Fitch rates EMAL's bonds expected 'A-'; Outlook Stable

The final ratings are contingent on the receipt of final documents conforming to information already received.

The expected ratings reflect the strong underlying economics of the joint venture aluminium project that is backing the bonds, as well as Fitch's view that the project benefits from some implied government support due to its strategic nature and maintenance of ownership clause.

In December 2007, EMAL raised bank debt of about $1.8bn with final maturity in 2023.

EMAL's sponsors have represented to the bank lenders that they would provide financing and complete financial close were the bonds not to be issued.

The project is part of a joint venture between two government-owned entities, which aim to develop their collaboration in aluminium production.

Mubadala is a wholly owned investment vehicle of the Government of the Emirate of Abu Dhabi ('AA'/Outlook Stable) and Dubal is an aluminium producer owned by the government of Dubai.

Although the sovereign is not rated by Fitch, the agency believes it has a strong financial profile.

Fitch believes that the project fits well within the Emirates' strategy to use hydrocarbon reserves to develop a local industry.

Due to competitive gas supply, the project is expected to benefit from relatively low operating costs.

This is evidenced by the low break-even aluminium price in the Fitch base case, well below market consultants' forecasts of $2,100 per tonne and consistent with historical lows.

The project is constrained by the long tenor of the bonds and the fact that they do not amortise within their term.

Fitch takes comfort from the technical adviser's view that many smelters have been operating for over 30 years, and that there is no major technological change expected in the industry that could significantly affect the project's competitiveness over the bond tenor.

The refinancing risk is mitigated by the establishment of a sinking fund four years prior to the bond maturity.

The expected ratings address the timely payment of interest and principal in accordance with the terms and conditions of the notes.