May 12, 2017 / 8:13 AM / 8 months ago

UPDATE 1-Rusal boosts Q1 profit, to restart aluminium smelter project

(Adds Taishet project resumption, context on En+’s possible IPO)

May 12 (Reuters) - Russian aluminium giant Rusal posted higher first-quarter recurring net profit on Friday amid stronger aluminium prices and said it was preparing to resume construction of its aluminium smelter in Siberia.

Russian tycoon Oleg Deripaska controls 48 percent of Rusal through his En+ Group, which also manages his hydro power businesses. En+ may raise $2 billion in IPO in London and Moscow in June, sources familiar with the deal have said.

Hong Kong-listed Rusal, the world’s second largest aluminium producer, reported first quarter recurring net profit of $434 million, up from $149 million a year earlier, thanks to higher prices and volumes of sales.

Global demand for aluminium continued to grow in the first quarter of 2017, led by the transportation sector, while supply is expected to tighten in the second half, it added.

In a separate statement on Friday, Rusal announced that it had proposed the resumption of construction of its long-standing Taishet aluminium smelter.

Its board of directors has already approved the $38.5-million financing of works at the smelter in 2017, it added.

“While the funding is relatively small, the capacity is unlikely to come on stream in the near term,” analysts at Citi said in a note.

Rusal, which started building this smelter in 2007 but then delayed it when aluminium prices fell, told Reuters that it was still in talks with banks and its partner Russian power generator Rushydro to organise the financing for Taishet.

In 2016, Rusal said it was negotiating the $800-million of the project financing and to build 430,000 tonnes of annual capacity there by the end of 2018.

A source who attended meetings between En+ management and analysts previously told Reuters that En+ hopes that Rusal’s two brownfield projects - Taishet and another Boguchansk smelter in Siberia - would raise their capacity by one million tonnes of aluminium in 3-5 years, boosting En+’s EBITDA.

En+’s 2016 EBITDA (adjusted earnings before interest, taxation, depreciation and amortisation) reached $2.3 billion. Rusal accounted for $1.5 billion of that sum, and EN+’s other businesses - power operations, coal mining and logistics - accounted for $822 million.

Rusal’s shares rose 1.6 percent in Hong Kong on Friday, against a 0.1-percent growth in benchmark index.

Rusal estimated demand grew 5.5 percent year on year to 15 million tonnes in the first quarter. Over the same period, global supply was up 7.8 percent to 14.9 mln tonnes, signalling a market roughly in balance, according to the company. (Reporting by James Regan and Polina Devitt; Editing by Sonali Paul and Keith Weir)

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