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31. May 2007

Baltic Aluminum to Build $1.2Bln Plant

According to a  leading Moskow newspaper, Baltic Aluminum, a hitherto little-known Russian company, is planning a $1.2 billion smelter near St. Petersburg to break United Company RusAl's monopoly on output of the metal in the country, a local government official said Tuesday.

The smelter would have capacity to produce 360,000 tons per year of aluminum, said Alexander Butenin, press secretary for Leningrad region's committee for economic development.

A first stage of 180,000 tons would go into production by September 2010, and capacity could be doubled by September 2013, he said, citing data from a proposal received by the committee mid-May.

"In principle, the capacity of this enterprise could be increased to 540,000 tons after 2013," Butenin said.

Vedomosti, citing another local government official, said Baltic Aluminum was connected with billionaire investor Mikhail Fridman's Alfa Group. Local newspaper Delovoi Peterburg said it was controlled by A1, the investment division of Alfa Group.

A1 officials declined to comment and the project was not listed on the company's web site, www.a-1.com. Butenin did not confirm the ownership of Baltic Aluminum.

He said a decision on whether to build the smelter in the Kingisepp locality within Leningrad region, near Russia's border with Estonia, would probably be taken by July.

Delovoi Peterburg quoted Baltic Aluminum CEO Ravil Musin as saying the smelter would use imported raw materials.

Aton analyst Dmitry Kolomytsyn said that there did not seem to be a strong basis for the proposal.

"Baltic Aluminum probably has no experience in the industry, so this doesn't seem to be a very good investment," Kolomytsyn said.

Mikhail Fridman was ranked the country's sixth-richest man in the May edition of Forbes. He was one of only two men in the Forbes top 10 with no direct known investment in metals.

Alfa Group, Fridman's private equity vehicle, is better known for its interests in retail, telecoms, banking and oil.

The group controls Alfa Bank and X5, the country's largest food retailer, and holds stakes in mobile phone companies VimpelCom and MegaFon as well as a minority stake in TNK-BP.

United Company RusAl, formed this year by a merger of RusAl, SUAL and assets of commodities trader Glencore, is the country's only producer of aluminum and accounts for one-eighth of world supply of the metal used in cars, construction and packaging.

Alcoa, which operates two aluminum-fabricating plants in Russia, has expressed interest in building a smelter in the Far East.

Hydro Aluminum, a unit of Norwegian energy and metals group Norsk Hydro, has also held discussions about building a smelter in Russia.

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