Energy & Infrastructure Insight - Issue 2

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PROJECT SPECIFICS The Republic of Guinea, on African's western coast, is home to the world's largest deposits of high-quality bauxite, which is refined into alumina, which is in turn used as feedstock for the production of aluminium. Guinea is also therefore a key part of the global supply chain for aluminium production and several mines have sprung up to develop north-western Guinea's bauxite reserves. Emirates Global Aluminium (EGA)'s GAC Project is an opencast bauxite mine about 100km inland from the coast of northwest Guinea. Bauxite is transported to the coast along a pre-existing railway line, operated by CBG. Rail capacity rights on the line are shared with other mine projects, subject to a multi-party agreement whose implementation is monitored by ANAIM, a state-owned infrastructure regulatory authority, and are guaranteed by the Guinean Government. To accommodate users' future capacity requirements, railway capacity is being expanded. Once the bauxite reaches the coast, it is delivered onto barges arranged by EGA which is then transport to an anchor point offshore, where it is transhipped onto oceangoing vessels and exported. A key objective for the GAC Project was the vertical integration of EGA's aluminium production business. EGA recently completed construction of a new alumina refinery at Al Taweelah in the UAE and has extensive aluminium smelting operations in the UAE. A second phase envisages the construction of an alumina refinery in country. 4 EXAMINING THE MILESTONE GUINEA ALUMINA CORPORATION PROJECT IN 2019, FINANCIAL CLOSE WAS ACHIEVED ON ONE OF THE LARGEST GREENFIELD MINING PROJECT FINANCINGS IN AFRICAN HISTORY, THE $1.4 BILLION GUINEA ALUMINA CORPORATION (GAC) PROJECT. WE EXAMINE HERE THE PROJECT AND IT'S FINANCING AND WHAT LESSONS CAN BE LEARNED FROM IT ABOUT FUTURE PROJECT FINANCE OPPORTUNITIES IN BOTH AFRICA AND BEYOND. FINANCING OF THE PROJECT By the time of financial close, EGA had already invested significant equity capital. The financing, which will partly be used to refinance the up-front investment, involved facilities totalling $750 million contributed by IFC, AfDB, EDC, two European DFIs and an international consortium of commercial banks, including UAE banks. IFC provided a total loan facility of $330 million to the project, including the commercial banks' syndicated debt. MIGA committed political risk guarantees of up to $129 million to the same commercial lenders. The loans had a tenor of between 12 and 14 years. The revenues of the Project are derived from a long-term offtake agreement between EGA and GAC, pursuant to which EGA agrees to purchase a minimum annual quantity of bauxite sufficient to generate cash flow for debt service and operational expenses. The offtake agreement reflects a balance of operational flexibility while managing the risk to lenders associated with operational issues and fluctuations in bauxite quality and quantity. The Project was a major achievement for Guinea, representing a substantial foreign direct investment that is expected to significantly boost the economy and generate an annual average of $50 million in government revenues. From a sustainability perspective, the project complied with IFC's Performance Standards and the African Development Bank's Integrated Safeguards Systems. It also involved IFC working with GAC to implement a $4.4 million advisory services program to increase its social and economic development interventions and enhance benefits to host communities. It is also contributing $28 million to promote biodiversity within Guinea's Moyen Baffing National Park.

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