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Ma'aden's $7.5 billion smelter project seeks bank financing

JEDDAH - Saudi Arabian Mining Company ( Ma'aden ) has launched its $7.5 billion aluminum smelter project financing to banks.

The deal is part of a general uptick in project funding activity in the kingdom from a low point last year when just $1.9 billion of new commercial project funding was raised in the Kingdom according to Thomson Reuters data. This year at least $20 billion will be financed.

Ma'aden and its joint venture partner Alcoa are splitting the Raz Al-Zour plant financing into two between the smelter which will total $5 billion and the rolling mill, which will total $2.5 billion.

On the smelter equity will account for $1.8 billion, the commercial banks will be asked for $1.4 billion, there will be a $300m Coface tranche, $1.3 billion from the PIF and $300 million from SIDF . Pricing on the 16-year commercial loan is expected around the 250bp mark. On the rolling mill there will be $1.25 billion from equity, $160 million from SIDF , $1 billion from PIF and just $100 million from local banks.

The local Saudi banks are liquid at present and so should be able to fund the deal. A key question, as on all Saudi projects, will be how much of the commercial funding will be raised in riyals and how much in dollars.

A range of international banks are being approached on the deal too.

Ma'aden is being advised by Standard Chartered and Riyad Bank .

Alcoa, which has reduced its stake in the scheme from 40 percent to 25 percent, is being advised by BP Paribas.

The Saudi funding market has been expecting a bumper year. In the market right now Aramco is raising $10 billion for its Jubail refinery joint venture with Total and a GDF Suez team is raising $2.5 billion for the Riyad independent power project. A further $10 billion was being raised for the Aramco/ConocoPhillips joint venture refinery at Yanbu.

Given Conoco 's withdrawal Aramco will now have to re-evaluate and if it pushes on with the scheme, seek new funding commitments from banks. Conoco 's involvement was linked to its expertise in heavy oil refining gained in Venezuela. Aramco has been seeking lower loan margins on its schemes than seen on other Saudi financings, sub 200bp, which has been stressing the banks. The Yanbu deal attracted a lot fewer international banks as a result than Jubail.

© The Saudi Gazette 2010