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Alcoa-Saudi JV Raises $4.5 Billion Funds for Mega Plant
Jul 13,2010 10:24CST
industry news

JEDDAH, July 13 -- Alcoa's (AA.N) joint-venture with Saudi Arabian Mining Co (Maaden) (1211.SE) has raised $4.5 billion in debt for their giant aluminium project, three bankers close to the deal said on Saturday.

Pricing for the combined conventional and Islamic debt ranges from 165 to 275 basis points over Saudi Interbank Offered Rate (SAIBOR) depending on riyal and dollar funding and the stage of projects, they said.

The $7.5 billion project, expected to be one of the world's largest aluminium projects, consists of a rolling mill and a smelter which will each be financed separately and signed by September, bankers said.

State-controlled Maaden announced last month that its board had agreed on a $4.5 billion financing plan for the first phase of the aluminium plant with U.S. firm Alcoa, without giving pricing details or naming the banks involved. 

The $5 billion aluminium smelter will be 65 percent financed by debt and 35 percent by equity.

"It was raised in terms of commitments but lawyers are working on the final documents. We expect to sign in September," one banker said.

Financial advisers for the project are Saudi's Riyad Bank 1010.SE and Standard Chartered (STAN.L).

For the smelter, Saudi and international banks will provide $1.3 billion in Islamic and conventional loans, while the Saudi finance ministry's Public Investment Fund (PIF) will provide $1.3 billion and the government-owned Saudi Industrial Development Fund (SIDF) will provide $320 million, bankers said.

A $300 million loan guarantee from credit agency Coface is currently being studied, the bankers said.

Among international banks that took part in the financing are UAE-based Emirates NBD (ENBD.DU), France's BNP Paribas (BNPP.PA) and Standard Charted as well as Canada's Export Development Canada, another banker said.

The pricing of the Saudi riyal-denominated tranche of the smelter loan starts at 165 basis points above SAIBOR throughout the construction period before being raised to 205 basis points for the five-year period that will follow the completion of the construction works, sources said.

Pricing after five years from the project completion onwards will be at 245 basis points.

"For the dollar (-denominated tranche of the smelter loan) ... you add 40 basis points on all the pricing, except for the last period, you only add 30 ... (So the) last period is 275 basis points," one banker said.

The total cost of the rolling mill is $2.5 billion and it will be 50/50 financed by debt and equity, one banking source said.

The PIF will lend $750 million, SIDF will lend $160 million and banks will provide $220 million for the rolling mill.

The aluminium smelter and the rolling mill are the first phase of the Maaden Alcoa $10 billion joint venture complex which will include a bauxite mine and an alumina refinery.

The smelter and the rolling mill are expected to begin operations in 2013, while the mine and refinery are expected to come on stream the following year.


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