State-owned firm hits banks to arrange loan to fund world's largest aluminium smelter.
State-owned Emirates Aluminium (EMAL) has approached banks to arrange a loan of as much as $5 billion to build the world's largest smelter in Abu Dhabi, bankers familiar with the deal said on Wednesday.
The 1.4 million tonnes-per-year project will be built in two phases, with the first scheduled for completion in 2010, Abu Dhabi government-owned Mubadala Development Co said in February. Mubadala owns half of EMAL and state-owned Dubai Aluminium (Dubal) the rest.
Banks are bidding to arrange the deal, three bankers said, asking not to be identified.
The entire loan, as much as $5 billion, will be raised at one time rather than in tranches, one of the bankers said.
Dubal declined to comment on the loan, saying only that committees involved in the smelter project, including the financing committee, would make their work public once they had finished. Mubadala could not be reached for comment.
Both Dubai and Abu Dhabi are members of the United Arab Emirates federation.
In February, Mubadala estimated the total cost of construction at $8 billion. The cost of some Gulf projects have risen since then due a shortage of labour and materials, and shifting exchange rates.
A credit squeeze in July triggered by defaults on US home loans has also made project financing more difficult, prompting some firms to delay borrowing or postpone projects.
Gulf petrochemical projects worth as much as $90 billion may be delayed as banks hold back from lending until global debt markets stabilise, the Gulf Petrochemicals and Chemicals Association said.
Qatar Steel Co, a subsidiary of state-controlled Industries Qatar, postponed plans to borrow $1.34 billion on Thursday because of turmoil in global credit markets.
EMAL is the latest government-owned firm from the UAE to turn to the loan market to finance expansion in the past month.
Dubai World and subsidiary DP World jointly raised a total of about $8 billion in loans, bankers told Reuter Loan Pricing Corp on Wednesday.
Dubai property developer Limitless is raising a $1 billion loan to fund foreign projects, with syndication due at the end of the month.
Dubai Drydocks World, a state-owned firm set up to invest in foreign ship-repair yards, is planning to borrow as much as $2 billion to fund expansion, two bankers familiar with the proposal said on Thursday.