Assan Expansion Project II

completed

Assan Demir, one of the principal companies of the family-owned Kibar group, was established in 1977. The company’s principal products are aluminum coil, sheets and foil as well as galvanized steel. The installed capacities for the various processes at Assan when all the project items are installed and commissioned would be as follows: (i) continuous casting capacity (casters 1, 2, 3, 4, 5, 6 and 7) of 180,000 tons; (ii) cold rolling capacity of 145,000 tons; and (iii) foil production capacity of 35,000 tons annually.The project involves capacity expansion, modernization and de-bottlenecking of an existing aluminum plant, Assan Aluminum (Assan or company), one of the leading Turkish manufacturers of rolled aluminum and galvanized steel products. The proposed expansion in the company''s rolled aluminum and foil production capacity includes new equipment, working capital, and investment period expenses. The project, which is expected to be completed in 2003, would increase Assan’s production capacity from its existing 52,000 metric tons (mts) of flat rolled aluminum product (FRP) and 18,000 mts of foil to 85,000 mts of FRP and 35,000 mts of foil respectively. The proposed expansion will also allow the company to add slitting capacity that will accommodate its existing cold mills and to handle evolving product mix (thicker than 1.5mm and wider than 2000mm). The project is aimed to fill a significant void in the Turkish and European rolled aluminum market, and to help Assan broaden its range of products, which will enhance the company''s position to compete with the other European producers.Development Impact & IFC Role:The project is expected to have a positive economic impact through the addition of new technology, reduced production costs, and increased supply of international quality aluminum sheet and foil, for downstream industrial customers, houseware, construction, packaging, and the automotive industry. The expansion project will further improve Assan''s international competitiveness in the aluminum sector by offering a wider range of quality products. In addition, the project will allow Turkey to benefit from the proceeds generated from the exports to neighboring countries and Europe which will also help the Turkish economy to recover from its economical turmoil.IFC’s participation in the project would also provide reassurance to other foreign investors who are wary of Turkey''s perceived macro-economic and political risks, and encourage additional foreign direct financing and investment in Turkey. The devaluation of the currency has made Turkey''s exports more attractive. By providing the timely financing, IFC will help Assan seize the market opportunity, increase exports and thereby increase the country''s foreign currency earnings. Finally, the project will make Assan the undeniable leader in the use of speed-casting technology for producing a wide range of flat rolled aluminum alloys. Assan could use the technology developed to forge strategic alliances with other manufacturers thereby promoting more eco-efficient production methods for these products. IFC has a strong role to play in this project especially after the effect of the most recent economic crises in Turkey. First, the provision of long term financing with reasonable interest rate has become very scarce especially from the local Turkish banks. Loan maturities exceeding even a one year range are currently not available to the Turkish market. IFC''s financing will allow the project to be leveraged with a long term foreign currency loan without burdening the company with a heavy interest rate. At this time, without IFC''s proposed financing, Assan would be forced to postpone the project or rely on much more expensive medium and short-term financing which would squeeze its cash generation. Second, IFC’s involvement will allow the Corporation to continue to leverage a strong client relationship to support a successful project in a difficult environment.