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Russia VEB to buy RUSAL stake with own cash-FinMin

YALTA, Ukraine, Nov 20 (Reuters) - Russia will let state bank VEB keep the profits from investing government cash, and it will spend some of the money on a stake in indebted aluminium giant UC RUSAL, Finance Minister Alexei Kudrin said on Friday.

VEB is prepared to buy up to 3 percent of RUSAL, which plans to float shares this year or next, for 4-18 billion roubles ($488-627 million), valuing the world’s biggest aluminium producer at between $16.3 billion and $20.9 billion, a government source said on Thursday. [ID:nLJ328833]

The state bank has been a key agent in the government’s anti-crisis programme and, among other things, was last year given 175 billion roubles from the National Wealth Fund to invest in stocks and bonds to support the Russian market.

But Kudrin said that money would not be used to help RUSAL.

“RUSAL’s IPO will be bought into not from the National Wealth Fund’s (NWF) money, but from VEB’s own funds,” Kudrin told reporters.

He said that the Finance Ministry had given the NWF cash to VEB to manage in return for interest of 7 percent a year.

“We were planning to change these terms ... But we agreed that we will remain within the confines of a 7 percent deposit, and the profits earned will go to VEB,” he said.

As such, VEB could get around 100 billion roubles, a source close to its supervisory board said. Only a fraction of that is needed to buy the RUSAL stake, and some of the rest will be spent on supporting the Russian mortgage market.

RUSAL, owned by indebted industrial magnate Oleg Deripaska, is striving to complete Russia’s biggest ever debt restructuring deal before raising up to $2 billion in a Hong Kong and Paris stock listing.

“VEB will buy (the stake in) RUSAL at market price. We are taking part in the smaller share of this deal ... the bigger part will come from market participants,” the source said.

“Private investors will see that we are supporting this deal and I think that is a good signal. We are interested in RUSAL sorting out all its financial issues and coming out of the crisis.”

VEB has already thrown a lifeline to RUSAL, supplying an unprecedented $4.5 billion loan to avoid margin calls on Western credit and extending the facility until 2010 to help out one of the country’s biggest employers. ($1=28.71 Rouble) (Reporting by Darya Korsunskaya; Writing by Toni Vorobyova)