United Company RUSAL Plc: Continuing Connected Transactions Purchase of Raw Materials and Provision of Corporate Guarantees

28-Dec-2017 Intellasia | BusinessWire | 7:20 AM Print This Post

HONG KONG–(BUSINESS WIRE)–Regulatory News:

United Company RUSAL Plc (Paris:RUSAL) (Paris:RUAL):

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of
Hong Kong Limited take no responsibility for the contents of this
announcement, make no representation as to its accuracy or completeness
and expressly disclaim any liability whatsoever for any loss howsoever
arising from or in reliance upon the whole or any part of the contents
of this announcement.

UNITED COMPANY RUSAL PLC
(Incorporated under the laws of
Jersey with limited liability)

(Stock Code: 486)

CONTINUING CONNECTED TRANSACTIONS
PURCHASE OF RAW
MATERIALS AND PROVISION OF

CORPORATE GUARANTEES

The Company announces that on 1 January 2018, a member of the Group, as
buyer, and an associate of Mr. Deripaska, as supplier, will enter into
the Purchase of Alumina and Hydrate Contract. Corporate Guarantees is
and will be provided by the member of the Group in order to secure the
contract price under the Purchase of Alumina and Hydrate Contract and to
support the modernization and expansion of the supplier´s production to
meet its supply obligations under the Purchase of Alumina and Hydrate
Contract.

THE PURCHASE OF ALUMINA AND HYDRATE CONTRACT

The Company announces that, on 1 January 2018, UC RUSAL Trading House
JSC, as the buyer, and BaselCement-Pikalyovo LLC, as the supplier, will
enter into a contract pursuant to which UC RUSAL Trading House JSC
agreed to buy and BaselCement-Pikalyovo LLC agreed to sell alumina and
hydrate (the “Purchase of Alumina and Hydrate Contract”). The key
terms of the Purchase of Alumina and Hydrate Contract are set out below:

Date of
contract

 

Buyer
(member of
the Group)

 

Seller (an
associate of
Mr.
Deripaska)

 

Raw
materials to
be purchased

 

Estimated
purchase
volume

 

Estimated
consideration
payable
excluding
VAT
(USD)

 

Scheduled
termination
date

 

Payment
terms

 

1 January
2018

UC RUSAL
Trading House
JSC

BaselCement-
Pikalyovo
LLC

Alumina and
hydrate

2018:
260,000 tons
2019:
400,000 tons
2020:
400,000
tons
2018:
59.52 million
2019:
101.27 million
2020:
105.03
million

31 December
2020

Payment to be
made on the
5th, 15th, 25th
day of the
current
month,
and the final
settlement to
be made on the
5th
day of the
next month

The consideration under the Purchase of Alumina and Hydrate Contract is
to be paid in cash via bank transfer.

THE CORPORATE GUARANTEES

In order for BaselCement-Pikalyovo LLC to agree with the contract
pricing as set out above, a corporate guarantee (“First Guarantee”)
is provided by a member of the Group to assist BaselCement-Pikalevo LLC
to obtain the following bank financing for refinancing part of its
existing debt owing to CJSC Pikalevskaya Soda (which is an independent
third party, a member of the PhosAgro Group). As of 1 September 2017,
the debt of BaselCement-Pikalevo LLC equals RUB 1.856 billion at an
interest rate of 10.73% per year.

Guarantor:   JSC RUSAL;
Lender: PJSC Sberbank;
Borrower: BaselCement-Pikalevo LLC;
Lending Amount: up to RUB1 billion;
Intended use: partial repayment of existing loan from CJSC Pikalevskaya Soda;
Financing costs: 8.9 % per year;
Repayment schedule:   equal repayments of RUB83.33 million starting from the 25th month;
Loan period: up to 36 months.

In order for the modernization and expansion of production of
BaselCement-Pikalevo LLC to meet its supply obligations under the
Purchase of Alumina and Hydrate Contract, corporate guarantee (“Second
Guarantee
” and together with the First Guarantee, the “Corporate
Guarantees
”)) is expected to be provided by a member of the Group to
obtain the following additional financing for BaselCement-Pikalevo LLC:

Guarantor:   a member of the Group;
Lender: financial institutions or other independent third parties;
Borrower: BaselCement-Pikalevo LLC;
Lending Amount: up to RUB1.75 billion;
Intended use: retrofitting of current facilities, purchase of new furnaces,
equipment, development of the mine, and other activities required to
expand the production at BaselCement-Pikalevo LLC;
Financing costs: not higher than the Bank of Russia key rate + 1.5% per year;
Loan period: up to 36 months.

