Moody's assigns (P) A3 to EMAL; stable outlook

EMAL's current financing plan envisages issuance of Series A Senior Secured Bonds of approximately $1bn due 2038, Series B Senior Secured Bonds of approximately $1bn due 2028, and possibly Pound Sterling Series C Senior Secured Bonds due 2028 (the "Bonds"). EMAL has also raised subordinated amortising bank debt (the "Facility") of approximately $1.8bn due 2023. The Facility will rank pari passu with the Bonds and Additional Project Debt after the completion of Phase I of the Project. EMAL's sponsors have represented to the bank lenders that they would provide financing and complete financial close if the bonds were not issued.

On the basis of EMAL's ownership structure, and the strategic importance of its activities to the Emirate of Dubai and particularly to the Emirate of Abu Dhabi (Aa2, stable outlook), Moody's categorises EMAL as a Government-Related Issuer and thus applies its Joint Default methodology.

In accordance with this methodology, Moody's has assessed both support and dependence as high, therefore, the assigned ratings achieve an uplift from the company's fundamental creditworthiness.

The ratings reflect:

- The fundamental strength of the aluminium industry whereby rising costs of energy are expected to be the primary driver in reversing the long term historical declining price trend.

- The positioning of EMAL in the lowest quartile of the cost curve by the lenders' independent aluminium market consultant. As access to low cost energy is a dominant source of comparative advantage in aluminium smelting, this should give the project a significant competitive advantage.

- The terms of the EPCM construction contract through which cost- overrun risk is taken by EMAL, not by the sub-contractor. The bond holders do not benefit from sponsor completion guarantees.

- Commodity risk which exposes EMAL to both commodity input (predominately Alumina) and commodity output (predominately Aluminium) price risk.

- The hybrid nature of the financing terms which allow EMAL to expand into other businesses, as long as it is related to aluminium, and to raise additional debt pari passu with the Bonds for broadly defined purposes subject to a number of financial covenants.

- Refinancing risk.

The stable outlook for the rating of the Bonds reflects the stable outlook for the project's underlying economic characteristics, or its fundamental creditworthiness, as well as the stable outlook for the Emirate of Abu Dhabi sovereign rating.

A change in any parameter of the Joint Default Methodology may change the debt ratings. Factors that could change the rating include:

- A change in the uplift arising from the ownership. This could be through either a change in the Sovereign rating, or a change in Moody's perception of the level of support and/or dependence.

- An improvement in the project's underlying economic characteristics, potentially following successful completion of Phase I and Phase II and an established business track record.

- A deterioration in the project's underlying economic characteristics, potentially following: (a) failure to complete construction of the plant within preset specifications or within time and budget without clear sponsor support; (b) significant long-term weakening of major markets or commodity prices; (c) EMAL investing and expanding into more risky businesses.

EMAL is a private joint stock company established pursuant to Abu Dhabi Law for the purpose of the construction and management of a single-site aluminium smelter in Abu Dhabi. Construction involves two phases whereby the first phase, at a total cost of about $7.1bn, is scheduled to be completed by 2011, and with an expected production capacity of 700,000 tonnes p.a. of aluminium. If the sponsors decide to go ahead with the second phase, total production capacity should be increased to 1.4 million tonnes p.a. which will make the Project the largest single site aluminium smelter in the world.

EMAL is a 50:50 joint venture between Dubai Aluminium Company ("DUBAL") and Mubadala Development Company ("Mubadala"). DUBAL is wholly owned by the government of the Emirate of Dubai and is one of the largest aluminium producers. Mubadala is a wholly owned investment vehicle of the Government of the Emirate of Abu Dhabi.