Altech Chemicals signs German project financing mandate

THE BOURSE WHISPERER: Altech Chemicals (ASX: ATC) has executed an exclusive mandate with German KfW IPEX-Bank GmbH, a wholly-owned subsidiary of the promotional bank KfW.

Under the deal KfW IPEX-Bank will provide Altech advisory and structuring services in relation to the provision of senior debt project financing for the company’s proposed high purity alumina (HPA) project.

KfW IPEX-Bank is a leading German export and project finance specialist with significant experience in the debt financing of mining and chemical projects worldwide, including projects in the Asia-Pacific region and projects similar to Altech’s proposed HPA project.

Altech explained the mandate will consider senior debt project financing to maximise the use of Export Credit Agency (ECA) insurance cover under German government-backed project finance export guarantees.

ECA cover is an instrument for the promotion of German exports that provides a cover to bank lenders to insure against the risk of an export loan and is administered by Euler Hermes, the German Export Credit Agency.

The interest rate charged by lenders on the portion of total project debt that qualifies for ECA cover is available under attractive conditions with long tenor in accordance with OECD guidelines.

Interest charged on any senior debt and/or mezzanine debt over and above the ECA cover portion of debt is normally at standard commercial rates.

Altech’s initial estimate is that approximately US$40 million of HPA project debt should qualify for ECA cover.

The company said the ECA cover applies to the HPA project because the majority of the plant and equipment will be sourced from German and other European Union manufacturers, such as German company M+W Group, which has been appointed engineering, procurement and construction (EPC) contractor for the project.

Altech outlined its first step in the ECA cover approvals process is for it, KfW IPEX-Bank and M+W Group to make a presentation to Euler Hermes for its assessment of the project, from which an initial determination of eligibility for ECA funding will be made.

ECA cover and subsequent senior debt project financing is subject to a detailed due diligence process and Altech indicated there to be no guarantee ECA eligibility or final funding will eventuate, however, the company considers execution of this mandate with KfW IPEX-Bank is an important step in support of the project.

“The execution of this mandate with KfW IPEX-BANK for senior project debt financing, including its support in pursuing German Export Credit Agency (ECA) cover, is a significant step in the company’s project financing efforts,” Altech Chemicals managing director Iggy Tan said in the company’s announcement to the Australian Securities Exchange.

“The possibility of accessing low interest rate, long term project financing that may be available under German ECA cover is compelling and the detailed due diligence process associated with final grant of the cover will be a strong endorsement of the company’s HPA project.”