Summit News

War of words escalates at Russia's Norilsk

MOSCOW (Reuters) - Russian Prime Minister Vladimir Putin may have declared progress on peace between the billionaire tycoons who own Norilsk Nickel GMKN.MM, but their war of words was on with full force on Tuesday.

“I think there is a whole logic for them to stop abusing the other shareholders and play a normal game with all participants, employees, (the) government, and shareholders,” RUSAL Chief Executive and major shareholder Oleg Deripaska told the Reuters Russian Investment Summit.

The world’s No. 1 aluminum producer RUSAL, which owns around 25 percent of Norilsk, the world’s largest producer of nickel and palladium, accuses Norilsk of inept management and waste, and says it has the right to a major dividend payment.

The management, backed by fellow billionaire Vladimir Potanin’s Interros consortium, accuses Deripaska of trying to bleed cash rich Norilsk to pay off RUSAL’s debts of more than $12 billion, the largest of any non-state company in Russia.

“If a company is in good shape, it is paying its debts and honoring its obligations to creditors... then it is necessary to squeeze from it as much as possible for dividends and to demand loans from the company...” Norilsk CEO Vladimir Strzhalkovsky told the summit.

Putin traveled to the Arctic mining town of Norilsk, where he met with Potanin and Deripaska. The powerful prime minister was expected to force a resolution to the conflict. Instead, he merely praised progress in resolving the conflict.

“I never heard anything like that,” Deripaska said when asked if Putin hinted the row could be over soon.


In hopes of unseating RUSAL, Strzhalkovsky said, Norilsk’s pension fund is planning a buyout of RUSAL’s stake.

“The pension fund has launched an initiative to create a pool of investors to buy out RUSAL’s Norilsk stake,” Strzhalkovsky told Reuters Summit. “In principle this is not a bad idea.”

Strzhalkovsky said the pension fund, Norilsk and Interros could take part in the pool.

Deripaska said RUSAL had no plans to sell its stake and had also put on hold its previous plans to merge RUSAL and Norilsk at least until aluminum prices recover.

“You can’t buy what isn’t for sale, but things can change,” Strzhalkovsky said.

Deripaska said he wanted to hold his stake and watch it rise in value.

“My view is improvements that could be done in less than 6 months could add $500-$600 million in EBITDA and proper marketing could change investor assessment of the future value (of Norilsk),” Deripaska said. “This is what we need.”

Deripaska calls Norilsk’s marketing erratic, while Strzhalkovsky said sales were consistently above exchange prices and Deripaska was acting as a stalking horse for another RUSAL shareholder, global commodities trading house Glencore.

Strzhalkovsky said he has recently complained to Putin about pressure from RUSAL to change Norilsk’s marketing policies and award most export contracts to Glencore instead of the current system of long-term deals with all global customers.

“Glencore’s proposals turned out to be uncompetitive... He (Deripaska) may be willing to transfer (contracts to Glencore) but it would be against the interest of the company and the Russian Federation. I told Prime Minister about it and he fully supports me.”


Strzhalkovsky said he was ready to go in his fight with Deripaska as far as asking the state to abolish tolling schemes for RUSAL, which allows to the company to import raw material and export finished products duty free and pay only a certain fee for processing.

“This question must be raised and it will be raised,” he said.

But Deripaska -- who became synonymous with state intervention in 2008-2009 when he was the biggest recipient of state funds to bailout his enterprises -- said the state could stay out this time.

“I think it is a nice lesson,” he said. “For everyone. Thecompany should be managed properly, without any government interference, and we can bring (it) back on track. And actually we are not in a hurry.”

Reporting by Michael Stott; Sitaraman Shankar, Mike Dolan, Aleksandras Budrys, Polina Devitt, Melissa Akin and Dmitry Zhdannikov; writing by Melissa Akin and Dmitry Zhdannikov, editing by Leslie Gevirtz