By Souhail Karam
RIYADH, April 3 (Reuters) - Alcoa has cut its stake in a planned $10.8 billion aluminum complex in Saudi Arabia by more than a third, its partner said on Saturday, the second time a foreign partner has reviewed its position in the plan.
State-run Saudi Mining Co (Maaden), the main stakeholder in the project, called Alcoa's stake cut to 25.1 percent from 40 percent 'a rejig' in the joint venture project. Maaden's statement gave no further details.
The move raises the prospect of a cash injection by the Saudi government in the project, crucial to the kingdom's efforts to diversify the economy away from oil.
The stake reduction corresponds to a reduction of Alcoa's investment to $2.71 billion from $4.32 billion. Maaden said the project's size and schedule would not be affected by this change, which raises its stake to 74.9 percent.
Alcoa was not immediately reachable for comment.
Shares in Maaden closed 0.3 percent lower after the news.
Hesham Abu Jamea, head of asset management at investment bank Bakheet Financial Group, played down the impact on Maaden.
'Financing needed for this project is huge. Alcoa may have realised that getting the financing will be difficult. We have met them (Maaden) a month ago and they were positive about ensuring their part of the financing. Maaden is government-run, it should not face a (financing) problem,' Abu Jamea said.
Alcoa agreed in December to take the 40 percent stake in the Ras Azzour plant after tight credit conditions forced Rio Tinto Alcan to abandon a 49 percent stake in a similar plan with Maaden about a year earlier. The project was then budgeted at $8 billion.
Since its agreement with Alcoa, Maaden has said little about progress in raising financing for the project scheduled to start production in 2013.
'The (Saudi) government will have to foot the bill,' John Sfakianakis, chief economist at Banque Saudi Fransi, said of Alcoa's stake reduction move. 'It could be a good development since it may push the government to help accelerate the execution of this project.'
Ras Azzour is the biggest of the investments Maaden pledged to deliver in 2008 when it raised 9.25 billion riyals ($2.47 billion) in an IPO that was open only to Saudi investors. Saudi Arabia's three biggest state funds together hold 64 percent of Maaden's capital.
Affiliated Research Group analyst Charles Bradford said Alcoa may have been concerned that the money it would have been required to invest would have eroded its credit rating. Or it could be weighing investments in other regions, he said, since two other aluminum projects are already under way in the Middle East.
'It did look like a very expensive venture and I don't think the aluminum market looks as strong as some people do. There's a lot of capacity coming on,' he said.
Maaden's deal with Alcoa provided for the setting up of a 1.8 million tonne-per-year refinery, a 740,000 tonne-per-year smelter, a bauxite mine with an annual capacity of 4 million tonnes and a rolling mill with a capacity of up to 460,000 tonnes.
The smelter and mill are slated to start production in 2013 while the refinery and mine would come online in 2014.
Alcoa's Chief Executive Klaus Kleinfeld said in December the project's cost would be split, with the U.S. firm controlling 40 percent while Maaden would handle 60 percent.
Alcoa would control its portion of the project through an investment partnership in which it would hold 20 percent. It and its partners would each contribute $900 million over four years.
Maaden is investing about 60 billion riyals to develop the kingdom's phosphate, bauxite, gold and industrial minerals and help reduce reliance on oil.
(Additional reporting by Matt Daily in New York; Editing by Ruth Pitchford and Doina Chiacu) Keywords: ALCOA MAADEN/ (souhail.karam@thomsonreuters.com, +966 1 463 2603; Reuters Messaging: souhail.karam.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
RIYADH, April 3 (Reuters) - Alcoa has cut its stake in a planned $10.8 billion aluminum complex in Saudi Arabia by more than a third, its partner said on Saturday, the second time a foreign partner has reviewed its position in the plan.
State-run Saudi Mining Co (Maaden), the main stakeholder in the project, called Alcoa's stake cut to 25.1 percent from 40 percent 'a rejig' in the joint venture project. Maaden's statement gave no further details.
The move raises the prospect of a cash injection by the Saudi government in the project, crucial to the kingdom's efforts to diversify the economy away from oil.
The stake reduction corresponds to a reduction of Alcoa's investment to $2.71 billion from $4.32 billion. Maaden said the project's size and schedule would not be affected by this change, which raises its stake to 74.9 percent.
Alcoa was not immediately reachable for comment.
Shares in Maaden closed 0.3 percent lower after the news.
Hesham Abu Jamea, head of asset management at investment bank Bakheet Financial Group, played down the impact on Maaden.
'Financing needed for this project is huge. Alcoa may have realised that getting the financing will be difficult. We have met them (Maaden) a month ago and they were positive about ensuring their part of the financing. Maaden is government-run, it should not face a (financing) problem,' Abu Jamea said.
Alcoa agreed in December to take the 40 percent stake in the Ras Azzour plant after tight credit conditions forced Rio Tinto Alcan to abandon a 49 percent stake in a similar plan with Maaden about a year earlier. The project was then budgeted at $8 billion.
Since its agreement with Alcoa, Maaden has said little about progress in raising financing for the project scheduled to start production in 2013.
'The (Saudi) government will have to foot the bill,' John Sfakianakis, chief economist at Banque Saudi Fransi, said of Alcoa's stake reduction move. 'It could be a good development since it may push the government to help accelerate the execution of this project.'
Ras Azzour is the biggest of the investments Maaden pledged to deliver in 2008 when it raised 9.25 billion riyals ($2.47 billion) in an IPO that was open only to Saudi investors. Saudi Arabia's three biggest state funds together hold 64 percent of Maaden's capital.
Affiliated Research Group analyst Charles Bradford said Alcoa may have been concerned that the money it would have been required to invest would have eroded its credit rating. Or it could be weighing investments in other regions, he said, since two other aluminum projects are already under way in the Middle East.
'It did look like a very expensive venture and I don't think the aluminum market looks as strong as some people do. There's a lot of capacity coming on,' he said.
Maaden's deal with Alcoa provided for the setting up of a 1.8 million tonne-per-year refinery, a 740,000 tonne-per-year smelter, a bauxite mine with an annual capacity of 4 million tonnes and a rolling mill with a capacity of up to 460,000 tonnes.
The smelter and mill are slated to start production in 2013 while the refinery and mine would come online in 2014.
Alcoa's Chief Executive Klaus Kleinfeld said in December the project's cost would be split, with the U.S. firm controlling 40 percent while Maaden would handle 60 percent.
Alcoa would control its portion of the project through an investment partnership in which it would hold 20 percent. It and its partners would each contribute $900 million over four years.
Maaden is investing about 60 billion riyals to develop the kingdom's phosphate, bauxite, gold and industrial minerals and help reduce reliance on oil.
(Additional reporting by Matt Daily in New York; Editing by Ruth Pitchford and Doina Chiacu) Keywords: ALCOA MAADEN/ (souhail.karam@thomsonreuters.com, +966 1 463 2603; Reuters Messaging: souhail.karam.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.