Banks confirm financial
support for Komi Aluminium project after change in ownership
Washington/Moscow, January 17, 2006 —
The International Finance Corporation and the European Bank for Reconstruction
and Development have confirmed that they plan to disburse loans totalling
$150 million for the Komi Aluminium project after determining that the
recent entry of Russian Aluminium (RUSAL) as an equal partner is acceptable.
The decision is an important step towards final agreement to disburse.
It is based on full disclosure of ownership by RUSAL’s and Basic Element’s
owner Oleg Deripaska, and additionally provides for detailed commitments
to greater transparency, good corporate governance and high business standards,
covering RUSAL and Basic Element. Compliance with these commitments is
covenanted in legal documentation with IFC and the EBRD.
In particular, IFC and the EBRD welcome the adoption by RUSAL of an action
plan over an 18-month timetable covering significant corporate ownership
disclosure, the publication of financial information and specific steps
aimed at improving corporate governance – notably the election of three
independent directors. These independent directors, to be appointed in
agreement with IFC and the EBRD, will chair and constitute the majority
of the sub-committees that will oversee audit and corporate governance
as well as other corporate matters.
For Basic Element, the agreement encompasses the disclosure of information
on the holding’s investments as well as the adoption of a code of ethics.
Eighteen months ago, IFC and the EBRD agreed to provide financing to SUAL,
Russia’s second-largest aluminium company, to expand the Middle-Timan
mine in the Komi Republic, 250 km south of the Arctic Circle. In mid-2005,
SUAL formed a 50-50 joint partnership for the Komi project with RUSAL,
Russia’s largest aluminium producer.
IFC and the EBRD then conducted an extensive review of RUSAL’s record
and ownership structure in order to determine if they could maintain their
support to the Komi project because the partnership’s new ownership constituted
a material change to the original loan agreement.
The EBRD and IFC, the private sector arm of the World Bank Group, had agreed
to initial 9-year loans of $75 million each, to be used to increase the
domestic production of bauxite, the raw material of the aluminium industry.
One of Russia’s strategic priorities is to develop its own bauxite deposits
in order to reduce its dependence on imports and make its domestic aluminium
industry more competitive.
A key part of both the IFC’s and the EBRD’s strategy is to help Russia
use its natural resources as a catalyst to diversify and develop the economy,
decreasing reliance on oil and gas while setting high standards for Russian
corporates in terms of disclosure, transparency, governance and business
conduct, as well as environmental protection.
The International Finance Corporation is the private sector arm of the
World Bank Group and is headquartered in Washington, D.C. IFC coordinates
its activities with the other institutions of the World Bank Group but
is legally and financially independent. Its 178 member countries
provide its share capital and collectively determine its policies.
The mission of IFC is to promote sustainable private sector investment
in developing and transition countries, helping to reduce poverty and improve
people’s lives. IFC finances private sector investments in the developing
world, mobilizes capital in the international financial markets, helps
clients improve social and environmental sustainability, and provides technical
assistance and advice to governments and businesses. From its founding
in 1956 through FY05, IFC has committed more than $49 billion of its own
funds and arranged $24 billion in syndications for 3,319 companies in 140
developing countries. IFC’s worldwide committed portfolio as of FY05 was
$19.3 billion for its own account and $5.3 billion held for participants
in loan syndications. For more information, visit www.ifc.org.