters of intent and memoranda of understanding. It commented that "a less marked downward pressure continues to affect the real estate market in Moscow across all asset classes."

AFI CEO Alexander Khaldey said, "Our first half results were adversely affected by the continuing decrease in the values of our properties under development. At the same time as evidenced by the sale of our Kossinskaya project at significant premium to its book value, we believe that our projects continue to have potential for revaluation gain in future.

"Aside from the impact of revaluations resulting from the current economic uncertainty, we have seen a steady growth in lettings. Although funding remains scarce across the market, our cash resources, reinforced by the recent Kossinskaya sale, mean that we are better placed than many other developers to cope with the challenges of this still volatile market.

"We are focusing on Mall of Russia which will now be positioned as one of the few new high quality retail centers to be opening in Moscow in 2010. This will strengthen the Mall's ability to attract major operators as tenants, as shown by our recent leasing agreement with Inditex and its major brands such as Zara and Bershka."