Middle East’s Biggest Petrochemical Plant Moves a Step Closer to Financing

(Bloomberg) -- Carbon Holdings hopes to finalize financing for its $10.9 billion petrochemical plant by the end of the year, and expects to begin construction of what would be the Middle East’s largest such facility in the third quarter of 2019.

The Tahrir Petrochemical Complex, which will be built in the Suez Canal Economic Zone, will be financed by equity and a $5.4 billion debt package, Mohamed Hassan, the company’s managing director for environment and sustainability, said in an interview.

"We are really close to finalizing funding for TPC from lenders and investors,” Hassan said. “We expect to reach financial close by the end of this year.”

Carbon Holdings has been working on the plant’s financing for years, and is planning a dual listing on the Egyptian bourse and the London exchange in 2019. Development institutions are the main equity investors in the project. The African Finance Corp. has signed on as an equity investor, but its investment has yet to be finalized. It will also help recruit others.

General Electric has also confirmed its intention to invest in the project, in addition to the technical services and supply contracts, he said. GE’s investment in the project has yet to be finalized.

“We are in serious talks with other equity investors now,” Hassan said, declining to identify them. Bechtel will oversee construction.

The TPC financing, once completed, would mark a major boost for the country -- both in terms of investments and in moving toward Egypt’s goal of being a regional energy hub. Carbon Holding expects to start production from the complex in 2022 and reach full capacity by the end of that year.

The company has already signed loan agreements with the U.K.’s Export Finance, Germany’s Euler Hermes, the Overseas Private Investment Corporation and U.S. Export-Import bank. Loan tenors are up to 18 years.

Other export credit agencies have “shown interest in supporting the project and this might be considered," he said. Chinese financial institutions have also “offered up to $3 billion in direct equity and mezzanine financing for Carbon Holdings."

Egypt’s November 2016 decision to float the currency and curb costly fuel subsidies helped it finalize a $12 billion International Monetary Fund loan that, in turn, bolstered investor confidence in the country. It has, however, struggled to attract major foreign investments outside the oil and gas industry. Foreign direct investment fell to $6 billion in the July 2017-March 2018 period compared to $6.6 billion a year earlier.

Exports from the plant are expected to be around $2.7 billion in the first phase of operations, rising gradually to $8 billion when the plant reaches full capacity, Hassan said.

©2018 Bloomberg L.P.