RusAl: A New Player in the Premier League
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Transcript of RusAl: A New Player in the Premier League
RusAl:
A New Player in the Premier League
2001 Russian Equities Conference
Moscow, 12 September 2001
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• RusAl Foundation: Following the Global Trend
• Company Overview
• Corporate Strategy
• Financial Strategy
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Recent Aluminium Industry Mergers
March March 19981998
Alcoa (USA) and Alumax (USA)
August August 19991999
August August 19991999
March March 20002000
Alcoa (USA) and Reynolds (USA)
Alcan (Canada) and Algroup (Switzerland)
RusAl foundation through merger of largest CIS aluminium producers
• RusAl foundation falls in line with a recent global industry trend
March March 20012001
BHP (Australia) and Billiton (S. Africa)
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Industry Leader...
Source: Company reports
Primary Aluminium Capacity (mln MT)4.2
2.21.9
1.1 1.00.8
Alcoa RusAl Alcan Pechiney Billiton Norsk Hydro
• Second largest in the world’s aluminium industry• Fourth largest in the global metals industry (by Metal Bulletin)
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… Not Only in Size
0.32
0.43
0.52
0.65 0.670.72
RusAl Pechiney Alcan BHP Billiton Alcoa Norsk Hydro
Financial Debt/Equity (31 December 2000)
•High margin combined with low leverage
9%
18%19%
22%
26% 27%
Pechiney Alcan Alcoa BHP Billiton Norsk Hydro RusAl
EBITDA/Sales (2000)
Source: Company reports
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Reasons to Merge
Develop vertical integration
Combine management experience
Improve efficiency due to centralisation of product and cash flows
Reduce administrative expenses
Re-establish historical cooperation between production units
Leading position in the national economy and world aluminium industry
Multiply investment resources and political power
Facilitate access to capital markets
Potentially increase market
capitalisation
Synergy Scale&
•Increased shareholder value as a result of:
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• RusAl Foundation: Following the Global Trend
• Company Overview
• Corporate Strategy
• Financial Strategy
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Production Assets
Bratsk Aluminium Smelter (98%)
Achinsk Alumina Refinery (70%)
Sayansk Aluminium Smelter (88%)
Sayansk Foil Mill (88%)
Krasnoyarsk Aluminium Smelter (66%)
Samara Metals Plant (88%)
Belaya Kalitva Metals Plant (55%)
ArmenAl* (44%)
Oradia Alumina Refinery* (100%)
Rostar (100%)
Dmitrov Rolling Mill (79%)Nikolaev Alumina Refinery* (80%) Consolidated Production
Capacity
• 2.5 mln MT of bauxite
• 2.3 mln MT of alumina
• 2.2 mln MT of primary aluminium and alloys
• 0.7 mln MT of aluminium semi-products
• 0.1 mln MT of aluminium foil and flexible aluminium packaging materials
• 1.3 billion of aluminium beverage cans
Krasnoyarsk Metals Plant (29%)
Note: Equity ownership shown in brackets
* Owned by RusAl’s shareholders
SBK (Guinea)
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Samara
Product Flow
Achinsk
Nikolaev
Alumina Primary Aluminium
Krasnoyarsk
Sayansk
Bratsk
Export
Aluminium roll
Foil
Cans, etc.
