VI Holding hoping for support from Chinese gov't to complete investment project
BEIJING. Nov 12 (Interfax) - Russia's VI Holding, which is building a complex in China for hot and cold rolling of aluminum alloys, is hoping this project will be the pilot platform to develop state support mechanism during crises.
Launch of the Yulian facility will mark the concluding phase of the project to create a group of enterprises for high level aluminum processing in China that Vi Holding began in 2006. Overall investment now totals $3.3 billion, including $1.2 billion provided by shareholders, with the rest financed with Chinese bank loans and reinvested earnings.
"Financing for this project came exclusively from the Russian investor itself and from loans taken out. There is not a single yuan in this project, not a single ruble of state funds," the chairman of Vi Holding's board of directors, Valery Krasnov, said on the sidelines of an Asia-Pacific Economic Cooperation (APEC) forum in Beijing.
The holding's project in China is currently entering its finishing stage, and in the middle of next year the main investment phase will be practically finished, he told Interfax. "Though the market for aluminum and aluminum products has not been in the best condition for quite a while. That's why the investor's calculations on raising funds from the market through the project's capitalization have been crossed out by economic tsunamis in this case, the source of which is neither Russia, nor China. A force majeure has occurred," Krasnov said.
"Under such conditions, support from China's government is needed to finish building this production complex of VI Holding, [help] from its economic agencies and local authorities. These are not any support measures that are selective or focused only on this project. This concerns support measures that are in line with current Chinese legislation and economic practice in China. And Chinese companies, unlike us, use these preferences. That is, Russia and China actually just need to work out a cooperation algorithm between Russian investors and the Chinese government under, we'll say, force majeure circumstances," he said.
"Because Russia and China have become closer politically and economically, and given possible future joint projects - both private and with state capital - cooperation between these countries must be fine tuned," Krasnov said.
He added that the holding's project was already being discussed at bilateral Russian-Chinese meetings. "It has received a very important political impulse that will be used by the economic authorities of both countries. We are basing things on the idea that a discussion of the prospects of this Russian and Chinese project at the political level of the two countries shows that both Moscow and Beijing are aware of the importance of successfully carrying it out further since it will be an important signal for the rest of investors," Krasnov said.
Vi Holding plans to complete construction and fully start up the vertically integrated Yulian complex in Henan province for hot and cold rolling of aluminum alloys, with capacity for 600,000 tonnes and 400,000 tonnes respectively, in the second half of 2015.
Speaking at an intergovernmental meeting in Sochi in October, Vice Premier Wang Yang said that there had never been a comparable Russian-implemented investment project in China.
When it has started up, the Yulian complex will hold a 20% share of the Chinese market for aluminum production in a host of high-tech segments - the largest in the world, Group Founder and President Vitaliy Machitski said.
Vi Holding's Chinese complex currently has capacity to produce about 800,000 tonnes of highly refined aluminum, including 600,000 tonnes of hot roll, 60,000 tonnes of flat products and 150,000 tonnes of anodes. It has capacity to produce 750,000 tonnes of primary aluminum for refining and 420,000 tonnes of castings.
A vertically integrated production complex has been created, including coal production, electricity generation, output of prebaked anodes, electric aluminum and alloys, and high level processing of primary aluminum into high-tech products. The Yulian complex is not an aluminum smelter, but rather a facility for producing high-tech products from aluminum, Vi Holding management said.
Electricity is supplied from power plants with 1,500 megawatts of combined capacity, the fuel for which is supplied from nine nearby company-owned mines with 150 million tonnes of proven reserves. Vi Holding employs about 16,000 people in China.
The complex is located in two industrial parks, in the cities of Gongyi and Linzhou. It is part of Henan Yulian Energy Group, which is 97% owned by Vimetco, which in turn is controlled by Vi Holding.
Vi Holding, which until now had developed the project without any state support, expects to receive support from the Chinese authorities under China's policy of stimulating creation of high-tech integrated production.
Vi Holding management said the project will reduce the Chinese market's reliance on imports in a host of segments: materials for aluminum cans, lithographic sheet (CTP, CNCP), billets for high-tech foil, aluminum sheet for the automotive industry and other products requiring high-precision alloys.
"The Yulian investment project is included on the list of the 500 best high-tech enterprises in China," said Zhang Deguang, the board chairman of the China Foundation of International Studies. "This will serve as a worthy example for future expansion of our cooperation," he said.
At the intergovernmental meeting in Sochi, Wang said the Chinese authorities "are studying the topic of conversation with the Russian side concerning the Vi Holding project" and will seek a solution to the problems that metallurgical enterprises in China are encountering.
Yulian received the status of a joint venture with participation of foreign capital even before the arrival of Vi Holding: in 2003, Oriental Patron, a company controlled by Hong Kong investors Zhang Gao Bo and Zhang Zhi Ping, invested in company shares. Vi Holding joined the project in 2006. Oriental Patron currently has a 10% stake in Vimetco.
In addition to its investment in the aluminum sector, Vi Holding is engaged in developing the Darwendale platinum deposit in Zimbabwe, one of the biggest platinum deposits in the world. It also has property development projects in Moscow.