Landmark Financing

February 23, 2017 TINE BREMHOLM KOKFELT

The success of the greenfield cement plant, Margem Companhia de Mineração in Brazil, was partly the result of a unique financing arrangement between several parties – FLSmidth, with its strong connections with cement manufacturers on the one side, and financiers on the other.

Tine Bremholm Kokfelt, Department Manager of Global Project & Export Finance at FLSmidth, has driven FLSmidth’s contribution to several attractive financing solutions for FLSmidth customers in recent years. She says that the Margem transaction is another example of a project that FLSmidth has been involved in from start to finish:

“Margem (Supremo Cimentos) had purchased the land and obtained the necessary licences to develop a greenfield cement plant in Brazil. When Supremo Cimentos partnered with Portuguese Secil, who has a long history with FLSmidth, we were asked to assist with facilitating long term
financing for the new cement plant. With our strong and longstanding cooperation with the Danish Export Credit Agency, EKF, as well as our wide international financing connections, we were confident this was possible. We involved EKF very early on in the process, and they issued a letter of interest as far back as 2011. Banco Santander and the Brazilian Development Bank, BNDES were also involved, and all the parties worked together to come to a very satisfactory financing, which was finalised in 2013.” - Tine Bremholm Kokfelt, Department Manager of Global Project & Export Finance at FLSmidth

The arrangement enabled Margem to obtain one international long-term financing for the project through the Danish EKF, arranged by Banco Santander.

Margem also secured another long termloan, denominated in local currency, from BNDES. From the start, EKF showed a high degree of flexibility, with Santander structuring and arranging a tailor-made financing solution, and with EKF providing a long-term export credit loan fully denominated in Brazilian local currency.

According to Søren Juhl, Head of Industry Team at EKF, EKF has a solid history in financing export contracts for projects in South America. “However, this transaction was quite unique for several reasons. It was the first greenfield cement project in the region and it was the first financing provided in local currency, which meant it would reduce the investors’ exposure to currency devaluations.”

As EKF can only finance imported equipment and services for the project into Brazil, BNDES was an important partner financing a major part of the local cost.

“This was the first time EKF had entered into a project co-financed by BNDES. It has proved to be a successful cooperation,” - Søren Juhl, Head of Industry Team at EKF

Matias Herkómmer Carrión, Global Export and Agency Finance, Banco Santander adds: “This was a unique transaction because it was tailor-made in terms of structure and currency. We took a ‘project finance’ approach, as Margem was a startup company.”

The structured financing package for the project also included short-term loans from various banks. The Portuguese cement producer and investor Secil was an ideal partner, not only because of its knowhow within cement production, but also its financial strength and expertise. Secil took the lead on behalf of Supremo Cimentos on the financing arrangement.

Antonio Balastreiro, former Supremo Cimentos Chief Financial Officer, and now Innovation Manager at Secil says, “We saw that this was an excellent financing opportunity to enter a growth market like Brazil, and we welcomed the guidance and trust from EKF and FLSmidth in getting the financing in place.”

Financing project highlights
A tailor-made financing solution was structured an arranged by Santander based on the flexible approach of EKF and the continuous support of FLSmidth:
- An international loan of 94.5 million USD in BRL (approx. BRL 200 million) provided by EKF and arranged by Banco Santander. Loan maturity: construction phase plus repayment over 10 years.
- A local loan of 202 million BRL provided by BNDES. Loan maturity: construction phase plus 7-year repayment.
• The first cooperation between the Brazilian Development Bank (BNDES) and the Danish Export Credit Agency (EKF)
• The first time local currency financing for a Brazilian company has been provided by the Danish government.

Contact:
Tine Bremholm Kokfelt
 tbk@flsmidth.com

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