Middle East Economic Survey

VOL. LV

No 24

11-Jun-2012

EGYPT

Financing For $3.7Bn Musturud Refinery Project Finalized 

The Egyptian Refinery Company (ERC) signed the final agreements on 7 June with lenders to receive financing for its $3.7bn Musturud refinery project North of Cairo, MEES understands. Lenders had agreed to provide $2.6bn of debt in August 2010, but the deal was held up by changes in the equity ownership and further delayed by the revolution that toppled the Husni Mubarak regime. The refinery, which will process around 5mn tons/year of heavy fuel oil to yield 4mn t/y of products, including 2.3mn t/y of Euro V diesel, secured investment from Qatari sources (MEES, 6 February). Qatar’s largest lender, Qatar National Bank, is also contributing to the project’s debt by replacing one of the international banks originally signing up to the deal. Engineering, procurement and construction (EPC) contractors (Japan’s Mitsui and South Korea’s GS Engineering) will now get the green light to proceed with the project.

There were concerns the project would be stymied by political upheaval in Egypt, but the authorities acknowledged it is vital because it will help alleviate the country’s growing products shortage and thus help it tackle the budget deficit by reducing imports. Helping to keep the project alive through the turmoil was support (in the form of loans and cover) from institutional lenders, the European Investment Bank (EIB) and African Development Bank, and three export credit agencies (ECAs) which comprise the Japanese Bank for International Cooperation (JBIC), Nippon Export and Investment Insurance, and South Korea’s Kexim. Most of the banks that had originally signed up to the deal are present in the final line up of lenders. Of the $3.7bn total cost, $2.6bn is coming from senior and subordinated debt, with $1.1bn from equity. The Qataris are taking a stake in a fund that holds 85% of ERC. State-run Egyptian General Petroleum Corporation (EGPC) holds the remaining 10%. Cairo-based private equity firm Citadel leads the investors that are financing ERC through its 10% ownership of the fund.

© Copyright MEES 2012.