On June 17, the first joint meeting of public JSC Nikolayev Alumina Plant (NAP) shareholders was held. The plant’s famous privatization will doubtlessly contribute to the history of Ukrainian economic reforms.
STRUGGLE FOR NIKOLAYEV ALUMINA PLANT IS OVER
On June 17, the first joint meeting of public JSC Nikolayev Alumina Plant (NAP) shareholders was held. The plant’s famous privatization will doubtlessly contribute to the history of Ukrainian economic reforms.
The plant was originally set up to supply alumina to aluminum smelters of Russia. Its productive capacity is enough to provide 25% of raw materials required for the Russian aluminum industry. Such a crucial feature pushed the enterprise into the "great aluminum wars" ravaging the Siberian region in the middle of the 90s.
The NAP shareholders’ meeting was scheduled for last year, however, conflict of interests of the parties fighting for control over the company has twice caused the meeting to be set off. In addition, the plant’s privatization depth was not sufficient, namely, according to the law, shareholders meetings in public joint-stock companies with privatization depth of less then 60% is not considered legitimate. Commercial tender conducted in March 2000 resulted in sale of a 30% stake. Thus, the company obtained an influential owner, 75% privatization depth was achieved, and the NAP shareholders’ meeting was finally held.
The largest NAP shareholder is now the winner of the March tender, i.e. limited liability company Ukrainsky Aluminiy (Ukrainian Aluminum), which holds just over 35% in the plant. The second shareholder is private JSC Working Staff of Nikolayev Alumina Plant with somewhat over 30% of the authorized capital. The third one is the State, which still owns a 25% blocking interest, though Ukrainian Aluminum expects to acquire this stake some time later. By the way, approximately 66% of shares belonging to the former two stockholders are the indirect property of Siberian Aluminum company because it has contacts with Ukrainian Aluminum and controls Working Staff of NAP. Some 420 stockholders and proxies holding the total of 1,465,389,112 shares or 96% on the NAP, participated in the meeting; thus, the quorum was sufficient enough to make decisions.
Three attempts were made to resolve the issue of who should be the legitimate head of the NAP. Last year Vitali Meshin, a typical Soviet-type director, was replaced by Nikolai Naboka, who worked on behalf of international tolling company Trans World Group. Naboka was then replaced by Mikhail Stolyar, who was appointed by the Cabinet half a year ago. Stolyar is a well-known person on the CIS aluminum market, a genuine technocrat who has been working for the NAP ever since this plant was put into operation in 1980. Ukrainian Aluminum management recommended Mr. Stolyar for the office of chairman of the board with the NAP.
Ukrainian Aluminum president Herman Tkachenko, who proposed this candidate, explained his decision in the following way. During the six months of Mikhail Stolyar’s employment as the company’s top executive officer, the plant switched to different transactions that rejected tolling technologies of raw material supplies and product sales, thus significantly improving its manufacturing performance. Within the first five months of the current year, the NAP produced 458,000 tonnes of alumina, almost 28% more than in the respective period of the last year. Hence, it was no surprise that the overwhelming majority of the voters approved the candidate proposed.
The meeting also elected the supervisory board, which comprised Ukrainian Aluminum president Herman Tkachenko and State Property Fund deputy head Leonid Kalnichenko. The subsequent supervisory board meeting chose Herman Tkachenko as its head.
In addition, the meeting also examined the issue of UAH 27 million retained earnings of the company in 1998-1999. After discussing a number of alternatives, the majority of stockholders approved the approach suggested by Mr. Tkachenko. The meeting decided to allocate 15% of the retained earnings for dividends payable; to give about UAH 1.5 million as financial aid to employees, primarily to labor veterans who for some reason didn’t manage to acquire shares in the plant during privatization. The remaining UAH 21 million will replenish company’s tangible fixed assets that were somewhat depleted after the previous mismanagement.
In addition, the stockholders decided to allot UAH 1 million till the end of the current year to issue no-interest-bearing loans to NAP employees, mainly to purchase houses or improve housing conditions. The plant’s management headed by Mr. Meshin spent some USD 10 million per year to support the social sphere of the plant. After Mr. Meshin had been discharged, social-purpose assets of the NAP were restructured and partially handed over to municipal communal property.
Therefore, the absolute majority of the voters (on average, people holding over 95% in the company gave their approval) resolved every essential issue on the agenda. The shareholders approved the 1997-1999 management report, audit commission report, and 1997-1999 financial statements of the company, as well as the supervisory board report. They also gave their approval to alterations and amendments to the NAP Statute and the main directions of the plant’s activity for 2000-2001.
In the course of the current year, the company plans a significant increase in alumina output, namely it is scheduled to make 1.1 mln. tonnes of these raw materials for aluminum-making, 11% up compared to 1999. Next year outputs are planned to reach 1.2 mln. tonnes. The 2000 schedule of the company’s technological development implies a USD 3.6 mln. investment in priority production upgrade projects. These steps should drive alumina output up to 1.5 mln. tonnes per year.
In addition, the NAP is planning to launch a number of large-scale promising investment projects. During the struggle for control over the plant, nobody really cared about investments. One of these projects mentions co-making of gallium (a rare-earth metal widely applied in radio-electronics and highly valued on the global market), along with alumina, from alumina-based bauxite. The plant’s experts have generated a project of zeolite production (zeolite is a universal and environmentally safe ingredient for a new generation of synthetic detergents). Other plans are to complete construction of the second stage of a unit that should dehydrate and handle red mud, i.e. the gob remaining after alumina production process and a valuable raw material for iron & steel and construction industry, as well as efficient agricultural fertilizer. The Dnieper-Bug commercial seaport expansion project has been pending for a long while. This port was built to render services to the NAP, and its modernization will make it possible to export Ukrainian alumina by water and turn the port into the sea gate to the highly developed agrarian region of Ukraine.
The company’s management concludes that the time has come to view Nikolayev Alumina Plant from a different perspective, namely the struggle for the best piece of state-owned property is over and the regular production routine has begun.