Viktor Vekselberg, the owner of ZAO Renova, is prepared to load Ukraine's entire titanium industry onto himself
Photo: Dmitry Azarov
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A Titanium Holding for Renova
// Is being set up by the Ukrainian government
Kommersant has learned that the government of Ukraine intends to sign a decree by July 10 setting up a state holding that will include all of the country's titanium producers and processors.
The holding will then be privatized, with the main contender for the holding being ZAO Renova, owned by Viktor Vekselberg. The managers of Ukraine's titanium enterprises fear that their future owner will reorient the plants entirely to producing raw materials for Russia, leaving Ukrainian industry without them.
Vekselberg spoke of plans to set up a vertically integrated titanium company in Ukraine back at the end of March (see Kommersant of March 30) – Renova has owned development licenses for the Fedorov apatite-ilmenite deposit (Zhitomyr Region, Ukraine) since 2003. At that time, it was learned that Renova was interested in the Irshan and Vysokogorsk ore mining and processing enterprises (GOK), which supply ilmenite concentrate (titanium ore) to the Russian OAO VSMPO Avisma and the Ukrainian OAO Sumykhimprom for the production of titanium dioxide.
However, Vekselberg was unable to reach an agreement to buy up the state-owned GOK. He then proposed another plan to the Ukrainian government. Vladimir Sokolovsky, the general manager of ZAO Titanium-Apatite Company (TACO, which is part of Renova), told Kommersant that “we recommended setting up an industrial and financial group under the provisional name of Titanium of Ukraine and attracting Ukrainian, Russian, and Western capital. The country's leaders supported this idea and approved Renova as the Russian partner.” According to TACO's information, the government will consider the question of setting up NAK Titanium of Ukraine before July 10. Sokolovsky refused to name Renova's stake in the new company, but according to Kommersant's information, it will be no less than a controlling interest.
Kommersant has learned that Titanium of Ukraine will include the Irshan and Volnogorsk GOK and GAK Titan, which will receive their facilities; Sumykhimprom; Zaporozhye Titanium-Magnesium Plant (ZTMK); and two specialized research institutes – GNII MINDIP (Sumy) and GNIPI Titana (Zaporozhye). ZTMK and the two mining and processing plants will be auctioned off before joining the holding. Then the government plans to transfer its stake in Titanium of Ukraine to a private investor. Kommersant sources in the Ukrainian government say that Prime Minister Timoshenko will personally be in charge of preparations for setting up the new holding.
Market participants estimate that privatization of Ukraine's titanium industry could take one to two years. “Development of the Fedorov deposit is possible only if there is an agreement with processing structures in Ukraine,” explains Aleksey Evgenyev, the general manager of Renova Capital [the Renova subdivision in charge of this project]. “It would be premature to start developing the deposit before this.” According to Sokolovsky, investments in the new company should amount to $525 million before 2008, and more than $700 million between 2008 and 2014. The money will go towards modernizing existing enterprises and building new ones – Renova is planning to set up paint factories and plants producing rolled titanium for pipes and for the aerospace industry.
However, the formation of the new holding may encounter opposition from its potential members. In the opinion of Supreme Rada deputy Evgeny Lapin, who is honorary president of OAO Sumykhimprom, the project is flawed, because the investment commitments have been insufficiently specified. Sumykhimprom is convinced that Renova is more interested in control over the raw material base for the Russian titanium alloy industry, and therefore will probably curtail investments in the chemical industry. Lapin is also disturbed that the government's preparations for setting up Titanium of Ukraine are nontransparent. The deputy believes that if a consolidated titanium company is formed, the state must retain control over it.
Stanislav Zatrutin, CEO of GAK Titan, told Kommersant that “we believe this amalgamation is not in the interests of potential members but rather in Mr. Vekselberg's interests. Amalgamating the companies will not solve the problem of attracting investments. There is no economic justification; there are fine words and promises without any indication of sources, periods, and conditions for providing investments.”
Maria Molina; Konstantin Kravchuk, Kiev; Maria Cherkasova, Ekaterinburg
All the Article in Russian as of June 27, 2005
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