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Altech Chemicals (ASX:ATC)



Altech Chemicals (ASX:ATC) announced on 12 March 2019 a construction update for Stage 1 of its high purity alumina (HPA) plant in Johor, Malaysia. Initial site establishment activities are complete, with the site fully fenced and secured. The site construction office has been erected, and safety and access controls put in place. Removal of top soil is complete and bulk earthworks and site levelling is in progress. Workshop foundation piling is expected to commence shortly and preparations for the reinforced concrete works are in progress.  


On 8 March 2019, ATC announced that it had officially mandated Macquarie Bank as the preferred mezzanine lender. Completion of the mezzanine facility is conditional upon the bank’s views of usual due diligence processes (legal, market, technical), and agreement with KfW-IPEX Bank on inter-creditor arrangements.  


State One comment

The official ground-breaking ceremony at the Johor HPA site took place on 8 August 2018. The construction update indicates that slow but steady progress has been made on site preparation works over the past seven months. On 11 May 2018, ATC received an indicative non-binding US$90m mezzanine debt term sheet (from Macquarie Bank). Eight months later, Macquarie is now mandated as the preferred mezzanine lender – but due diligence is still outstanding. Securing US$90m in mezzanine debt is vital as it fills the “hole” required to fund the US$280m lump-sum fixed-price HPA plant EPC contract with German engineering firm SMS Group GmbH. Note: ATC has already secured US$190m in senior debt funding from German government-owned KfW IPEX-Bank. Thus, while the latest mezzanine debt announcement shows that progress on this front is advancing, it appears, at least from the outside, to be progressing a lot slower than initially expected.  Our base case forecast of HPA production commencing in FY22E (at ~25% plant operating capacity) is predicated on ATC obtaining full project financing of US$280m (A$400m) in FY19E, followed by a two-year construction period. Based on the time is has taken to date, we suggest that it may be stretching expectations to get any mezzanine debt agreement signed sealed and delivered by June 2019.

14/03/2019 11:00:00 AM

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