Diversification may be a logical step for many successful companies, but for Russia-based mining, metals and energy company, En+ Group, synergy is the essential ingredient for its success. “We want to become a group that will have business synergies between all the companies in our portfolio,” said Alexander Popov, the company's chief financial officer.
En+ has an impressive portfolio of interests. It holds a 47.41% (the largest stake) in UC Rusal, the largest aluminium producer globally, which was listed on the Hong Kong Stock Exchange in January last year. It also owns 100% of EuroSibEnergo, the largest Russian independent power producer and one of the world’s largest hydropower generating companies. Another notable company in En+’s portfolio is SMR, a ferromolybdenum producer, which it owns in full.
In the past couple of years, En+ has focused on getting EuroSibEnergo ready to list. “Along with the company’s management, we have been preparing EuroSibEnergo to be listing-ready in terms of meeting the relevant standards, including corporate management and finance,” said Popov.
Around 80% of EuroSibEnergo’s energy production is derived from hydropower. The remainder comes from coal-fired stations, with most of the power plants located in Siberia. EuroSibEnergo provides UC Rusal with energy for aluminium production, which is one of the factors that contributes to the latter’s profitability.
En+ is also developing several coal, uranium and magnesium projects to create synergies with the existing companies in its portfolio. However, when Popov joined the company in March 2007, it was still relatively young with few staff, and approximately 20% of its assets and around 20% of its revenues were derived from its oil business. Popov was responsible for building the finance and treasury functions from scratch. En+ is actively involved in the finance and treasury functions of the smaller businesses in its portfolio, because it does not have separate finance and treasury teams specifically for these businesses, though its larger businesses operate independently.
“En+ does not control the treasury and finance functions of companies like UC Rusal because it’s a self-sufficient public company in terms of its own management,” said Popov.
Perhaps the most important decision that Popov made for En+, along with the company’s senior management, was to leave the oil industry and sell off its oil assets by the end of 2009. “Our oil business had little synergy with the other businesses in our portfolio. The added value of the oil business was within itself.”
The company needed more liquidity after the global financial crisis to reduce its debt to an “optimum level” and to invest in its coal business. Looking ahead, Popov sees coal as a key business to expand into because of the synergy it brings to both UC Rusal and EuroSibEnergo.
“Our strategy is to tap the markets in Asia and specifically China. I think China will be one of the largest resource consumers in the world for an indefinite period of time. As an exporter of resources, we want to be a major supplier for China and other emerging markets in Asia,” Popov concluded.
