Moscow, 14 October 2008 — UC RUSAL, which owns a 25% plus two shares stake in Norilsk Nickel, љis issuing this statement to raise its concerns about the announced purchases of a number of assets by љa Norilsk Nickel subsidiary from Vladimir Potanin, the shareholder controlling the company, as well as about financial situation of Norilsk Nickel in general.


The decision to purchase the assets worth more than USD 600 mln from the shareholder controlling the company was taken without discussions with other shareholders or Board of Directors. This decision as well as buyback of Norilsk Nickel’s shares by the subsidiaries including OGK-3 is a serious violation of corporate governance principles.


Vladimir Potanin and Interros having control over Norilsk Nickel and OGK-3 are using the balance sheet of Norilsk Nickel in its interests without taking into account the difficult situation on the global financial markets, as well as the importance of maintaining the company’s liquidity.љ In the case of OGK-3 such acquisitions threaten the implementation of the investment programme of the generating company and are misuse of funds received from the additional emission in 2007.


Neither RUSIA Petroleum, nor Plug Power, or, moreover, OOO T-Invest are core assets for OGK-3 and their purchase is explained only by the desire of Interros to get access to the cash of the company.љ In the RUSIA Petroleum case, Interros sold even not a blocking stake, leaving less than 1%, which is a qualitative change to the cost of the stake.


These deals are made in the overall unfavorable situation at Norilsk Nickel related to the fall of price on nickel, copper, and other metals, on the one hand, and with the considerable increase of production costs, on the other hand. As a result, the company’s profitability declines significantly.


The purchase of the unprofitable assets, such as LionOre, buybacks of the company’s shares using the subsidiaries’ balance sheets at prices higher than the market, purchase of non-core assets are depriving Norilsk Nickel of its substantial cash reserves. This may lead to partial or complete termination of the planned investments in the environmental programmes, production and modernisation.љ This may also cause the reduction of tax payments to the Norilsk city budget, which are core to the city, and severe social consequences for both Norilsk city and the whole Krasnoyarsk region, where the company is one of the key taxpayers. љ