Tunis, 19 March 2010 - The African Development Bank (AfDB) Group has approved a USD 200-million senior loan and a US$ 25-million Subordinated Convertible Loan to the Egyptian Refining Company (ERC).
In addition, the Bank will if requested by the Borrower consider providing a B-loan of up to USD 80 million.
The loans, approved by the AfDB Board on Wednesday, 17 March 2010, will enable the ERC to construct and operate a new hydro-cracking/coking facility and ancillary units adjacent to the existing refining units of the Cairo Oil Refinery Company (“CORC”). The ERC will use low quality atmospheric residue from CORC as feedstock and produce 4.8 million tons of refined products per year for the domestic market.
ERC was incorporated in July 2007. Private Egyptian and regional investors, led by Citadel Capital own 85% of its shares while the Egyptian General Petroleum Corporation (“EGPC”) owns the remaining 15%. Citadel Capital is a private equity firm with a strong record in the oil & gas sector.
Demand for refined products in Egypt has grown rapidly since 2003 and supply from the existing refineries is not sufficient to bridge the gap. The ERC project will supply refined products to Cairo, the main consumption center. It offers strong resilience to economic downturn given its low production costs.
The project is in line with Bank Country Strategy for Egypt which focuses on supporting infrastructure development, trade and economic growth. The institution’s 2007- 2011 assistance to Egypt will have two thematic strategic objectives aimed at:
- Promoting private sector development and
- Promoting social development and protection. Furthermore, the project is in line with the Bank strategy to support Egypt’s power sector and efficient use of its oil & gas resources. The project relies on private funding as an efficient recourse for Egypt to finance large investments, releasing more financial resources to carry out poverty-reduction programs.
The Bank’s presence complements other lenders in the transaction such as the European Investment Bank (EIB) and the Korean Exim Bank (KEXIM), and encourages the participation of commercial banks.
The project will create a large number of jobs for Egyptians, including 8,000 indirect employments during construction and 790 permanent positions during operations, as well as jobs generated by government revenues derived from the project. It will also have a significant impact on local industries which will support the construction and operation activities.