Long-term financing for mineral fertilizers plant viola-funding June 29, 2023

Long-term financing for mineral fertilizers plant

mineral fertilizer plants
Long-term loans for fertilizer plants around the world

High demands for agricultural products is in higher propensity which, along with a shortage of fertile land, contributes to the demand for fertilizers of all types. The global market for mineral fertilizers is showing steady growth. Governments continue to provide strong support to producers in the form of subsidies, preferential long-term loans for mineral fertilizer plants and tax incentives, all of which help the industry as a whole.

Mineral fertilizer Plants are being built all over the world, requiring multimillion-dollar capital investments and active use of capital-intensive innovations such as new chemical formulations or nano-fertilizers.

The use of long-term financing for large investment projects offers great opportunities for chemical companies and other stakeholders.

Viola Funding Limited offer a long-term loans for fertilizers plants in Europe and beyond, as well as project financing for a large projects.

Costs of construction for fertilizer plant

The main factor in financing a fertilizer plant, as well as any other major project, is its economic feasibility, since the desire of investors to participate in the launch of the enterprise is closely linked to the expected return on investment.

The cost of building a mineral fertilizer plant depends largely on the chosen technology, capacity, location and a number of other factors.

On average, such facilities cost a few tens of millions of dollars, but the cost of some facilities runs into hundreds of millions of dollars (for example, the famous Dangote Fertilizer Plant in Nigeria the biggest in Africa, worth $2.5 billion)

In general, the pre-project costs are small compared with the total investment costs and amount to no more than 3-5%.

Application of long-term loans for the construction of mineral fertilizer plants

Development of large investment projects in the agricultural sector, chemical and fertilizer production requires powerful financial instruments, which allow customers to obtain the necessary funds for construction and launch of new facilities without affecting current economic activity.

Long-term loans and project finance has become one of the most common methods of financing the mineral fertilizer plants, because in this case, the funds are allocated to the project itself and are paid out of the cash flows it generates.

Stages of an investment project

The organization of project finance includes four main stages. These are the planning and comprehensive study of investment opportunities, the bidding phase, the construction phase, and the operation and income generation phase.

During the planning and due diligence phase, potential investors conduct a detailed technical, legal, and financial evaluation. The due diligence report is considered a key tool for evaluating the project. This report includes a description of the project’s legal framework and a detailed analysis of legal, technical, environmental and financial risks.

The legal evaluation is an analysis of the statutory documents of the SPV and the contracts it enters into in the context of the applicable laws of the host country and international law.

The construction phase of a fertilizer plant ends with the testing and commissioning of the facility. The construction stage implies assumption of high risks, since the greatest investment efforts are made long before the cash flows required to secure repayment of the borrowed funds are received.

Special Purpose Vehicle (SPV)

The SPV is an instrument for the execution and follow-up of the work, acting as a borrower and recipient of generated cash flows.

The PF always creates a special project company, which will be responsible for developing the project, obtaining financing and acting as a party to all contracts that will constitute it.

The financial risk of the founders is reduced to their contribution to the SPV, so the only source of income on which the obligation to pay the debt will be the assets of the project company and its cash flows. The equity structure and the agreements between the shareholders and the financial institutions will determine the guidelines of the company.

At present, given the high level of competition between fertilizer producers in the global market, the market structure requires new methods of cooperation between companies that allow them to achieve their goals in a flexible and efficient way in order to maximize their benefits and limit their risks.

If you are interested in mineral fertilizer plant project financing, contact Viola Funding Limited. We have a wide network of business partners all over the world, including producers and suppliers of industrial equipment, engineering and construction companies, scientific institutes and universities, banks and financial institutions.

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