Emal plans three bond issues for smelter

Dubai: Emirates Aluminium, the venture building what may be the world's biggest aluminum smelter in Abu Dhabi, plans to sell bonds in three phases to help finance construction, Moody's Investors Service said.

The company, known as Emal, will sell $1 billion senior secured bonds due 2028, $1 billion due 2038, and "possibly" more bonds due 2028 in British pounds, Moody's said in a statement e-mailed February 29.

The bonds have an A3 rating, the credit agency's seventh- highest investment grade, and will supplement about $1.8 billion of bank loans due 2023, according to the statement.

Mubadala Development, an investment arm of Abu Dhabi's government, started Emal with state-owned Dubai Aluminium in 2006 to take advantage of cheap local power and surging global demand for aluminum, used to make beverage cans and airplanes.

Production cost

Power accounts for 29 per cent of the cost of producing the metal, making plants in the US and Europe less profitable than those in the energy-rich Middle East.

Citigroup, Goldman Sachs Group and National Bank of Abu Dhabi will manage Emal's bond sales, people familiar with the matter told Bloomberg in December.

Emal in December agreed to $4.94 billion loans with banks led by BNP Paribas, Calyon, Royal Bank of Scotland Group and Standard Chartered, data compiled by Bloom-berg show.

The debt includes a six-year so-called equity bridge of $2.8 billion and a $1.87 billion 16-year term loan.

The first phase is due to be completed by 2011 and will now cost about $7.1 billion, Moody's said.

"If the sponsors decide to go ahead with the second phase" that would double capacity and make it the world's largest single site smelter, the statement said.

Outlook

Emal in May said its first phase may have capacity to produce 700,000 tonnes of aluminum a year in 2010, before doubling to 1.4 million tonnes in the second phase.

The first phase was then forecast by the company to cost $5 billion and the second a further $3 billion.