Rusal, one of the world’s leading aluminium producers, has secured a €46.6mn export loan to fund a large-scale programme to upgrade its Rusal Armenal foil mill in Armenia.  The loan, extended by German-based Bayerische Landesbank with guarantees from the German export loan agency Euler Hermes, is unprecedented in Armenian business both in terms of the sum and the term. It is the first such loan granted by a foreign bank to a private company in Armenia to undertake a technical modernisation programme.

Rusal’s agreement with German-based Achenbach to commence Armenal’s major modernisation was signed in October 2004. The US$70mn upgrade programme will create a full cycle production system and extend the plant’s product assortment.

Armenal’s loan, extended in two parts, will fully cover capital equipment costs and service fees necessary to implement the modernisation programme. BayernLB will provide the first part – a €6.99mn commercial loan – for 3.5 years. The second €39.61mn part is granted under the German export loan agency’s guarantees for 8.5 years. Rusal acts as a loan guarantor for the borrower.

“The loan raised by Rusal is important not only in terms of the company’s business development in the region – it’s a landmark development for Armenia’s economy,” says Rusal chief financial officer Vladislav Solovyov. “BayernLB has pioneered business lending in the republic and we hope that other members of the international banking community will follow this example.”

“Armenal’s renovation is one of the largest investment programmes in the Armenian economy,” Armenia’s trade and economic development minister Karen Chshmaritian says. “Thanks to Rusal’s efforts, Armenia will soon acquire a state-of-the-art foil rolling plant. The economic effect of BayernLB’s loan, secured with the help of the Russian company, will significantly improve the investment climate in our republic.”

The first stage of the modernisation project is expected to be completed in autumn 2005.  The modernised plant’s production capacity will reach 25,000 tons of foil annually.  Armenal will focus on the manufacture of thin foil (6-7 micron thick) – a product in high demand both in Russia and internationally. As a result of the modernisation, the plant’s thin foil output will amount to 18,000 tons a year.