Egyptian Refining Company (ERC), the joint venture leading a US$3.7 billion (Dh13.57bn) project to build a petroleum refinery within sight of the pyramids of Giza, has secured $2.6bn from a banking syndicate to finance the development. "We are delighted to announce the debt package for what we believe stands as one of the largest project finance deals ever assembled in Africa," said Marwan Elaraby, the managing director of Egypt's Citadel Capital, which owns 85 per cent of ERC.
The financing deal includes $2.35bn of senior debt from the Japan Bank for International Co-operation (JBIC), Nippon Export and Investment Insurance, the Export Import Bank of Korea and the African Development Bank. It also includes $225 million of subordinated debt from Japan's Mitsui, which is part of the group of contractors building the refinery, and $25m from the African Development Bank. "ERC has won outstanding backing from leading global institutions because it will have a notable effect on both Egypt's economy and on the environment, particularly in the greater Cairo area," Mr Elaraby said.
"It has similarly enjoyed the full backing and support of the government of Egypt and, in particular, of the ministry of petroleum." The proposed Mostorod refinery is a rare petroleum project that could improve local air quality. It would process heavy fuel oil, which is produced in excessive quantities by an ageing, state-owned refinery adjacent to the Mostorod site on the outskirts of Cairo. When complete, it would produce up to 4 million tonnes a year of cleaner, more valuable fuels, especially low-sulphur diesel.
The new refinery's output would include as much as 2.3 million tonnes a year of EURO V diesel, which meets EU emissions standards and is the cleanest fuel of its type in the world. "This undertaking is a major step in upgrading a low-grade, polluting product to more valuable and cleaner products, such as ultra-low sulphur diesel for domestic consumption," said WorleyParsons, the Australian consultancy that conducted an environmental and social impact assessment for the project. JBIC said many of Egypt's refineries were equipped with "simple and outdated" distillation units. As a result, the country exported surplus fuel oil but was unable to meet domestic demand for diesel, the major fuel used to power lorries, trains and industrial machinery.
The project would help reduce Egypt's emissions of pollutants such as oxides of nitrogen and sulphur, which have been linked to respiratory problems and acid rain, the bank said. "When the project was forced to reconsider its financing plan due to the credit squeeze in the aftermath of the financial crisis of 2008, JBIC decided to participate," it added. The Mostorod partners include the Saudi company Swicorp Joussour, with a 15 per cent stake, and the state-owned Egyptian General Petroleum Corporation, through its 15 per cent holding in ERC.