Tuesday 24 April 2018

Sanctions rock firm behind vast Aughinish Alumina plant

Aughinish Alumina refinery on the Shannon estuary
Aughinish Alumina refinery on the Shannon estuary

Donal O'Donovan and Polina Ivanova

The crisis engulfing Aughinish Alumina's Russian owner Rusal deepened yesterday, as the parent company's bonds slumped to record lows, two major customers said they were reviewing their contracts, and the London Metal Exchange distanced itself from the aluminium giant in the latest aftershocks from US sanctions.

A Government spokeswoman was last night unable to say what the sanctions mean for Rusal and its employees here. "The Department of Business, Enterprise and Innovation is assessing the potential implications that new US sanctions, targeting certain Russian individuals and firms, may have for both Irish and overseas companies operating in Ireland. The Department is also in close and regular contact with its enterprise agencies, IDA Ireland and Enterprise Ireland, who are monitoring this evolving situation," she said.

The sanctions imposed on Rusal and its main owner, metals magnate Oleg Deripaska, mark the first time a major international company has been targeted by Washington in its moves to punish Russia for alleged meddling in the 2016 US election.

Rusal took control of Aughinish Alumina in Limerick in 2007. The plant refines imported bauxite into alumina, a major ingredient in aluminium manufacturing, and employs 450.

The huge site on the Shannon estuary is the biggest of its kind in Europe and is responsible for approximately 30pc of alumina produced in the EU.

The company could not be reached for comment. The websites of Rusal and sister company En+ were down on Tuesday evening for unknown reasons, although they'd worked earlier in the day.

While Russian markets, including the rouble, fell across the board on Monday, Rusal assets were hardest hit, with its Hong Kong-listed shares halving and the company warning it risked tipping into technical default.

Yesterday its dollar bonds maturing in 2023 fell 17.3 cents to a new low, according to financial data provider TradeWeb. Yields had previously been steady at around 6pc, but spiked yesterday to 28.5pc, a signal of investor nervousness.

Swiss-based commodities trader Glencore, a Rusal shareholder and one of its biggest customers, said it was evaluating the position under its contracts with Rusal in the light of the sanctions.

Glencore CEO Ivan Glasenberg also resigned from his role as a Rusal director.

Oleg Deripaska's companies have seen other resignations by non-Russian board members since the sanctions, with his newly-created holding company En+ Group saying board directors Dominique Fraisse and Zhao Guangming had quit on April 6 and 9 respectively.

Glencore also said it was pulling back from earlier plans to swap its stake in Rusal for En+ assets.

"Glencore is committed to complying with all applicable sanctions in its business and is taking all necessary measures in order to mitigate any risks to Glencore's business as a result of the designation of Rusal and En+ as SDNs (specially designated nationals), including in respect of secondary sanctions," Glencore said in a statement.

"Glencore will not proceed with the transaction at this time in light of the designation of Rusal and En+ as SDNs," it said.

Matt Chamberlain, the CEO of the London Metal Exchange (LME), said it would take steps to keep aluminium produced by Rusal after sanctions were imposed out of its warehouses.

The US sanctions explicitly bar US entities from doing business with Rusal. Some companies outside the United States are wary that Washington could slap so-called 'secondary sanctions' on them if they are deemed to be facilitating Rusal's business. (Additional reporting Reuters)

Irish Independent

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