PFI - India - Andhra Pradesh/UAE jv raises US$1bn alumina loan

Singapore, Jan 14 (Project Finance International) - Penna Group, owned by the state of Andhra Pradesh, has tied up with RAKIA of the UAE to jointly enter the fast-growing aluminium industry. They have successfully raised some US$650m of loans to fund a US$1bn greenfield alumina refinery. The joint venture is a result of a memo of understanding signed in February 2007 between the government of Andhra Pradesh (AP) and the government of Ras-al-Khaima (RAK) to set up a greenfield aluminium plant in AP. RAK through its investment arm Ras-al-Khaima Investment Authority (RAKIA), entered into an agreement with Penna Group, a leading industrial group in Andhra Pradesh to form a JV to implement the project. Penna Group, which is promoted by Prathap Reddy, is a diversified corporate group in Andhra Pradesh and has interests in cement, the power sector, construction and hospitality. It is undertaking the Anrak project through subsidiary Penna Cement Industries. The JV is called Anrak Aluminium Limited (Anrak) and it will develop the project in phases, with the first phase comprising an alumina refinery with a 90MW captive power plant at Makavarapalem, in the Visakhapatnam district in Hyderabad in AP. It will initially be built with a capacity of 1.5mtpa. The project cost is estimated at Rs46.08bn (US$1bn). The project is funded on a 65:35 debt to equity ratio. Both Penna and RAKIA will inject Rs16.13bn as the equity portion. The remaining Rs29.95bn is being raised as debt, with Axis Bank and SBI Capital as financial advisers and lead arrangers. The debt portion comprises a subordinate debt tranche of Rs23.05bn and senior debt comprising a US$100m ECB tranche (equivalent to about Rs4.6bn) and a domestic term loan of Rs25.35bn. Both domestic loans have a door-to-door tenor of 12 years (maturing on March 31 2022) while the ECB tranche has a tenor of eight years.