Egypt's Carbon Holdings takes first step to IPO

26 May 2015

Petrochemicals firm securing financing from Abu Dhabi’s Gulf Capital

  • Gulf Capital and Carbon Holdings sign $25m financing deal
  • Convertible facility give Gulf Capital a leading role in upcoming IPO
  • Funds will be used to support three industrial projects in Egypt

Abu Dhabi’s Gulf Capital has signed a AED92m ($25m) financing agreement to fund Carbon Holdings’ industrial projects in Egypt, a move that will give Gulf Capital a leading role in the Egyptian Petrochemicals Holding Company upcoming listing on the Cairo exchange.

“This is our first step [to an IPO], we expect that to happen, the decision so far is we will do public offering. We believe it will take place over 36 months, it takes a year to a year and a half to put in place all characteristics, and yes it will be in Egypt,” said Basil el-Baz, chairman and CEO of Carbon Holdings on 25 May in Abu Dhabi.

The listing will be on the Cairo exchange. “Currently we will only look at Egypt,” says El-Baz. “A dual listing is always a possibility, but we see tremendous growth in Egypt not just in industrial sector, but also the equity markets.”

For Gulf Capital the convertible financing provided to Carbon Holding gives it a role in the upcoming IPO and exposure to Egypt’s growing economy. “It is more than money and returns. We are looking to invest, even though we are not taking role in management, we will sit on the board. We have had experience of IPOs in the past, and we hope to bring that experience to Carbon Holding,” said Karim el-Solh, CEO, Gulf Capital, who was also speaking in Abu Dhabi on 25 May.

The $25m funding is a convertible five-year loan facility provided by Gulf Capital’s credit fund GC Credit Opportunities Fund I. It will be used to finance the development and expansion of three of Carbon Holdings’ petrochemical projects: Egypt Hydrocarbons Corporation, Oriental Petrochemicals Corporation, and Tahrir Petrochemicals Corporation.

The signing of the funding facility means Gulf Capital becomes Carbon Holdings’ first institutional investor, a move that El-Baz expects will transform the company. “[Gulf Capital] is first institution investor to step forward with us on this journey. Typically if you look at how privately owned companies develop, if you look at their path to public offerings you will always be able to find one crystalising moment when an institutional investor comes in as part of private placement or convertible debt placement.”

Carbon Holdings’s largest project is the $7.4bn Tahrir Petrochemicals Complex and the $4bn of financing for the scheme is close to being finalised. The project is set to be financed with assistance national export credit and development agencies: Export-Import Bank of the US (Eximbank); the US’ Overseas Private Investment Corporation; Export-Import Bank of Korea (Keximbank); Korea Trade Insurance Company (Ksure); and Italian Export Credit Agency (Sace).

The TPC project includes the construction of a 1.5 million tonne-a-year (t/y) ethylene cracker and a polyethylene facility with capacity of about 1.4 million t/y.

Construction work on the plant is expected to start in early 2016. The engineering, procurement and construction (EPC) contract will be completed by a consortium of Germany’s Linde, South Korea’s SK Engineering & Construction, Italy’s Maire Tecnimont, and Greece’s Archirodon. Completion is expected in 2019.

Carbon Holdings started work on the TCP project one year before the 2011 uprising. Originally, it was expected to be completed in 2017, but due to delays caused by the revolution and subsequent turmoil.

Carbon Holding has three other future projects planned says El-Baz. There is a second polypropylene plant. The design of the 350,000-tonnes-a-year plant is 50 per cent complete and it will use Novolen technology. A 400,000 t/y ethylbenzene and styrene unit is also planned. It will attach to the polypropylene plant. The third planned scheme is an expansion to the firm’s ammonium nitrate plant that will take capacity from 370,000 t/y to 740,000 t/y.

El-Baz does not expect Carbon Holdings plans to be derailed by fluctuations in oil prices. “We are a margin business. If you track feedstock and commodity prices there is a slight lag, but ultimately they follow each other. You may get a certain squeezing in the margin, but overall the costs usually transfer through.”

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