Altech Chemicals (ASX:ATC) has appointed German engineering firm, SMS group GmbH, as the engineering, procurement and construction (EPC) contractor for its proposed Malaysian high purity alumina (HPA) plant.
A key condition of Altech’s application for German export credit project finance cover is the provision of a throughput guarantee for the HPA plant by the EPC contractor.
SMS brings a number of positive additions as the EPC contractor including an initial subscription of US$100,000 Altech shares.
Iggy Tan, managing director, commented: “Not only does SMS have prior experience with the company’s kaolin to HPA hydrogen chloride acid leaching process, it has demonstrated its confidence in Altech and the process with an initial US$100,000 equity investment pledge and project equity or subordinated debt support upon financial close.
“SMS also has extensive experience with German ECA cover and is amongst the top three users of this facility in Germany.”
Benefits of SMS
While the original EPC contract was a fixed price turnkey contract with completion and cost guarantees, SMS intends to satisfy those original proposals and more.
SMS, as the incoming EPC contractor has proposed the following to Altech:
- Fixed price turnkey EPC contract (existing);
- Completion and cost guarantees (existing);
- Process guarantee including final product quality (additional);
- Throughput guarantee (additional);
- Commissioning and start up responsibility (additional);
- Initial subscription of US$100,000 of Altech shares (additional); and
- Project equity or subordinated debt support at project financial close (additional).
SMS has proposed a clear and concise guarantee to Altech for HPA plant throughput.
In addition, having prior experience with the kaolin-HPA hydrogen chloride processing technique that Altech will use, SMS has proposed process and final product guarantees and this will significantly strengthen Altech’s export credit project finance cover application.
The additional guarantees proposed by SMS are positive outcomes that significantly de-risk the project.
A tier one contractor
SMS is a large privately owned German engineering company with an annual turnover of circa €3.3 billion and offices worldwide.
SMS builds turnkey solutions based on innovative plant technology, complete with buildings, infrastructure and auxiliary equipment for processing plants such as Altech’s proposed HPA plant.
SMS has recent EPC contract experience in Malaysia, having successfully completed the Sakura smelting project, in Sarawak.