* En+ CEO forecasts steeper aluminium shortage
* Considers public capital markets to reduce debts
* Says En+ gives entry into emerging markets without FX
By Dmitry Zhdannikov
LONDON, May 16 A deepening global shortage of
aluminium and an improving outlook for Russian equities should
make tycoon Oleg Deripaska's En+ company attractive to investors
seeking exposure to emerging markets free of foreign exchange
risks, its chief told Reuters.
Chief Executive Maxim Sokov said En+ is billing itself as a
Russian aluminium and hydropower conglomerate similar to
Norway's Norsk Hydro but with the benefit of lower-cost Siberian
power, a boon for highly energy-intensive aluminium smelting.
"We convert power into aluminium and sell it to the world.
We believe the aluminium market has a significant upside," said
Sokov, whose company owns Siberian power assets and a 48 percent
stake in Rusal, the world's second-largest aluminium
In a Reuters poll published this month, analysts slashed
their estimates of a global aluminium surplus this year by 74
percent to 82,000 tonnes from 317,000 tonnes in the previous
poll in January. They have pegged in a deficit of 200,000 tonnes
for 2018, mostly due to a crackdown in top producer China to
The metal, mainly used in transport and packaging, has been
the best performer on the London Metal Exchange, rising
13 percent this year 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 to reduce pollution.
That should lead to a further decline in aluminium
production globally by about 1.2 million tonnes, beginning from
the winter months of 2017, Sokov said.
En+ is considering an initial public offering (IPO) in
2017, possibly as early as June, market sources have said.
Sokov declined to comment on any IPO, saying the group "is
considering various instruments, including public capital
markets" to raise funds as it is seeking to cut its debt.
En+ has amassed debts of around $5 billion during the last
decade when it was consolidating power assets in Siberia and
wants to reduce the leverage to around three times its core
earnings from the current ratio of around six.
Deripaska, who started as a metals trader in the 1990s, was
Russia's richest and the world's ninth richest person, according
to Forbes, before the markets crashed in 2008.
The tycoon spent the next decade successfully renegotiating
his debts although he never fully recovered and with an
estimated wealth of $5.1 billion he ranks today as Russia's 23rd
The debt is mainly with top Russian state banks Sberbank
and VTB, of which two thirds is rouble
denominated and one third is dollar denominated.
Sokov said rouble revenues from power sales support
repayment of rouble debts, while Rusal's dollar-denominated
dividend supports dollar debt payments, thus limiting foreign
exchange risks which often put off investors in Russian
"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 said.
Besides an improving outlook for the sector, the outlook for
Russia is also getting better as geopolitical and sanctions
"The outlook for Russia will depend on the meeting between
(Russian President Vladimir) Putin and (U.S. President Donald)
Trump. But even among this uncertainty, Russian assets have
considerably gone up in price," said Sokov.
He gave as an example yields on Russian corporate bonds,
which used to trade above 10 percent but have lately declined to
4-6 percent on renewed appetite from investors, including for
"I think a similar story will happen with Russian equities"
he said, predicting the narrowing of valuations gaps with
(Editing by Susan Thomas)