06 September 2005
The unveiling of the world's longest aluminium smelter line in Bahrain this week looks set to place the country in the top league for the metal's production. The plant is also part of a wider plan to boost Bahrain's industrial capacity and expand employment, with further lines are also on the way, as the kingdom seeks to steer ahead of other regional rivals.
This is a major milestone, Prime Minister, Sheikh Khalifa bin Salman Al Khalifa, told the press at the inauguration ceremony for the $1.7bn Line 5 expansion at Aluminium Bahrain (Alba) on September 5. He then added that it was a step that has moved Alba and Bahrain to a new phase... While this is a major achievement for the company, what it has done to the national economy is of equally great significance.
Line 5 is due to increase output at the giant plant from around 550,000 tonnes annually to about 850,000 tonnes.
According to the chairman of the Alba board of directors, Dr Mohammed JK Alghatam, currently half of the plant's total production is sold on the Bahraini market, another 20% is exported to the Far East, 18% to Gulf Cooperation Council (GCC) states and 7% to South-east Asia.
Alba exports aluminium to various countries, he said. It has even reached Mars through NASA, which used it for one of its space vehicles in 1997.
Alba is a joint venture, owned 77% by the government of Bahrain and 23% by Saudi SABIC Industrial Investments and Germany's Breton Investments. In addition to its reduction lines and casthouses, the company has a dedicated carbon department and a 1500-MW power plant, along with a 450,000 tonnes per annum coke calcining plant at the company's marine terminal.
The company also employs more than 3000 workers, of whom, the Alba chairman said, some 89% were native Bahrainis. The Line 5 expansion alone had created some 500 extra jobs. As a result of all this, Sheikh Khalifa predicted that Alba would contribute some 12% to the kingdom's GNP when the whole project was completed. He said that it already contributed some 8%. The project is expected to see profits of around $70m per year.
Such figures give a strong impression of Alba's significance, with the plant now a flagship project for Bahrain's efforts to diversify away from hydrocarbons, a necessity for the kingdom given its vanishing domestic supplies.
Yet the project is also a flagship of a different kind - for private financing. Some 60 banks participated in the project, a factor that has now helped place Alba on the study list of the Harvard Business School (HBS).
This prestigious achievement was announced by Alba acting CEO Ahmed Saleh al-Noaimi early September.
The financing of the $1.7bn Line 5 expansion project was a combination of 90% debts and 10% equity. How this was achieved forms the basis of the HBS case study.
The total debt of $1.55bn was financed through five tranches, al-Noaimi told the Bahrain Tribune in its September 6 edition. A commercial-loan facility, a normal syndication loan from a group of local and international banks, an Islamic financing facility based on leasing assets for the project, a metal tranche linked, in part, to international prices of metal, and an export credit facility guaranteed by the government of countries from which we buy equipment. Floating-rate export bonds were also issued as part of our financing strategy.
The success of such a complex financing package is also one of Alba's great achievements. However, there have also been drawbacks.
Back in mid-August an unprecedented power outage in Bahrain was blamed by the electricity minister on the Alba plant.
On Black Monday - August 15 - Alba was transferring 400 MW of power from its lines during a routine maintenance operation to an electricity ministry power station when the transfer overloaded the power grid, Electricity Minister Sheikh Abdullah Bin Salman Al Khalifa told the press.
As result of the power transfer, all power stations stopped operating, leaving the ministry with zero electricity capacity... The ministry was not responsible for the blackout, although our engineers could have restored the power in a shorter period of time, he said.
The blackout lasted some 12 hours and led to calls for the minister's resignation - along with claims by experts in the Gulf Daily News that the outage had cost the economy some $26.5m.
Yet despite such glitches, Alba looks set to play a major role in the future of the country's economy, as well as that of the region.
The Gulf is becoming a centre for the aluminium industry, with increasing global demand and lower production costs within the GCC, where power can be supplied relatively cheaply. Right now, smelters in the GCC produce approximately 1.5m tonnes of primary aluminium per year, or some 6% of total world production. With Alba on stream, Bahrain's slice of this particular pie looks set for some substantial growth.