THE ANNUAL AGGREGATE TRANSACTION AMOUNT

The contract price payable under the Purchase of Alumina and Hydrate
Contract and the terms of the Corporate Guarantees have been determined
with reference to the market price/terms and the Purchase of Alumina and
Hydrate Contract, when considered as a whole with the Corporate
Guarantees taking into account the terms and the total guaranteed
amounts thereunder, is on terms no less favourable than those prevailing
in the Russian market for raw materials of the same type and quality and
those offered by the associates of Mr. Deripaska to independent third
parties. The terms of the Corporate Guarantee are also provided on terms
no less favourable than corporate guarantees of same type provided by
members of the Group to independent third parties. The basis of
calculation of payments under the Purchase of Alumina and Hydrate
Contract is the unit price of the raw materials (alumina: USD237.19 per
ton (for 2018); hydrate: USD227.84 per ton (for 2018)) multiplied by the
volume to be supplied. The price per ton of the alumina and hydrate is
based on the industrial products producers’ price index. The unit prices
of the raw materials for 2019 and 2020 may be changed according to the
industrial products producers’ price index.

Based on the terms of the Purchase of Alumina and Hydrate Contract, the
annual aggregate transaction amount that is payable by the Group to the
associates of Mr. Deripaska for the financial years ending 31 December
2018, 31 December 2019 and 31 December 2020 is estimated to be
approximately USD59.52 million, USD101.27 million and USD105.03 million
respectively. Based on the terms of the Corporate Guarantees, the
maximum aggregated guaranteed amount (calculated based on the maximum
lending amounts under the respective loans) will be RUB2.75 billion
(approximately USD45,833,334).

The Company’s procurement managers, in line with the best-in-class
experience and know-how of the Company’s procurement policies, chose the
contractor offering the best terms and conditions (taking into account
the quality offered and the price) and then entered into the contract
with the chosen party. Accordingly, the Purchase of Alumina and Hydrate
Contract will be entered into.

The annual aggregate transaction amounts are estimated by the Directors
based on (i) the amount of raw materials to be purchased and their
contract price; (ii) the maximum aggregated guaranteed amounts under the
Corporate Guarantees.

Pursuant to Rule 14A.81 of the Listing Rules, the continuing connected
transactions contemplated under the Purchase of Alumina and Hydrate
Contract and the Corporate Guarantees should be aggregated, as they were
entered into by the Group with the associates of the same group of
connected persons who are parties connected or otherwise associated with
one another, and the subject matter of each of the contracts relate to
the purchase of raw materials for production by members of the Group.

REASONS FOR AND BENEFITS OF THE TRANSACTIONS

The Directors consider that the Purchase of Alumina and Hydrate Contract
and the Corporate Guarantees are for the benefit of the Company, as
BaselCement-Pikalyovo LLC offered a competitive price in consideration
of the Corporate Guaranee. The Purchase of Alumina and Hydrate is
entered into mainly for the purposes of purchasing raw materials for the
Company’s aluminium production by its aluminium smelters. The Corporate
Guarantees enable BaselCement-Pikalyovo LLC to offer the alumina and
hydrate at such a competitive price and in the required volume.

The Directors (including the independent non-executive Directors)
consider that the Purchase of Alumina and Hydrate Contract and the
Corporate Guarantees have been negotiated on an arm’s length basis and
on normal commercial terms which are fair and reasonable and the
transactions contemplated under the Purchase of Alumina and Hydrate
Contract and Corporate Guarantees are in the ordinary and usual course
of business of the Group and in the interests of the Company and its
shareholders as a whole.

None of the Directors has a material interest in the transactions
contemplated under the Purchase of Alumina and Hydrate Contract and the
Corporate Guarantees, save for (i) Mr. Deripaska, who is a director of
Basic Element and is interested in more than 50% of the issued share
capital of Basic Element; (ii) Ms. Gulzhan Moldazhanova, who is a
director of Basic Element; (iii) Ms. Olga Mashkovskaya, who is a deputy
chief executive officer for finance of Basic Element; and (iv) Mr.
Siegfried Wolf, who is the chairman of the board of directors Russian
Machines LLC and the chairman of the board of directors of PJSC GAZ,
being the companies controlled by Basic Element. Basic Element is the
holding company of BaselCement-Pikalyovo LLC. Accordingly, Mr.
Deripaska, Ms. Gulzhan Moldazhanova, Ms. Olga Mashkovskaya and Mr.
Siegfried Wolf did not vote on the Board resolutions approving the
Purchase of Alumina and Hydrate Contract and the Corporate Guarantees.