C
o
n
s
u
m
e
r
s
Rostar
Dmitrov
Sayansk Foil
ArmenAl
1.1
2.5
0.9 0.9
0.8
0.4
2.0
0.3
Mln MT
0.2
Domesticmarket
SBK
Own
nepheline
0.2
Cemtrade0.2
Others0.4
Others
Others
Belaya Kalitva
KraMZ
Bauxite1.5
2.0
Fabricated Products
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Targets and Achievements in the First Year of Operations • Consolidate assets
• Introduce effective management structure
• Reduce costs
• Develop strategy
• Increase transparency
• Introduce risk management
• Access bank financing
• Established full control over subsidiaries through equity buy-out• Set up the holding company via contribution of aluminium assets• Acquired new capacities in bauxite, alumina and aluminium products
• Appointed professional management team and established Moscow Headquarters with over 500 staff members
• Centralised product and cash flows
• Decreased average power tariff paid by the Group’s smelters by 30% through new contracts with electricity providers
• Introduced centralised purchases and competitive bidding system
• Developed and approved corporate strategy and investment priorities
• US GAAP financial statements audited by PricewaterhouseCoopers• Technical appraisal reports on RusAl’s smelters produced by Kaiser Engineering• Independent asset appraisal performed by American Appraisal
• Developed and implemented comprehensive insurance strategy (including property damage, business interruption and cargo insurance) with participation of top-tier insurance companies
• Over $300 mln in trade finance by Western banks• Over $400 mln in credit facilities by Russian banks
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• RusAl Foundation: Following the Global Trend
• Company Overview
• Corporate Strategy
• Financial Strategy
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• Balance production capacity
• Expand margins
• Reduce costs
• Establish world-class management processes
• Meet international standards of environmental management and quality control
• Enter capital markets
Key Strategic Objectives
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Balance Production Capacity
• By 2005, RusAl intends to produce at own facilities 100% of the required alumina and up to 50% of the required bauxite via
– expansion of existing alumina capacity by up to 30%– acquisition and building of new capacity in CIS, Guinea, etc.– potential strategic partnerships to develop large scale greenfield projects
Alumina Production
1.8 2.02.3
4.8
1999* 2000* 2001F 2005F
'000
MT
+13%+15%
* pro-forma combination of RusAl's production assets
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Expand Margins
• Increase production of alloys and fabricated products at 26% and 12% annual rate respectively
• Increase sales to end users and regional international traders from 30% in 2001 to 70% in 2003
Sales Structure
2,100 2,042 1,813
1,200
800
50037313
98222 275 320
1999* 2000* 2001F 2005F
'000 M
T
Primary aluminium
Aluminium alloys
Fabricated products
2,359 2,4462,415 2,500
* pro-forma combination of RusAl's production assets
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Reduce Costs
• Secure against raw materials price volatility by raising own bauxite and alumina
production
• Enter long-term contracts with energy suppliers
• Reduce transportation costs via launch of own expeditor
• Further optimise logistics
• Upgrade existing facilities (US$100-150 mln in annual capex) to achieve by
2005:
– reduction of electric power consumption by 9% per MT of primary aluminium
– reduction of anode consumption by 6% per MT of primary aluminium
– increase in average pot life by 12%
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• RusAl Foundation: Following the Global Trend
• Company Overview
• Corporate Strategy
• Financial Strategy
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Financial Strategy
• Maintain working capital financing at up to $700-800 mln
• Restructure existing debt by replacing short-term and high-interest loans for long-term low-interest financing
• Use hard currency debt to match export revenues
• Consider financing selected investment projects by international project finance institutions
• Utilise internally generated cash flows for investment projects and acquisitions
• Lower weighted average cost of capital through long-term unsecured finance including
– corporate term loans
– capital markets instruments
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Experience In Raising Finance
• Over $300 mln in trade finance including:
$100 mln credit facility by WestLB
$125 mln club deal by European banks
$47 mln domestic syndication by Raiffeisenbank
At least two club deals worth up to US$150 mln to be completed by the year end
• Over $400 mln in corporate loans including :
$200 mln credit line by Sberbank
$100 mln loans by DIB
$75 mln loans by Rosbank
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Issues to Address
• Transparency
• Investor Awareness
• Issued US GAAP financial statements audited by PricewaterhouseCoopers
• Independent asset appraisal and engineering reports produced by Western consultants
• Received approval by Russian Ministry for Antimonopoly Policy
• Key assets contributed to the holding company
• Established Investor Relations function
• Appointed public relations consultants
• Complete consolidation of all Group’s assets
• Credit rating by international rating agencies
• Establish transparent dividend policy
• Ensure enhanced information flow between the Company and investors
– regular investor meetings
– Web-site
Completed To Be Done
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20042004
EarlyEarly20022002
EndEnd20022002
Proposed Capital Markets Timeline
• Potential issuance of structured notes backed by export receivables
• Potential international bond offering (e.g. Eurobond)
• Potential international equity offering
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Statements made in the course of this presentation which describe the Company’s intentions, expectations or predictions may be «forward-looking statements». The Company cautions that, by their nature, forward-looking statements involve risk and uncertainty and that the Company’s actual actions or results could differ materially from those expressed or implied in such forward-looking statements.