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EBRD completes first commodity-linked loan for Slovak aluminium smelter
The European Bank for Reconstruction and Development (EBRD) today completed its first commodity-linked loan. The link to the Slovak primary aluminium producer, Slovalco a.s., provides price protection to the company on part of its aluminium production.
Guy de Selliers, Deputy Vice President of the EBRD, said: “With the start-up of the new smelter now complete, this was an appropriate time to implement the aluminium link. It not only demonstrates the EBRD’s ongoing commitment to Slovalco but also its ability to bring the latest risk management techniques to companies in its countries of operations. We worked closely with Slovalco’s management and our equity partners, ZSNP a.s. and Hydro Aluminium, to implement the link. Although the link is the first of its type, we expect this type of risk management instrument will have wider application in financing businesses dealing in metals and other commodities”.
The start-up of Slovalco’s aluminium smelter was completed on 5 December 1995 using technology supplied by Hydro Aluminium (Hydro). The smelter is capable of producing 108,500 metric tonnes of primary metal a year and up to 132,000 metric tonnes of aluminium products. The new smelter was financed with a US$ 110 million (ECU 85.6 million) loan from the EBRD, one of the Bank’s largest private sector loans.
Under the link, payment of interest and repayments of principal on the EBRD's loan will be directly linked to a selected average London Metals Exchange (LME) price for aluminium. The link eliminates Slovalco’s exposure to decreases in the price of aluminium on the tonnage hedged. The transaction will be settled financially; no physical delivery of metal will be involved.
Slovalco a.s. was established in 1993 by ZSNP a.s., the state-owned aluminium producer, with the subsequent equity participation of Hydro, a light metal subsidiary of Norsk Hydro of Norway, and the EBRD.
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