Published: August 12, 2010
Cairo set for new refinery after banks pledge support.
The Egyptian Refining Company (ERC) is on course to build a new oil refinery after it raised US$2.6bn to help develop the project.
The company is constructing a US$3.7bn second-stage site in Cairo, which will produce more than 4mn tons of refined products a year, including 2.3mn tons of the world’s cleanest fuel, EURO V diesel.
The package includes US$2.35bn of senior debt provided by a syndicate of institutions comprising Japan Bank for International Cooperation, Nippon Export and Investment Insurance, the Export-Import Bank of Korea, the European Investment Bank and the African Development Bank (AfDB).
Mitsui & Co, which is part of the consortium of contractors building the refinery, is providing US$200mn of subordinated debt with AfDB injecting a further US$25mn into the project.
ERC’s chief executive, Tom Thomason, says the signing of the agreement was “remarkably” quick considering the operational, financial and regulatory complexity of building a refinery.
This debt package was approved just weeks after the IFC announced it would invest US$100mn of equity into the project.
ERC’s owners include private equity firm Citadel Capital and the state-owned Egyptian General Petroleum Corporation (EGPC).
Marwan Elaraby, one of Citadel’s managing directors, believes this is one of Africa’s largest project finance deals and was made possible due the effect that the refinery will have on Egypt’s economy and the environment.
One of Elaraby’s fellow managing directors, Ahmed El-Houssieny, says it is a testament to the company’s fundamentals that the project remained on track through the deepest financial crisis in living memory. “Iron-clad fundamentals and strong support from both legislators and regulators are exactly what financial institutions look for when considering which projects to back.”
ERC has obtained all regulatory and environmental approvals for the project, which will be built in Mostorod, a district of Cairo. Completion is expected in the second half of 2014 ready for operational testing before the site opens for business in 2015.