A multi-billion-dollar refinery project near Cairo faces delays because of difficulties in finalising the largest ever project finance package in North Africa. The scope of the facility has also been downgraded.
The $2bn-plus financing for the refinery was due to be finalised by the end of June. However, Egyptian Refining Company (ERC), which is developing the refinery, has now set a deadline of the end of October to complete the financing process.
A consortium of private sector investors led by local investment house Citadel Capital has taken an 85 per cent stake in ERC. The balance is held by state oil company Egyptian General Petroleum Corporation (EGPC).
One executive close to the project tells MEED that although a strong list of banks has been assembled for the financing, closing the deal has been difficult because of the contraction in the credit market this year. “It is unusual in that the delays we are seeing are not actually on the engineering, procurement and construction [EPC] side of things,” says the executive.
“There has been a slight stutter on the banks’ side. We are still in active negotiations with all of them but getting them to cross the finish line is proving more problematic.”
Although banks were first lined up for the deal in January, the source says there is still a backlog of issues to work through. “It is a really challenging economic environment at the moment,” he says. “The project takes great comfort from the fact it has export credit agencies on board as the response from banks is slightly daunting.”
The source says he still expects the project to progress, with the final amount of money raised likely to be $2-2.5bn.
It is not yet clear how large the portion supplied by banks will be. However, once it is in place, ERC is required to submit details to a board meeting of the European Investment Bank, one of two credit agencies expected to approve the bulk of the loan. The other is the Korean Export Credit Agency.
The role of Egypt’s Banque Misr on the deal has been downgraded, leaving Commercial International Bank as the main domestic financier. Bank of Tokyo-Mitsubishi, HSBC, Calyon and Sumitomo Mitsui Banking Corporation will work on the international portion of the financing.
Another executive close to the project says the configuration of the refinery, which will enable Egypt to reduce its fuel imports, has also been changed following consultation with EGPC.
It will now process 3.5 million tonnes a year (t/y) of fuel oil residue, compared with the original 4.2 million-t/y target, to produce 2.25 million-t/y of high-grade diesel. The planned output of 700,000 t/y of petrol has been scrapped.
“There has been a decision that some of that output will now be handed back to EGPC and it will produce its own gasoline,” the executive says.
Due to come on stream in 2010, the refinery will share facilities with an existing refinery at Mosto-rod, an industrial area 10 kilometres north of Cairo (MEED 8:6:07).
ERC refinery figures
$2-2.5bn: Predicted cost of project
3.5 million t/y: Fuel oil residue processing capacity
2010: Date refinery is due to come on stream
t/y=tonnes a year