Debt financing gets sugar mill going in Swaziland

Investec Capital Markets, Nedbank Capital and the Standard Bank of South Africa acted as lead arrangers in this Swaziland local debt market financing transaction. The medium term funding is an 8-year facility, with all the funding raised from commercial banks in Swaziland on an amortising repayment profile. Funding participation is from Nedbank Swaziland, Standard Bank Swaziland and Swaziland Development and Savings Bank.

The lead arrangers advised that the debt facility, taken up by the Swaziland banks, provides Illovo with local funding for Ubombo and that a healthy appetite from lenders was forthcoming for what is the single largest commercial investment in Swaziland in recent years.

The expansion project, initially funded by Illovo, commenced in 2009 and has resulted in its annual production capacity increasing from around 220 000 tons of sugar to more than 300 000 tons.

Graham Clark, MD of Illovo said, "This funding has been critical to our expansion plans and will enable us to increase production capacity at our sugar factory, while improving our power generation capacity from renewable resources."

Links to power generation

Ubombo is located at Big Bend in the south eastern region of Swaziland adjacent to the Usuthu River. Having been the first sugar company to establish such operations in the country in 1958, it is now one of three sugar producers which contribute significantly to the economic stability and development of Swaziland.

It currently provides permanent employment for around 1 300 people and approximately 1 500 seasonal agricultural workers at peak periods. The expansion and co-generation project is linked to the government-sponsored Lower Usuthu Smallholders Irrigation Project (LUSIP) under which a major new dam and canal system has been constructed, which will facilitate the new development of an initial 5000 hectares of land to cane under irrigation in the medium term, some of which is ready for harvesting in the current season.

Subsequent phases of cane development will continue to be undertaken, using government and EU funds. The co-generation project will enable the factory and agricultural operations to become self-sufficient in electricity consumption and will export surplus power under a commercial agreement with the Swaziland Electricity Company into the national grid.