Maaden smelter forms banking group

17 August 2010

Financing due to be completed in September

Saudi Arabian Mining Company (Maaden) has formed the banking group for the development of its aluminium smelter at Ras al-Zour and financial close is expected to occur in mid-September.

The financing has had a strong response and has been more than two times oversubscribed.

The financial advisers are expected to take several months to finalise the documentation and allocations because of the slowdown in activity due to Ramadan and summer holidays.

A total of around 15 banks will fund the project, including only four non-Saudi banks. They are Export Development Canada (EDC), the UAE’s Emirates NBD, France’s BNP Paribas and the UK’s Standard Chartered, which is also acting as financial adviser. The total commitments they have provided totals $620m, although this will be scaled back when the bank allocations are made. EDC alone has offered to lend around $300m.

Maaden aluminium project timeline
April 2007Signs heads of agreement with Alcan (later Rio Tinto Alcan)
December 2008Rio Tinto Alcan says it will no longer be equity partner
March 2009Signs technology transfer deal with Rio Tinto Alcan
December 2009Signs agreement with new partner, Alcoa
26 AprilMaaden, Alcoa and advisers meet potential lenders
1 MayBanks sent request for proposals for funding project
5 JuneBank responses due after being delayed from 29 May
19 JuneBreaks ground at Ras al-Zour
22 JuneMaaden sets pricing levels on project debt
10 SeptemberExpected date of financial close
Source: MEED

In addition, Saudi banks involved in the deal are National Commercial Bank, Riyad Bank, Samba, Banque Saudi Fransi, Alinma, Saudi Hollandi, Al-Rajhi Bank, Sabb, Apicorp and Arab National Bank (ANB). They will be predominately providing riyal loans to the deal. The local banks had originally offered over $1bn to the project in dollar loans, but many banks decided to shift their commitments to riyals when the pricing on the deal was revealed in late June.

Pricing starts at 165 basis above the Saudi interbank offered rate (Sibor) for the riyal loans, and 205 basis points above the London interbank offered rate (Libor) for the dollar loans.

A loan with backing from French export credit agency Coface that would total around $300m, is still being considered. A source close to the deal, however, says the pricing on this loan was not attractive enough to make it appealing for the project sponsors.

As a result the financing will be split between a $1.7bn bank tranche, a $1.3bn loan from state-owned Public Investment Fund (PIF) and around $320m from the Saudi Industrial Development Fund (SIDF).

Riyad Bank is also acting as financial adviser on the project, and BNP Paribas is advising Maaden’s joint venture partner on the project, the US’ Alcoa. The US firm will have a 40 per cent stake in the company and will invest around $900m in the project over four years.

Once complete, the complex will have a refinery with capacity of 1.8 million tonnes a year (t/y), a 740,000-t/y smelter and will be linked to a 4 million-t/y bauxite mine at Zubairih in the central Qassim province.

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