ALSCON: Rusal Fights Back, Disputes Alleged Insolvency

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In its first public reaction to allegations of financial mismanagement and criminal devaluation of the Aluminum Smelter Company of Nigeria (ALSCON), UC Rusal, the current operator of the plant, has described the accusations as misleading and incorrect.

The sale of ALSCON to Rusal had been nullified by the Supreme Court in a July 6, 2012 ruling, which ordered that the company be handed over to US-based firm-BFI Group because it originally won the bid to acquire the plant before it was sidelined and ALSCON was awarded to Russia’s Rusal.

But, since the apex court directive, the Bureau of Public Enterprises (BPE) and BFIG had been at loggerheads over the execution of the Share Purchase Agreement (SPA) as the latter had refused to pay the initial $410 million-price for ALSCON because it believed the company had been criminally devalued.
The crisis between BFIG and the privatisation agency had resulted in the cancelation of the sale offer to the former, prompting the duo to again resort to the apex court for the second time to resolve the issue.

BFIG had claimed that Rusal had consciously devalued ALSCON form $1.2 billion in 2006 to only about $89 million as at 2011. It said recently that it had directed its legal council to petition the Economic and Financial Crimes Commission (EFCC) and the Independent Corrupt Practices and Other related Offences Commission (ICPC) to probe Rusal to that effect.

Also, a KPMG audited report of 2011 had indicated that the company might be bankrupt amid rising short term loans value against the company’s declining asset value.

The audited report also indicated that the management had jettisoned the apex bank ruling by not mentioning the development in its financial statement to its shareholders.
Before now, Rusal had often refrained from making public statements on ALSCON arguing that issues were pending before the court of law.

It recently announced that it had temporarily suspended production at the plant owing to the uncertainty of the legal owner of the company as well as power related issues.

But its Spokesman Tatyana Smirnova told THISDAY over the weekend that contrary to media reports, Rusal was not insolvent and had invested about N11 billion (about $ 79.28 million) into fixed assets from 2007 to 2011.
Giving a breakdown of its financial commitments in equipment, machinery, and facilities, she said in 2007 it invested N4.87 billion (US$34.81 million; 2008 – N4.81 billion (US$34.39 million); 2009 – N0.53 billion (US$3.81 million); 2010 – N0.60 billion (US$4.34 million); and N0.27 billion (US$1.935 million) in 2011.

She added that, “The false statements which have emerged in the mass media about the possible existence of a plot by the management of ALSCON, owned by the Russian Company UC RUSAL, to strip the enterprise of its assets by announcing them as obsolete are completely groundless and defamatory.”

She said: “Information about the insolvency of ALSCON, in respect to ensuring the redemption of borrowed funds is false. ALSCON has in its possession officially certified letters from its shareholder, Dayson Holding, which state that Dayson Holding is not planning to recuperate loans previously granted to ALSCON while Dayson Holding remains its main shareholder. In accordance with the conditions of the loan agreements, Dayson Holding has granted loans to ALSCON totaling US$159.4 million as of the 1st of January 2013, allowing ALSCON to develop.”

Smirnova, also described as groundless, allegations that it had been granted a $120 million loan by information that the Nigerian Government for the purpose of dredging the Imo/Okpobo river.

On the allegation that it had unnecessarily classified some of the equipment as obsolete without proof, she said, “The spare parts and equipment that is worth N5.9 billion and the availability of which is mentioned in some publications, constitute an inventory stock of extended shelf life items. At the time of preparation of the administrative reporting for 2011, work for the identification of the spare parts and equipment had commenced and completion took place at the end of 2012 in accordance with the agreed schedule. These reports are available and will be submitted to the KPMG auditors, to be added to the report for 2012.”

She said: “No assets of the enterprise were divested. In order to implement the plans for the enhancement of production output, during the period from 2007 to 2012, ALSCON’s storeroom supplies were increased by RUSAL from N4.87 billion (US$34.78 million) to N8.4 billion (US$60 million). This means that the value of the plant in terms of its inventory stock and fixed assets increased by N3.53 billion (US$24.2 million).”

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