The unveiling of the world's longest aluminium smelter line in Bahrain this week looks set to place the country in the top league for the metal's production. The plant is also part of a wider plan to boost Bahrain's industrial capacity and expand employment, with further lines are also on the way, as the kingdom seeks to steer ahead of other regional rivals.
This is a major milestone, Prime Minister, Sheikh Khalifa bin Salman Al Khalifa, told the press at the inauguration ceremony for the $1.7bn Line 5 expansion at Aluminium Bahrain (Alba) on September 5. He then added that it was a step that has moved Alba and Bahrain to a new phase... While this is a major achievement for the company, what it has done to the national economy is of equally great significance.
Line 5 is due to increase output at the giant plant from around 550,000 tonnes annually to about 850,000 tonnes.
According to the chairman of the Alba board of directors, Dr Mohammed JK Alghatam, currently half of the plant's total production is sold on the Bahraini market, another 20% is exported to the Far East, 18% to Gulf Cooperation Council (GCC) states and 7% to South-east Asia.
Alba exports aluminium to various countries, he said. It has even reached Mars through NASA, which used it for one of its space vehicles in 1997.
Alba is a joint venture, owned 77% by the government of Bahrain and 23% by Saudi SABIC Industrial Investments and Germany's Breton Investments. In addition to its reduction lines and casthouses, the company has a dedicated carbon department and a 1500-MW power plant, along with a 450,000 tonnes per annum coke calcining plant at the company's marine terminal.
The company also employs more than 3000 workers, of whom, the Alba chairman said, some 89% were native Bahrainis. The Line 5 expansion alone had created some 500 extra jobs. As a result of all this, Sheikh Khalifa predicted that Alba would contribute some 12% to the kingdom's GNP when the whole project was completed. He said that it already contributed some 8%. The project is expected to see profits of around $70m per year.
Such figures give a strong impression of Alba's significance, with the plant now a flagship project for Bahrain's efforts to diversify away from hydrocarbons, a necessity for the kingdom given its vanishing domestic supplies.
Yet the project is also a flagship of a different kind - for private financing. Some 60 banks participated in the project, a factor that has now helped place Alba on the study list of the Harvard Business School (HBS).
This prestigious achievement was announced by Alba acting CEO Ahmed Saleh al-Noaimi early September.
The financing of the $1.7bn Line 5 expansion project was a combination of 90% debts and 10% equity. How this was achieved forms the basis of the HBS case study.
The total debt of $1.55bn was financed through five tranches, al-Noaimi told the Bahrain Tribune in its September 6 edition. A commercial-loan facility, a normal syndication loan from a group of local and international banks, an Islamic financing facility based on leasing assets for the project, a metal tranche linked, in part, to international prices of metal, and an export credit facility guaranteed by the government of countries from which we buy equipment. Floating-rate export bonds were also issued as part of our financing strategy.
The success of such a complex financing package is also one of Alba's great achievements. However, there have also been drawbacks.
Back in mid-August an unprecedented power outage in Bahrain was blamed by the electricity minister on the Alba plant.
On Black Monday - August 15 - Alba was transferring 400 MW of power from its lines during a routine maintenance operation to an electricity ministry power station when the transfer overloaded the power grid, Electricity Minister Sheikh Abdullah Bin Salman Al Khalifa told the press.
As result of the power transfer, all power stations stopped operating, leaving the ministry with zero electricity capacity... The ministry was not responsible for the blackout, although our engineers could have restored the power in a shorter period of time, he said.
The blackout lasted some 12 hours and led to calls for the minister's resignation - along with claims by experts in the Gulf Daily News that the outage had cost the economy some $26.5m.
Yet despite such glitches, Alba looks set to play a major role in the future of the country's economy, as well as that of the region.
The Gulf is becoming a centre for the aluminium industry, with increasing global demand and lower production costs within the GCC, where power can be supplied relatively cheaply. Right now, smelters in the GCC produce approximately 1.5m tonnes of primary aluminium per year, or some 6% of total world production. With Alba on stream, Bahrain's slice of this particular pie looks set for some substantial growth.
© Oxford Business Group 2005
