Sirius Minerals adjusts terms of $3bn funding round for Yorkshire project

(Sharecast News) - Fertiliser producer Sirius Minerals said it was adjusting the terms of a planned $3bn (£2.3bn) funding round for its Yorkshire polyhalite project to reduce risk.The original deal structure was to have two equal tranches between a commercial bank and the UK government-backed Infrastructure and Projects Authority (IPA).It was revised to split the financing across three sources "drawn sequentially linked to key construction milestones".The first would be an uncovered debt capital markets tranche, the second a commercial bank tranche and the third the IPA guaranteed tranche."This structure is designed to reduce both the risk and the quantum of any IPA guaranteed bond tranche to the taxpayer as by this time we will be past the major construction risks and sales underway," Sirius said."The company is working towards having agreed commitment letters as soon as possible."Sirius said the project was still on track to achieve first polyhalite and commercial production on time and in line with the cost schedule announced on September 6.Shares in the company, having fallen more than 40% from last year's late-August high, were down another 6% to just over 21p by midday on Tuesday.Analysts at Cazenove said that while the new structure "mitigates the projects' reliance on the IPA/UK government guarantee, the addition of the uncovered bond adds another degree of complexity which could put at risk the prior timing for financial close by Q1'19"."It also puts upward pressure on the interest cost, where prior guidance (unchanged in today's release) is for an "all-in" cost of 6-7%. We reaffirm our view that the near-term equity thesis will be dictated by SXX's ability to secure the next tranche of financing, and as such look for additional procurement contracts and off-take agreements as focal points going forward."Broker Liberum said: "Given its strategic importance to investment and jobs for the 'Northern Powerhouse' policy, it remains a priority focus for the government to see the work done. Following Theresa May's defeat on her Brexit deal, it was the Sirius Minerals project that was one of the first questions to be asked at PMQs."The Treasury department that is working on the investment guarantee does not have a Brexit mandate and is not being distracted by the unstable political landscape. The collapse of two proposed nuclear plants, whose financing requirements are longer dated and more complex, only drives Government harder to deliver investment in the North."