Abu Dhabi-based Emirates Steel Industries (ESI) is seeking a financial adviser for the $1bn phase three expansion of its Mussafah steel plant.

A group of international and local banks have been asked to pitch for the mandate, with responses due in late July. The company is expected to make an appointment two weeks later.

According to the request for proposals (RFP) sent to the banks, phase three of the Emirates Steel plant expansion will cost between $800m to $1bn and will be developed alongside existing steel production facilities at Mussafah. The decision to develop the next phase of the project at Industrial City of Abu Dhabi (ICAD) in Mussafah ends speculation that the company is looking at building the plant at Khalifa Industrial Zone Abu Dhabi (Kizad) at Taweelah, also in Abu Dhabi (MEED 8:4:11).

The phase three expansion of Emirates Steel will involve the development of a flat products plant producing about 1.4 million tonnes a year.

After a financial adviser is appointed, the company is expected to start approaching banks to finance the construction of phase three in early 2012.

In August 2010, Emirates Steel raised $2.2bn to finance the development of phase two of its steel production facilities, split between a $733m project finance loan, a $367m Islamic finance loan, a $600m working capital facility, and a $500m loan raised by General Holding Company, the parent company of Emirates Steel. The financing was guaranteed by Italian export credit agency Sace. That deal was arranged by France’s Natixis.

Banks that have been approached to pitch for financial adviser on the latest phase of the expansion project include the UK’s HSBC and Royal Bank of Scotland, France’s BNP Paribas and Natixis, Germany’s Deutsche Bank, and National Bank of Abu Dhabi.

Emirates Steel did not respond to requests to comment on its plans for phase three.