BL reported that National Aluminium Company has declined to provide corporate guarantee to 2 global banks for raising USD 2 billion loans for its proposed gas fired smelter in Iran.

Mr BL Bagra director finance of Nalco said that there would be a delay in financial closure but without causing cost over run. We have begun scouting for lenders who would not ask for a corporate guarantee but would agree to fund the project based on asset security. Negotiations with a new set of financiers are on. International lenders sought Nalco's guarantee because of fresh sanctions on Iran and the uncertainty over the execution of the project.

Ne said that the Nalco management has decided not to provide additional guarantee for the loan with tenure of eight to 10 years. The proposed project also designed to be largely debt financed, consists of 0.31 million tonne per annum smelter and 750 MW power plant at a total investment of INR 9,100 crore.

Mr Bagra said that “We can afford to wait for the project as the acquisition of the equipment, mostly from European suppliers in euro, would now entail cost savings instead of over run. A probable cost increase for civil construction in Iran due to inflation will be offset by the savings on equipment and currency fronts.”

Nalco is not immediately inviting expressions of interest from the lenders but is relying on direct talks. It is also not contemplating any change in the scope of the project by bringing in a new financial partner in place of a lender. According to the original plan, the project was to be completed by 2016 to 2017 in 2 Phases.

Nalco, meanwhile after a due diligence has chosen its 15% JV partner Aluminium Paras an Iranian entity. Nalco has also acquired 400 acres in Kerman province following the feasibility study. The proposed Iranian project was conceived to save on energy cost and conserve scarce domestic resources. The proposed Iranian production was to be used for domestic consumption and exports.

(Sourced from Businessline.com)