Deripaska turns to UK Tory peer in race to save EN+ and Rusal

When Oleg Deripaska was preparing a $1.5bn listing of his holding company on the London Stock Exchange late last year, the Russian oligarch turned to a man who has served as a linchpin between Moscow and the UK establishment for at least two decades.

Gregory Barker, a Russophile Tory life peer, former UK energy minister and one-time employee of Chelsea FC owner Roman Abramovich, was hailed by the company as the man to chair EN+ and assuage corporate governance concerns among potential international investors.

Six months on, Lord Barker of Battle will need to draw on all his political skills as he tries to push through a deal to save EN+ and Rusal, the Russian aluminium producer it controls, from crippling US sanctions that have upended the global metals market.

The plan, which will see Mr Deripaska reduce his stake in the aluminium-to-hydro electricity producer from 70 per cent to below 50 per cent, has to win the blessing of both Washington and the Kremlin.

More immediately, Lord Barker needs to persuade the US Treasury to extend a May 7 deadline to end Mr Deripaska’s control of the company, otherwise shares in EN+ could be suspended from the LSE, causing further pain for investors.

Only then will the former MP be in a position to start sounding out buyers for the shares Mr Deripaska has agreed to sell.

Lord Barker has to convince the US Treasury that Mr Deripaska has genuinely severed his ties to the company, which will require finding a buyer who is not connected to the oligarch. A Russian company or businessman could buy his shares but only with the approval of Washington.

“There’s a difference between Russian ownership and [selling the company to Mr Deripaska’s] friends and family,” a person familiar with the matter said. The sale has to pass “the sniff test” in Washington.

The US Treasury declined to comment on whether it would extend its deadline. The sanctions, introduced on April 6, were the first to target a Russian company listed in London and were in response to Moscow’s “malign activities”, the US said.

While the US has said sanctions on EN+ and Rusal could be lifted if Mr Deripaska ceded control, it has also made clear that a “reduction in the percentage of ownership by a sanctioned individual is not necessarily in and of itself a basis for delisting”.

As well as reducing his stake in EN+, Mr Deripaska has agreed to tear up a shareholders’ agreement that gives the company effective control over Rusal via the right to nominate its chief executive and half its board, according to a person familiar with the agreement.

EN+ has a 48 per cent stake in Rusal, the largest aluminium producer outside of China, as well as hydropower assets that make it the seventh-largest producer in the world.

Rusal in turn owns almost a third of Russia’s Norilsk Nickel, a precious metals miner that is the world’s largest producer of palladium.

If the US Treasury accepts the deal, that could allow Rusal to keep trading its aluminium on international markets. Prices for the metal rose by up to a third after sanctions hit on fears that Rusal’s production could be cut off. They have since fallen 13 per cent from their peak on April 18.

Lord Barker has defended his decision to stay on as chairman of EN+ as necessary to represent minority shareholders, who make up about 13 per cent of the group. Its institutional investors include the Qatar Investment Authority, the country’s sovereign wealth fund, and Singapore-based AnAn Group, a partner of China’s CEFC China Energy.

Since EN+ was added to the US sanctions list its global depositary receipts — certificates which allow UK and international investors to hold its shares — have lost half their value.

While Lord Barker is said to have prospective buyers in mind for Mr Deripaska’s stake, they have not yet been formally approached, according to people to familiar with the plans.

In Moscow, Mr Deripaska’s move led some observers to the conclusion that the Trump administration had demonstrated unprecedented sway over the fate of the Russian economy.

“Respect to [Steven] Mnuchin, or whoever is responsible for this. They have demonstrated that they can force us to make changes to who controls one of the most strategic assets in this country, an enterprise that is make or break for entire Russian cities,” said a former Russian economic policy official.

Additional reporting by Barney Jopson and Kathrin Hille

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