PhosAgro, Deripaska’s Basic Element May Set Up Pikalyovo Venture

OAO PhosAgro, the phosphate fertilizer producer that’s holding an initial public offering in London and Moscow, said it may set up a north Russian joint venture with billionaire Oleg Deripaska’s Basic Element.

The plan is part of PhosAgro’s intention to increase output of nepheline concentrate by almost fourfold to 6 million metric tons with “insignificant” capital spending, Chief Executive Officer Maxim Volkov told reporters in Moscow today. The concentrate is used in alumina, cement and soda.

Basic Element controls the BaselCement-Pikalyovo plant, which in the Soviet era was a joint production site for the operations of PhosAgro and ZAO Metachem in Pikalyovo, 250 kilometers (155 miles) southeast of St. Petersburg. PhosAgro, the world’s second-largest maker of phosphate fertilizers bought stakes in Metachem and ZAO Pikalevskaya soda for a combined $11 million in May, the company said in its 2010 annual report.

“Our management is part of a working group with PhosAgro that has been in negotiations to modernize the Pikalyovo complex for more than a year,” Svetlana Andreyeva, a Basic Element Pikalyovo spokeswoman, said by phone today. “Setting up a joint venture was discussed by this group.”

The three factories in Pikalyovo, a town of 23,000 people, were idled for months in 2009 because the plant owners were unable to negotiate terms for supply contracts. This sparked protests by hundreds of local residents who blocked a highway in an attempt to draw attention to their plight.

Vladimir Putin, prime minister at the time, upbraided businessmen including Deripaska for idling plants and making “hostages” of workers left without wages or heating.

PhosAgro may raise at least $500 million in its IPO, according to a termsheet obtained by Bloomberg News. The fertilizer maker plans to sell a 10 percent to 15 percent stake, with pricing expected as soon as July 15.

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