Syndication is soon to close for Algeria's first project finance deal, covering 60 per cent of the construction cost of a $260 million cement plant at M'Sila, 250 kilometres south of Algiers.
The greenfield plant, which will have a production capacity of 2 million tonnes a year, is being developed by Algerian Cement Company, a project company formed by Egypt's Orascom Construction Industries (OCI)and local partners (MEED 20:10:00).
The $156 million deal entails two tranches of debt arranged by Citigroup, which is also acting as financial adviser to OCI. Four local banks, Banque Nationale d'Algerie, Credit Populaire d'Algerie, Banque de Developpement Localand Caisse Nationale de l'Epargne & de Preyvoyance, participated in the syndication of the $100 million equivalent local currency domestic tranche which was managed and arranged by Citibank Algeria. Some 60 per cent of the domestic tranche was fully guaranteed by the International Finance Corporationand Danish export credit agency EKF, reflecting the fact that FL Smidthof Denmark was awarded the $128 million engineering, procurement and construction (EPC) contract of the plant (MEED 29:3:02).
The domestic debt was priced over the Banque d'Algerie (central bank) rediscount rate. The guaranteed portion has a tenor of 10 years, while the remaining 40 per cent matures in 6 years.
The international debt tranche consists of a 12-year, $56 million loan from the European Investment Bank (EIB), the first private sector lending by the institution in Algeria. Some 30 international commercial banks have expressed an interest in providing the commercial risk guarantee for the loan. The deal is seen as particularly attractive because not only is this the first opportunity that banks have had to participate in Algerian corporate debt, but also because EIB is assuming political risk for the loan.
'With the EIB assuming the political risk, it is an easier platform for commercial banks and we have been able to broaden the spectrum of banks wishing to be involved,' says Austine Ometoruwa, the head of corporate financing and investment banking for Citigroup's North African region. 'We have got both local banks and international banks as well as financing institutions to dip their toes in the water in this landmark transaction. Its success could pave the way for future private financing in other deals, particularly in the hydrocarbons industry where dollar-based export revenue streams make project finance particularly attractive.'
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