Six banks to fund RM1.87bil ferro-alloy plant in Bintulu park

KUCHING: Six banks, including Malaysian ones, have to date indicated their participation to fund OM Materials (Sarawak) Sdn Bhd's (OM Sarawak) US$592mil (RM1.87bil) ferro-alloy smelting project in Samalaju Industrial Park in Bintulu.
Standard Chartered Bank (Stanchart), Chinese and international banks are among the banks. Stanchart is the smelting project's financial advisor.
A detailed memorandum on the project prepared by Stanchart and OM Holdings Ltd (OMH), which has a 80% stake in the joint-venture project with Cahya Mata Sarawak Bhd (CMSB), was dispatched to prospective lenders early last month.
“The
funding participation amounts (from the six banks) collectively exceed
the project's debt funding requirements,” OMH said when announcing its
plan to raise up to A$72.5mil through equity to fund the Sarawak
project.
OMH told the Australian Stock Exchange last week that
the fund raising consisted of a 3-for-10 non-renounceable pro-rata
entitlement offer of new ordinary shares to its eligible shareholders
at A$0.40 each.
OMH has earlier raised A$56mil from a series of equity placements and issuance of convertible notes with Boustead Singapore Ltd, Japan's Hanwa Co Ltd and several institutional investors.
According
to OMH, the smelting project was expected to be 70% debt financed by a
consortium of international and regional banks. The debt financing
facility documents are due to be executed in the second half of 2012.
The remaining 30% development cost would come from equity funding US$147mil from OMH and US$37mil from CMSB.
OM Sarawak recently awarded a US$36.1mil contract to Pestech Sdn Bhd for the engineering, procurement and construction package of a 275kV power substation for the project.
Under a 20-year power purchase agreement with Sarawak Energy Bhd, OM Sarawak will obtain supply of 500MW to power its smelting plant.
The RM70mil site earthworks carried out by KKB Builders Sdn Bhd
is due for completion by next week. Construction of the plant on 202ha
is due to start in the current quarter and will take 30 months to
complete.
OMH said formal offtake agreements were expected to be executed during the current quarter. The offtake partners are JFE Shoji Trade Corp and Hanwa, which both have earlier signed binding term sheets with OM Sarawak.
“OM
Sarawak is targeting to secure up to 60% of production under offtake
agreements focused on end-user integrated steel mills. About 42% of
ferro-silicon production and 26% of manganese alloy production offtake
have been secured to date. The balance to be sold under market-driven
agreements to leverage on OMH's market reach and sales expertise,” it
added.
OMH said the smelting plant was expected to generate average annual cash flows of US$286mil.