The decision is an important step towards final agreement to disburse. It is based on full disclosure of ownership by Rusal’s and Basic Element’s owner Oleg Deripaska, and additionally provides for detailed commitments to greater transparency, good corporate governance and high business standards, covering Rusal and Basic Element. Compliance with these commitments is covenanted in legal documentation with the EBRD and IFC.
For Basic Element, the agreement encompasses the disclosure of information on the holding’s investments as well as the adoption of a code of ethics.
Some 18 months ago, the EBRD and IFC agreed to provide financing to Sual, Russia’s second largest aluminium company, to expand the Middle-Timan mine in the Komi Republic, 250km south of the Arctic Circle. In mid 2005, Sual formed a 50:50 joint partnership for the Komi project with Rusal, Russia’s largest aluminium producer.
The IFC and EBRD then conducted an extensive review of Rusal’s record and ownership structure in order to determine if they could maintain their support to the Komi project because the partnership’s new ownership constituted a material change to the original loan agreement.
The EBRD and IFC, the private sector arm of the World Bank Group, had agreed to initial nine-year loans of US$75mn each, to be used to increase the domestic production of bauxite, the raw material of the aluminium industry. One of Russia’s strategic priorities is to develop its own bauxite deposits in order to reduce its dependence on imports and make its domestic aluminium industry more competitive.
A key part of both the EBRD’s and the IFC’s strategy is to help Russia use its natural resources as a catalyst to diversify and develop the economy, decreasing reliance oil and gas while setting high standards for Russian corporates in terms of disclosure, transparency, governance and business conduct, as well as environmental protection.