Qatar sovereign fund eyes stake in EN+ ahead of IPO
Russian group understood to be seeking valuation of between $8bn and $10bn
Qatar’s sovereign wealth fund is in talks to join CEFC China Energy and commodity trader Glencore in taking a stake in Russian hydropower-to-aluminium group EN+, as part of the company’s planned flotation in London and Moscow next month.
The Qatar Investment Authority, which is Glencore’s largest shareholder and previously partnered the trader to buy a stake in Russian oil producer Rosneft in December, is considering buying shares as part of the initial public offering, two people with knowledge of the talks told the Financial Times, as the $335bn fund looks to increase its Russian presence.
Owned by metals tycoon Oleg Deripaska, EN+ is seeking to raise $1.5bn in the IPO, of which $500m will be provided by CEFC. Glencore will become a shareholder after the listing by exchanging its stake in Rusal, the aluminium producer controlled by EN+, for shares in the parent.
“QIA are keen to come in through the flotation but [Mr Deripaska] knows it is about price,” said one of the people, who declined to be named as the talks were confidential.
A spokesman for EN+ declined to comment, while a representative for QIA, which owns UK department store Harrods, the Paris St Germain football team and a stake in Volkswagen, the German car manufacturer, did not respond to a request for comment.
QIA’s participation could help EN+’s IPO. Mr Deripaska is understood to be seeking a valuation of between $8bn and $10bn, but several market participants who had analysed the company’s financials told the FT that he may have to settle for less.
“[Mr] Deripaska wants a higher valuation than the market thinks is possible,” said one person, who declined to be named.
“My goal is to raise money,” chief executive Maxim Sokov told the FT, while declining to comment on the potential valuation being sought.
EN+ owns 48 per cent of Hong Kong-listed Rusal, to whom it sells the bulk of the electricity it produces from five hydropower dams in Siberia. The company also has medium-term plans to export electricity across Russia’s southern border to China.
Glencore, whose chief executive Ivan Glasenberg is a personal friend of Mr Deripaska, is understood to view EN+ shares as a better investment than Rusal’s given the extra potential upside from the hydropower assets, and sees potential in using CEFC to push the co-operation with Beijing, according to two people briefed on the plans.
After the Glencore transaction, EN+ will own 56.9 per cent of Rusal, and Glencore will own a stake in EN+ calculated on the basis of the IPO price.
Mr Deripaska built his fortune snapping up former Soviet state-owned assets in the chaotic years after the collapse of the USSR, and a tussle for control of smelters in the 1990s dubbed the “aluminium wars”. Rusal also owns a 27.8 per cent stake in Nornickel, the world’s largest nickel producer.
But the 49-year-old is now seeking to reinvent himself as a green evangelist through EN+, pitching the company as the Russian answer to a global trend towards alternative energy initiatives. It appointed a former UK climate change minister as chairman last week.
While EN+ owns a number of coal mines and operates coal-fired heating plants, the company has sought to burnish its green credentials by opening a solar panel plant and funding projects to develop solar panel technology and aluminium-based batteries.
“We have a huge hydropower potential, which is a great source of clean energy . . . demand for this is only going to increase,” said Mr Sokov, who says the new investments are aimed at positioning the company to tap into future demand for aluminium-built, battery-powered electric cars. “Our other long-term R&D ventures are also in this environmental space.”
Straddling the steep banks of the Yenisei river in southern Siberia, the 1.1km-wide Krasnoyarsk dam 40km upstream from the city of the same name, is at the heart of EN+’s pitch to investors. Each minute, 600 cubic metres of water tumble down 24 tubes to power 12 turbines each as wide as a single-decker bus.
Built in 1956 and with a 20-metre-high red mosaic of Vladimir Lenin’s face on the side of the structuralist turbine hall, about 75 per cent of the electricity produced here is fed to a nearby aluminium smelter where power accounts for about a third of all costs
While the remainder is sold to the local grid network, the potential growth in this demand is limited. But finding efficient ways to sell power to China would open up a new market, Mr Sokov says.
“Russia has definitely started to realise the huge green energy potential they have,” said Adnan Amin, director-general of the International Renewable Energy Agency. “And even if domestic demand might not be enormous at the moment, China is very much looking for green power.”