Vladimir Potanin plans Norilsk Nickel overhaul – by Courtney Weaver and Charles Clover (Financial Times – September 9, 2013)

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Moscow – After years of vicious shareholder infighting, lawsuits and mudslinging, Norilsk Nickel’s oligarch shareholders are scrambling to overhaul its investment strategy and management structure following the steep fall in metals prices.

In an interview, Vladimir Potanin, Norilsk Nickel’s single biggest shareholder with 30 per cent and chief executive, said the company had hired western consultants including McKinsey and BCG to advise the nickel, platinum and palladium producer, which has a market capitalisation of $20.6bn.

According to Mr Potanin, Norilsk has never managed to shake off its Soviet legacy and develop into a 21st century multinational, despite being the world’s largest nickel producer with $12bn in annual revenues and close to $5bn in earnings before interest, tax, depreciation and amortisation.

“To put it simply, the company should become more modern. It’s still working like a Soviet ministry,” Mr Potanin says. “There is a lot of red tape and other things that need to be done away with, given today’s difficult financial markets.”

The company plans to move away from massive development projects with 15-year timelines to short-term projects that will be completed within two years and have an internal rate of return of at least 20 per cent.

“We had the Soviet habit of state planning. We built everything with a long-term perspective and didn’t care about what efficiency was reached at each stage,” Mr Potanin says.

The company plans to sell off foreign assets no longer seen as part of the group’s core business, and invite sector peers to take stakes in existing projects to minimise Norilsk’s capital expenditure risks.

The strategic overhaul, Mr Potanin notes, comes out of necessity, not choice. While Norilsk was more pragmatic than peers in the pre-crisis years in terms of mergers and acquisitions and capital expenditure, its four-year shareholder conflict limited the management’s ability to re-evaluate its post-crisis strategy. The infighting also weighed on Norilsk’s share price, which lost 40 per cent of its value between April 2011 and the peace deal in November last year.

Mr Potanin denies he and his former rival, fellow Norilsk shareholder Oleg Deripaska, who controls 28 per cent, were forced to reach a peace agreement by the Kremlin last year because of a looming court battle in London.

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