Having shunned London back in 2010 — opting for partial listings on the much smaller Paris Bourse and in Hong Kong — Rusal’s majority owner, En+, is finally turning to London.
The earlier float flopped and turnover has been low in Paris ever since, but Rusal’s prospects have revived on the back of a rising aluminum price and some ambitious plans to complete a new smelter.
Rural has steadily paid down debt, but not fast enough for Oleg Derispaska who, conscious that debt nearly bought the company down just a few years ago, probably feels the time is right to tap into a buoyant stock market to raise some cash.
Not that we are talking about a major float here, but Rusal’s parent En+ Group (owner of 48% of Rusal stock along with the hydro-electric power plants that serve the company’s smelters) is only looking to raise $1.5 billion by listing between 15.8% and 18.8% of En+ shares. Such a return would value the group at up to $10 billion, according to The Times.
The float has major shareholder Glencore’s vote of approval, as it has agreed to swap its 8.75% stake in Rusal for En+ shares after the IPO, allowing En+ stake in Rusal to rise to 56.88% as a result.
Chinese conglomerate Chinese Energy Company Limited (CEFC) is also said to be a cornerstone investor in the floatation amid a wave of enthusiasm among Chinese corporations for stakes in Russian assets. CEFC took a $9 billion stake in Russia’s Rosneft just last month.
Apart from paying down debt, En+ is said to be looking to fund the completion of major capital expansion projects.
The firm is betting rising demand and curtailments in China will provide long-term support for current prices and is looking to expand both hydro and smelter capacity. Next year should see the completion of an expansion at the Boguchansk smelter and resumption of the Taishet aluminum smelter (which was halted some years ago when the aluminum price collapsed).
After spending some $800 million getting the project to an intermediate stage, it will need about the same again to finish it. According to Reuters, the first line of the smelter, with annual capacity of 430,000 tons, will now be built by 2020.
The En+ IPO is one of several coming to a resurgent London market and should tap into a willing investor appetite for commodity assets expected to have strong growth into the next decade.