German engineering goliath ups stake in Altech to $19m

The giant German engineering firm that will build Altech Chemicals High Purity Alumina plant in Malaysia has gone all in with Altech by agreeing to take a A$19.5m stake directly in the company ahead of the building of the plant in Malaysia that will be fed by Kaolin mined from Meckering in W.A.

Dusseldorf-based engineering goliath SMS Group last month emerged as a cornerstone investor in Altech by committing to take US$4m (A$5.1m) in an equity placement that raised a total of A$17.4m for Altech Chemicals.

Privately owned SMS, which has an annual turnover of around 3.3 billion Euros, has now dramatically upped the stakes by announcing an additional equity investment of US$11m (A$14.3m) in the company.

Altech’s 100%-owned Meckering Kaolin project could make it the world’s largest producer of high purity alumina, the critical ingredient in the manufacturing of synthetic sapphire, which is used to make LED lights, semiconductors and many other in-demand products including Lithium-ion batteries.

SMS have been a crucial player for Altech in its efforts to secure low-cost debt funding for the project via a German government export credit guarantee. A condition of German government backing, which is set to be decided on the 14^th of December, is a guarantee by SMS of the throughput rate for the HPA plant in Malaysia.

Not only will SMS provide the plant throughput guarantee but they will also provide an output guarantee of the quality of HPA produced.

In an apparent show of confidence in Altech’s business model and the plant technology, SMS will now own a sizeable stake in the project via its equity position in Altech.

SMS’s additional US$11m equity commitment is subject to financial close of Altech’s US$185 million debt facility, which Altech aims to have finalised in the first half of 2018.

Altech Managing Director, Iggy Tan said: “The company welcomes the additional direct equity investment by SMS in Altech. It demonstrates the commitment and confidence of the EPC contractor to the HPA project and the company. We are very fortunate to have such a supportive partner in this project.”