Russian tycoon Oleg Deripaska's En+, a company focused on energy and aluminium is expected to attract investors because of the growing global deficit in the aluminium market and improving outlook for Russian securities, as said by Chief Executive of the company Maxim Sokov to Reuters.
The company is posing as a Russian aluminium and hydropower conglomerate equipped with lower-cost Siberian power, a blessing for energy-intensive aluminium smelting business.
"We convert power into aluminium and sell it to the world. We believe the aluminium market has a significant upside," said Sokov. The company owns Siberian power assets and a 48% stake in Rusal, the world's second-largest aluminium producer.
According to a Reuters’ poll, global aluminium surplus in 2016 is estimated to drop by 74% to 82,000 tonnes from 317,000 tonnes in the previous poll in January. Analysts have projected a deficit of 200,000 tonnes for 2018, mostly due to the expected capacity cut by top Chinese producers in order to fight pollution.
Aluminium, the most sought after metal in transport and packaging, has been the best performer on the London Metal Exchange, registering a 13% hike in 2017 and touching 28-month highs. En+ predicts demand for aluminium will exceed production by 0.7 million tonnes this year even before China caps winter power generation and metal production to reduce pollution. Sokov projects that this will further cut aluminium production by about 1.2 million tonnes during the winter months of 2017.
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Market sources also said En+ is considering an initial public offering (IPO) in 2017, but Sokov declined to comment on that. En+ has current debts of around $5 billion taken during the last decade when it was consolidating power assets in Siberia. Sokov said rouble revenues from power sales support repayment of rouble debts. Another significant benefit comes from Rusal's dollar-denominated dividend that supports dollar debt payments, thus cutting down on foreign exchange risks.
"We effectively have a natural hedge thanks to aluminium and power generation. If the dollar weakens, we get stronger rouble revenues from power sales. If the rouble weakens, then we gain from higher dollar aluminium revenues," Sokov concludes.
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