LISTING RULES IMPLICATIONS

BaselCement-Pikalyovo LLC is directly held by Basic Element as to more
than 30% of the issued share capital. Basic Element is in turn
indirectly held by Mr. Deripaska as to more than 50% of the issued share
capital. BaselCement-Pikalyovo LLC is therefore an associate of Mr.
Deripaska and is thus a connected person of the Company.

Accordingly, the transactions contemplated under the Purchase of Alumina
and Hydrate Contract and Corporate Guarantees constitute continuing
connected transactions of the Company.

The estimated annual aggregate transaction amount of the continuing
connected transactions under the Purchase of Alumina and Hydrate
Contract and Corporate Guarantees for each of the three financial years
ending 31 December 2020 is more than 0.1% but less than 5% under the
applicable percentage ratios. Accordingly, pursuant to Rule 14A.76 of
the Listing Rules, the transactions contemplated under these contracts
are only subject to the announcement requirements set out in Rules
14A.35 and 14A.68, the annual review requirements set out in Rules
14A.49, 14A.55 to 14A.59, 14A.71 and 14A.72 and the requirements set out
in Rules 14A.34 and 14A.50 to 14A.54 of the Listing Rules. These
transactions are exempt from the circular and shareholders’ approval
requirements under Chapter 14A of the Listing Rules.

Details of the Purchase of Alumina and Hydrate Contract and Corporate
Guarantees will be included in the relevant annual report and accounts
of the Company in accordance with Rule 14A.71 of the Listing Rules where
appropriate.

PRINCIPAL BUSINESS ACTIVITIES

The Company is principally engaged in the production and sale of
aluminium, including alloys and value-added products, and alumina.

BaselCement-Pikalyovo LLC is principally engaged in the production of
alumina.

CJSC Pikalevskaya Soda is principally engaged in the production of
inorganic basic chemicals and sale of chemical products, and is
generally involved in production of products such as potassium carbonate
(potash), calcined soda, cement, aluminum hydroxide (hydrate) and other.

DEFINITIONS

In this announcement, the following expressions have the following
meanings, unless the context otherwise requires:

“associate(s)”   has the same meaning ascribed thereto under the Listing Rules.
“Basic Element” Basic Element Limited, a company incorporated in Jersey.
“Board” the board of Directors.
“Company” United Company RUSAL Plc, a limited liability company incorporated
in Jersey, the shares of which are listed on the Main Board of the
Stock Exchange of Hong Kong Limited.
“connected person(s)” has the same meaning ascribed thereto under the Listing Rules.
“continuing connected transactions” has the same meaning ascribed thereto under the Listing Rules.
“Director(s)” the director(s) of the Company.
“Group” the Company and its subsidiaries.
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
of Hong Kong Limited.
“Mr. Deripaska” Mr. Oleg Deripaska, the chief executive officer of the Company and
an executive Director.
“percentage ratios” the percentage ratios under Rule 14.07 of the Listing Rules.
“USD” United States dollars, the lawful currency of the United States of
America.
“VAT” value added tax.

By Order of the Board of Directors of
United Company RUSAL
Plc

Aby Wong Po Ying
Company Secretary

28 December 2017

As at the date of this announcement, the executive Directors are Mr.
Oleg Deripaska, Mr. Vladislav Soloviev and Mr. Siegfried Wolf, the
non-executive Directors are Mr. Maxim Sokov, Mr. Dmitry Afanasiev, Mr.
Ivan Glasenberg, Mr. Maksim Goldman, Ms. Gulzhan Moldazhanova, Mr.
Daniel Lesin Wolfe, Ms. Olga Mashkovskaya, Ms. Ekaterina Nikitina and
Mr. Marco Musetti, and the independent non-executive Directors are Mr.
Matthias Warnig (Chairman), Mr. Philip Lader, Dr. Elsie Leung Oi-sie,
Mr. Mark Garber, Mr. Dmitry Vasiliev and Mr. Bernard Zonneveld.

All announcements and press releases published by the Company are
available on its website under the links
http://www.rusal.ru/en/investors/info.aspx,
http://rusal.ru/investors/info/moex/
and
http://www.rusal.ru/en/press-center/press-releases.aspx,
respectively.

Contacts

United Company RUSAL Plc

 


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