Aluminium Bahrain (Alba) has secured commitments from export credit agencies and is moving towards signing deals for its Line 6 expansion project in early April.

“For the ECAs [export credit agencies], everything is on schedule and we are planning to sign the contract by early April according to the plan, which was to secure the ECAs’ commitments by the end of the first quarter,” Ali al-Baqali, chief financial officer at Alba, tells MEED.

Expected to start metal production in early 2019, the Line 6 scheme will boost annual production by 540,000 tonnes upon its full ramp-up, bringing Alba’s total production capacity to 1.5 million tonnes a year (t/y), making it the world’s largest single-site aluminium smelter. The expansion project also includes a power station, which Al-Baqali says will play a crucial role in maintaining Alba’s competitiveness in the future.

“If we did not do Line 6 and chose to keep silent, our costs would have escalated,” he says. ”The new power station we are building for Line 6 will be about 1,800MW and will increase our efficiency when it comes to utilising gas. Gas is the main cost for Alba along with raw materials, so this will reduce the cost of metal per tonne. In order to be in business, you have to be more efficient otherwise you will be out of the market.”

ECA funding has been secured for the power station. “A consortium of [the US’] GE and [Turkey’s] Gama is our EPC [engineering, procurement and construction] contractor while the power distribution system is with [Germany’s] Siemens,” says Al-Baqali. ”From the beginning, we said they will be ECA-financed and we put conditions in our contracts for both. We have two ECAs for the power stations, one is Serv from Switzerland and the other is Germany’s Euler Hermes. We have already secured lenders with them and we got competitive rates.”

Alba is using ECA finance to support the construction of the fifth power station at the site as well as the sixth potline. “We are also trying to maximise the use of ECAs for the smelter side,” says Al-Baqali. “We have already allocated some ECAs with the vendors. We are in the FEED [front-end engineering and design] study stage for the smelter and we have concluded or awarded many packages, some of which contain large equipment, so we have already coordinated with the ECAs and the suppliers for financing. For the smelter, we are communicating with vendors and will go with France’s Coface, Italy’s Sace and Japan’s NEXI.”

Contract awards

US-based Bechtel won the engineering, procurement and construction management (EPCM) for the line 6 expansion scheme in April 2016 and progress is being made on awarding construction and supply contracts. “For the actual line, we are in the final stages of awarding the packages,” says Al-Baqali. ”I am expecting that by May or June, most of the contractors will be on site. The good thing this time with line 6 is that it will not be like Line 5, because in order to save time and efforts, the subcontractors will not assemble the equipment on site, they will bring it on site already assembled and install it.”

Like the power station, the potline will play an important role in Alba’s future. “Line 6 is also vital because it will add more capacity,” says Al-Baqali”. For manpower, we expect we will need 400-500 more employees and this is a lot for Bahrain. For the downstream, we have good demand from local customers, who want to expand once we have expanded. In the past, we have received lots of requests for more quantities, but at that time we could not satisfy them. With Line 6, the downstream companies will be able to expand and I know that Mumtalakat and the EDB [Economic Development Board] are working with investors to bring more downstream to Bahrain.”

The ECA funding for the scheme will support Alba’s syndicated loan facility, which closed in October last year. Alba’s original target for the syndicated loan was to raise between $500m and $750m. Due to heavy oversubscription, Alba decided to upsize the loan to $1.5bn, making it the largest corporate loan in the country’s history.

Although the firm does not expect to raise more finance for the project, it can do so if necessary. “If a gap in the financing is discovered in the future, we will cover it with other instruments based on what we’ve planned earlier with our financial advisers,” says Al-Baqali. ”But even if there is a gap, it will be a minor gap and it will be very easy to close it.”

Alba’s use of ECAs is expected to be followed by other companies in Bahrain that are planning major schemes. “We are the largest company in Bahrain using ECAs, and it will be a benchmark,” says Al-Baqali. ”It will be easy for others to follow us as it will be a reference for others and make the process easier.”