UAE firm to fund largest smelter

Abu Dhabi's Mubadala Development Company plans to raise as much as $4.2 billion in loans this year to finance the construction of the world's biggest aluminium smelter. Mubadala, an investment company owned by Abu Dhabi's ruling al-Nahyan family, last year said it would spend $6 billion with partner Dubai Aluminium Co to build a smelter with a capacity to produce 1.4 million tonne of aluminum a year.

The so-called Emirates Aluminium smelter in Abu Dhabi would need its own power plant to produce 2,600 mw of electricity, the company said. Persian Gulf states, including Saudi Arabia, the UAE, Qatar and Oman, are investing billions of dollars to build aluminium smelters in an effort to utilise abundant cheap gas and low-cost labour.

Power accounts for 29 per cent of the cost of producing aluminium, making plants in the US and Europe less profitable than those in West Asia, a region with two of the world's top-three gas reserves.

"We'll leverage about 60-70 per cent of Emirates Aluminium's phase-I cost and expect financial close before the end of 2007," Waleed al-Muhairi, Mubadala's chief operating officer, said from the UAE. The money would be raised through "long-term" conventional and Islamic syndicated loans, he said. Citigroup is Mubadala's financial adviser. The UAE, which consists of seven sheikdoms, including Abu Dhabi and Dubai, is the third largest oil producer in the Organisation of Petroleum Exporting Countries and is committed to produce 10 per cent of the world's aluminium within a decade.

Aluminium prices will rise to a record $4,000 a tonne as early as next year on demand from automakers and a scarcity of cheap electricity, according to Russia-based United Company Rusal, the world's biggest producer of the metal.

Automakers keen to use lightweight aluminum frames to improve fuel efficiency will spur demand growth, Chief Executive Officer Alexander Bulygin said in a March 27 interview.

Mubadala has $1.3 billion of loans outstanding, Bloomberg data show. Last month, it signed a contract with Sonatrach, Algeria's state-owned energy company, to build a $5 billion aluminium smelter in the North African country. In February, it said, it secured $900 million of financing to build a power plant in Algeria, Africa's largest natural gas producer.