Project finance

Steel mills often need to upgrade their capital equipment in order to remain competitive. This generally requires large scale financing over a medium term (2-5 years).  Greenfield projects require financing over even longer time periods. The issue for both steel producer and capital equipment supplier is how to identify suitable sources of finance. The position is even more critical in emerging markets.

Where international banks remain willing to make loans to borrowers in emerging markets, increasingly they may try to mitigate the risk of default by obligating the borrowers to link their future sales revenues directly to the repayment of the loans.

Stemcor’s project finance agreements fund steel producers’ expenditure on capital assets. We are in a strong position to act as a go-between between the banks and borrowers. The steel producer normally enters into a long term agreement with Stemcor, whereby steel products of sufficient value to meet the loan repayments (and interest) are delivered to Stemcor. Stemcor pays for the steel by transferring funds into a specific project account to pay back the bank loan. In effect, Stemcor acts as a risk mitigant by reducing the default risk.

Project Finance in Emerging Markets