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Deripaska Creates a New Energy Holding

Oleg Deripaska's Basic Element said Tuesday that it had created a new energy holding company to manage its key energy, power and aluminum assets as part of an ongoing restructuring program.

The company is to be headed by Andrew Michelmore, an Australian who comes from the metals business. Michelmore will become deputy board chairman at RusAl, the new holding company's main asset.

Dubbed En+, the Jersey-registered company also includes Eurosibenergo, which manages power-generating facilities, and United Oil Group, which owns oil and gas assets.

En+ will generate $7 billion in revenues this year, BasEl said.

The adjustments in how the three main assets are managed could suggest Deripaska is looking for a way of bringing RusAl, the world's third-largest aluminum company, to the stock market, analysts said. The new structure also helps secure a continued supply of cheap energy for RusAl, analysts said.

"This is a very cunning structure. En+ will probably be floated on the stock market, as it is an offshore-registered company and doesn't have the problematic issues that surround RusAl," said Denis Nushtayev, a metals analyst with Metropol investment bank.

RusAl's use of tolling -- receiving ready metal from factories in return for raw materials and a small fee -- could hinder a listing, said Nushtayev and Rob Edwards, a metals analyst at Renaissance Capital. The stray minority shares in its individual factories could make listing difficult, Edwards said.

The fact the new company is registered offshore also offers Deripaska some protection, minimizing political risks, Edwards added.

According to BasEl, En+ is one of five holding companies set up to manage assets in a number of sectors. The other four holdings will manage resources, machinery, financial services and construction-related industries.

In October, BasEl managing director Gulzhan Moldazhanova said there were plans to transfer Deripaska's assets from BasEl to five industry-focused holdings.

Moldazhanova told Interfax at the time that BasEl would be restructured largely as an investment fund, while separate holdings would manage the majority of Deripaska's businesses.

Investment banks could not put a figure on the value of En+, but said that RusAl alone would be worth $14 billion.

BasEl said the new holding was registered at the end of 2005. Its name and assets were disclosed to the media on Tuesday, along with the appointment of Michelmore as CEO.

Michelmore -- who was formerly head of metals firm WMC, now part of mining giant BHP Billiton -- has 26 years of experience in the metals sector, BasEl said.

Michelmore's appointment brings a well-respected Western face to both En+ and RusAl, key to attracting investors, Metropol's Nushtayev said.

"Major international funds pay attention to the company's management first of all when they decide whether to invest," he said, adding that Michelmore would be useful if Deripaska decided to float En+.

Additionally, Michelmore's experience could help RusAl secure cheaper electricity and improve energy efficiency.

"He will have an acute awareness of the ties between energy and metals production," said Timothy McCutcheon, a metals analyst with Aton.

Electricity accounts for up to 45 percent of aluminum production costs.

BasEl is a private equity investment fund set up in 2001.

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