June 18, 2012:

Reuters reported that investors in an Egyptian petroleum refinery project, led by Citadel Capital and Qatar Petroleum have secured USD 3.7 billion in financing for the facility. Egypt Refining Company said that the financing, put together by private equity firm Citadel, includes USD 1.1 billion equity investment and is backed by USD 2.6 billion debt package. The ERC project is to produce more than 4.1 million tonnes of refined products and oil derivatives annually including more than 2.3 million tonnes of Euro V diesel per year. This is expected to cut Egyptian diesel imports by up to 50%. The ERC said that the refinery, on the outskirts of Cairo will contribute USD 300 million in direct benefits to the state and create jobs. It is set to start operating in 2016. The project will reduce present day diesel import needs by 50% improve air quality in the Greater Cairo Area help reduce Egypt’s annual subsidy bill.

A series of attacks on the natural gas pipeline that runs from Egypt to Israel has cut off supplies to the region and have forced Egypt to seek more fuel from abroad to meet rising demand from power generation and fuel needs for heavy vehicles. Egypt’s military rulers have sought to hike diesel imports as fuel shortages in central Cairo this year have caused long queues at petrol stations and traffic jams in some main thoroughfares, angering the public. In its latest tender, Egyptian General Petroleum Corporation was seeking to buy more than 1 million tonnes of gasoil or diesel, from July to September worth around USD 1 billion almost as much as it sought in the preceding 6 months.

Under the financing package for the refinery, EGPC has invested USD 270 million for 23.8% interest in the project while Qatar Petroleum International committed over USD 362 million for 27.9% stake. Citadel has directly and indirectly invested over USD 155 million and holds an equity stake of 11.7%. Other participants include Gulf Arab investor, the World Bank’s financing arm, the Netherlands’ development bank FMO, Germany’s private sector lender DEG and European Investment Fund’s InfraMed Fund. EFG Hermes Investment Bank acted as placement manager for the equity component. The financing is backed by USD 2.6 billion debt package arranged by ERC’s financial advisor, French bank Societe Generale and made up of senior and subordinated debt issued to Asian and African development agencies and banks.

By Retuers