UC RUSAL announces H1 2007 Results

• Alumina production rose by 4.6% compared to the same period last year and amounted to 5,583,833 tonnes.
• Aluminium production increased by 3.8% to 2,037,236 tonnes compared to the first half of 2006.
• Output of high value-added casthouse products increased by 14% and its share of total production reached 52%.
• Foil production increased by 21%.

Commenting on the half-year results Alexander Bulygin, CEO, UC RUSAL, said: “These strong results for the first six months of this year – showing an increase of alumina, aluminium and alloys production – indicate that we have successfully integrated our assets. We have laid a solid foundation for further growth by commencing construction of two aluminium smelters and one alumina refinery, which by 2012 will allow us to increase aluminium production by more than 26% and alumina production by over 13%. As a global corporation we have been actively expanding our international presence by opening representative offices in India and Vietnam, which solidify the Company’s presence in the Asia-Pacific region and provide us with closer access to the fastest-growing markets in the world. UC RUSAL’s expanded footprint enables us to unlock the potential of these regions to boost our own transformation into an integrated energy and metals corporation”.

Financial resultsⁱⁱ

• UC RUSAL's overall investment in its production assets during H1 2007 amounted to over USD 1.5 bln.
• Investment into expansion, reconstruction, modernisation and technical refurbishing of the existing facilities amounted to approximately USD 600 mln.
• Investment into R&D amounted to around USD 25 mln.
• The company's credit portfolio, as of July 1, 2007, reached USD 7.7 bln.

In H1 2007 UC RUSAL signed a number of loan facilities. In June, the United Company mandated banks to arrange USD 2 bln facility and raised USD 550 mln unsecured bridge. The funds will be used to refinance a number of unsecured bridge facilities.

Key projects and initiatives

In May UC RUSAL announced its Paving the Way to a Safer World initiative aimed at delivering considerable emissions reduction. By 2015 the company plans to have reduced direct GHG emissions from its existing aluminium smelters by 50% and in the long term to reach carbon neutrality across the aluminium production cycle.

To reach these goals, in the first six months of 2007 UC RUSAL continued its programme of commissioning new, state-of-the-art smelters and refineries, as well as continuing modernisation projects at existing facilities aimed at reducing harmful environmental impacts:

• UC RUSAL and HydroOGK launched construction of the Boguchanskiy aluminium smelter with a capacity of 600,000 tonnes within the framework of creating the Boguchanskoye Energy and Metals Complex. The smelter will be built using UC RUSAL’s RA-300 proprietary technology. Project investment has reached around USD 2.3 bln.

• The company began construction of the Taishet aluminium smelter with a capacity of 750,000 tonnes per year. Planned investment amount to approximately USD 2 bln. The smelter will use the RA-400 technology developed by the company’s Engineering and Technology Centre.

• The construction launch of Eurasia’s largest bauxite and alumina complex in the Komi Republic. Planned investment volume is over USD 1.5 bln. The project involves the building of an alumina refinery with a capacity of 1.4 million tonnes per year and expansion of bauxite mining at Middle Timan deposit from 2.6 to 6.4 million tonnes.

• The modernisation of Krasnoyarsk smelter is close to completion. Overall emissions have already been reduced by 12%. In the first six months of 2007 the programme received investment of over USD 40 mln. The company’s overall investment into the project in 2000-2008 will exceed USD 300 mln. This will allow for an almost 30% reduction of harmful emissions. A considerable investment was used to equip the smelter with automated alumina point feeders.

• UC RUSAL is completing construction of the Khakas aluminium smelter, the first to have been built in Russia in the past 20 years. The second start-up complex of Khakas consisting of 84 cells was launched in May. Overall investments into the regional infrastructure exceed USD 21 mln. Commissioning of cells in the third start-up complex is underway. The smelter should reach full capacity by the end of this year.

• UC RUSAL launched the modernisation of the world’s largest aluminium smelter at Bratsk. The programme is planned until 2012 and is aimed at improving environmental performance at the facility. Investments amount to around USD 400 mln. This should result in a 40% reduction of pollutants and a production increase of 150,000-180,000 tonnes per annum. The smelter will be refurbished with automated alumina point feeders, about 130 new cells and 25 gas scrubbers.

• The Irkutsk smelter modernisation and expansion programme is almost complete. Within its framework a new reduction shop will be launched operating on the basis of OA-300, the company’s proprietary production technology. The launch of a new potline is scheduled for Q4 2007. As a result of the programme the smelter’s capacity will be increased by 1.5 times to 450,000 tonnes annually.

• UC RUSAL created a joint venture with French energy giant AREVA to produce electricity transmission and distribution equipment. Over the next 5 years the JV is expected to produce and deliver about USD 500 mln worth of equipment for the modernisation of existing operations and expansion programmes as well as for green-field aluminium smelters.

• UC RUSAL and the United Nations Development Programme have signed a memorandum of understanding (MOU) regarding a preparatory project designed to accelerate greenhouse gas emissions reduction efforts among industrial companies. UC RUSAL is the first company in Russia to have joined UNDP in its effort to create a global network of projects driven by the single goal of addressing the challenge of climate change.

The 3.8% growth in aluminium output and 14% rise in value-added products output for the past six months resulted from UC RUSAL's ongoing programmes to bolster production, modernise equipment and improve technical as well as economic parameters of the United Company's smelter operations. The value-added products share in the total aluminium output amounts to approximately 52%.
In the past six months UC RUSAL focused on developing new types of products for automobile industry and launched production of new alloys at Bratsk and Novokuznetsk smelters. Today, 22% of the company’s products are sold to the automobile and machinery makers.
The drop in demand for aluminium in North America contrasted by the rise of demand in Europe resulted in increased supply of aluminium to the European market amounting to 49% of the total export volume compared to 41%^v  in H1 of last year. The steady annual growth in aluminium consumption in such areas as transportation, packaging and construction makes Russia and the CIS a priority sales market: the share of supply to this region in H1 2007 equalled 21%.

i - Figures for H1 2006 and H1 2007 reflect the combined production results of United Company RUSAL, formed through the completion of the merger of RUSAL, SUAL and Glencore’s alumina assets.

ii - Figures are preliminary and may be revised  following audit completion.

iii - Figures for 2006 reflect the combined production results of United Company RUSAL, formed through the completion of the merger of RUSAL, SUAL and Glencore’s alumina assets.

iv - Decrease is due to temporary reductions in mining in Guinea and the Komi Republic.

v - Combined supplies by RUSAL, SUAL and Glencore’s Kubal.