UC Rusal has launched the first stage of the Taishet Aluminum Smelter (TaAZ) with a capacity of 428,500 tons per year in the Irkutsk Region, the company said on December 17.
Investments in the project amounted to about 100 billion rubles, of which 45 billion rubles. a syndicated loan from VTB (RUB 30 billion) and Gazprombank (RUB 15 billion). The rest – own funds. Taking into account the Boguchansky aluminum smelter, which operates within the BEMO project jointly with RusHydro, as well as the Khakass aluminum smelter launched in 2006, TaAZ became the third aluminum smelter built in Russia after the collapse of the USSR. The cost of three projects is 250 billion rubles.
The construction of the Taishet aluminum smelter began in 2007.The first metal was planned to be obtained in 2009, but two years after the start of construction, it was frozen due to the global financial crisis in 2008. Aluminum prices fell, and UC Rusal focused on keeping the operating enterprises and started looking for funding for Taishet. Work at TaAZ resumed only in 2011. The plant will produce primary aluminum and high-tech alloys based on it, which will account for up to 80% of the total production. To supply power to the plant, En + Group also built the Ozernaya substation with a capacity of 1,500 MW for 13 billion rubles. In addition, UC Rusal is building an anode factory in Taishet worth over 52 billion rubles.
According to the UC Rusal report for 2020, the production capacity of the group’s enterprises is 3.8 million tons of aluminum per year. At the same time, in 2020 the company produced 3.76 million tons of metal. Thus, the launch of the first stage of TaAZ can increase the production of aluminum by more than 10%. After the commissioning of the second stage of the enterprise, its capacity will reach 962,000 tons per year, it will become the third largest after the Krasnoyarsk (capacity – 1.02 million tons per year) and Bratsk (capacity – 1 million tons per year) aluminum plants.
UC Rusal’s net profit under IFRS for the six months of 2021 amounted to $ 2.02 billion, for the same period of 2020 the company showed a loss of $ 124 million. The company’s revenue in January-June amounted to $ 5.45 billion against $ 4 billion in the first half of 2020. . (an increase of 35.7%). Adjusted EBITDA for the six months amounted to $ 1.3 billion against $ 219 million a year earlier (an increase of 6 times). The company’s net debt at the end of the first half of 2021 is $ 4.1 billion (-26.3% by the end of 2020). Last year, there was a drop in financial performance of UC Rusal: revenue decreased by 11.8% to $ 8.6 billion, EBITDA – by 9.8% to $ 871 million, net profit – by 20.9% to $ 759 million.
According to Yuri Solovyov, First Deputy President and Chairman of the Board of VTB Bank, TaAZ will increase Russian aluminum production by more than 10% over the next five years. According to Sergei Grishunin, Managing Director of the NRA’s rating service, the enterprise in the Irkutsk Region can reach full capacity within the next two to three years. According to NRA estimates, even if TaAZ is loaded by 50%, UC Rusal’s revenue due to the launch of the plant can grow by $ 1.1 billion (based on current metal prices), EBITDA – by $ 200 million per year.
Alexey Pavlov, chief analyst of Otkritie Investments for the Russian market, notes that a 10% increase in aluminum output by UC Rusal is possible already by the end of 2022. He estimates an additional contribution to EBITDA at $ 400 million. “Dmitry Glushakov adds that by the time the first stage of the plant reaches full capacity, Taishet will bring the company an additional 8% to revenue and the same amount to EBITDA.
On December 17, aluminum futures on the London Metal Exchange (LME) traded at $ 2,645 per ton.The price of aluminum has been growing since April 2020, a sharp jump occurred in September 2021 after the coup in Guinea, which accounts for 20% of world bauxite production … The rise in aluminum prices was also influenced by the general increase in energy prices. On October 15, for the first time since July 2008, the price of 1 ton of aluminum exceeded the $ 3200 mark, but then began to fall.
“Now is a good time to increase production, since the market has not seen such high prices for aluminum for a long time,” says Glushakov. He adds that the project will remain profitable even in the event of an expected correction in aluminum prices in the coming years. The cost of metal on the global market, according to Grishunin, is supported by the high price of electricity (energy consumption for the production of aluminum can reach 30% of the cost price. – Vedomosti).
The representative of UC Rusal believes that there should be no problems with the sale of TaAZ products, since the global aluminum market remains in short supply. The metal can be in demand both in the European Union and the United States, Grishunin agrees. At the same time, China has managed to reduce energy prices, so the local aluminum industry, in its opinion, will be able to compensate for the shortages in September-November 2021 on its own.
Vasily Karpunin, head of the information and analytical content department at BCS World of Investments, adds that the plant will have a very low carbon footprint thanks to the use of electricity from Siberian hydroelectric power plants.
On the Moscow Exchange, UC Rusal shares as of 18.00 Moscow time were down 2.5% by the close of the previous trading session (to RUB 67.3). According to Karpunin, the news of the launch was expected, and therefore did not have a significant impact on the share price. But in the long term, an increase in operating indicators will have a positive effect on the price of securities, he said.
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