Financing the Mozal Project

Team Members:
1. Mohit Holani – 40
2. Radhika Malani – 41
3. Raj Malkan – 42
4. Srishti Mistry – 43
5. Mridul Patwari - 44
 Equity Sponsors
Sources of Cash $ in millions
Gencor/ Alusaf 125
IDC 125
Others 250
Total (37% of total Source) 500

• Alusaf– Aluminum Subsidiary of Gencor Group, a South African natural

resource company
• IDC– Government owned development bank in South Africa
• Others - Contender for balance US$ 250 mn. is Mitsubishi Corporation,
US$ 78 bn. Japanese Industrial conglomerate with a large metals group
“Will the Sponsors be able to finance
the Mozal Project?”
 Alusaf & Gencor
Following shows their expertise
in technology and aluminum
production:
• Gencor – Parent Company of
Alusaf - Fourth largest aluminum
producer
• 1994 – Acquired Billiton from
Royal Dutch Shell
• 1996 – Set up of Hillside Smelter,
South Africa (world’s largest
greenfield aluminum smelter
having state- of- the- art
technology)
Synergy shared / mutual benefits:
• Alumina, a major input to produce
aluminum – 1/3rd*production cost
– can be imported from Billiton &
assist in plant management (fee-
based)
• Attractive power tariffs, labour
costs and favourable investment
incentives
• Make use of potential availability
of hydroelectric power at
competitive prices to build another
aluminum smelter
• New smelter benefits from access
to Maputo’s harbor and proximity
to existing Hillside Smelter
 IDC (Industrial Development Corporation
of South Africa)
IDC’s potential to invest:
• US$ 3.6 bn. Government
owned Development Bank
• IDC – instrumental in financing
the Hillside Smelter
• IDC – Five year plan – US$ 5
bn. of Industrial investment
Fulfillment of IDC’s purpose:
• IDC mission – promoting
entrepreneurship and promoting
private sector enterprises
• IDC seeks investment
opportunities in Southern Africa
as a means to ensure economic
stability in the region
• IDC arranged insurance of
US$400 mn. For Senior debt from
CGIC (SA’s export credit agency)
• Gencor can finance the
deal with the surplus which
is as follows:

Profit after tax and cash

resources together can
meet the current liability
obligations and still be left
with a surplus of US$ 129
mn. Out of which US$ 125
mn. can be used to finance
the Mozal project deal.

• IDC is a US$ 3.6 bn.

Company with a 5-year plan
of investing US$ 5 bn. In
industries which shows that
it has investment potential
and developmental goals.
 What is the IFC’s competitive advantage?
To what extent does IFC do something that
is unique, valuable and sustainable ?
 IFC’s Competitive Advantage
- IFC was world’s largest source of multi-lateral debt and equity financing.

- IFC was instrumental in creating common legal terms for critical issues like completion
guarantees, etc.

- It follows a multi-lateral structure to ensure fairness to all stakeholders, sponsors and

sovereign entity.

- Appraisal analysis carried out by IFC and Quality of due diligence.

- IFC had considerable experience in working in high risk developing nations.

 Unique, Valuable and Sustainable
- Long maturity period loans given.

- Presence if IFC increases likelihood of other lenders to finance the project.

- IFC was willing to lend on subordinate basis thereby exposing itself to higher risks.

- As compared to commercial banks, IFC was willing to accept lower returns for the same level
of risk because of the development policy.

- IFC structured deals in such a manner that sovereign risk was mitigated.

- IFC helps the sponsor in improving corporate governance and make them more sustainable.

- IFC also makes the companies adopt better environment practices.

- IFC’s association with the World Bank helped in reducing the political risk.

- IFC helps in developing the human capital among the Mozambicans through skills training.
Thank You