Egypt's Citadel says refinery loan pkg on course

By Alaa Shahine and Wael Gamal Posted 07 April 2008 @ 03:41 am EET     Print     Reprint     E-Mail     Comments

CAIRO (Reuters) - The leading Egypt-based private equity firm, Citadel Capital, said on Sunday it was on course to finalise a loan package of up to $2.25 billion to build an oil refinery near Cairo.

Chairman Ahmed Heikal told Reuters in a telephone interview that several export credit agencies (ECAs) including the Korean Export Credit Agency and the European Investment Bank have approved the bulk of the loan. The firm will raise the rest through commercial banks.

"It is going well and is expected to be finalised by the end of June or the end of July," he said.

"We have concentrated on ECAs and multilateral agencies because of the tough situation in the international credit markets, which raised the cost of debt," he added.

The firm said in August it will start building a $2.4 billion refinery in Mostorod in the greater Cairo area. The plant will process some 85,000 barrels a day of fuel oil residue from Egypt's existing refineries to make higher-value diesel and gasoline.

"The total cost now could be up to $3 billion, of which around $750 million would be financed through equity," Heikal said.

Citadel Capital, which has been expanding in energy, mining, cement and agriculture, bought Canada's Rally Energy along with other investors for $898 million Canadian last August.

The firm has increased its capital twice in the last quarter of 2007 to reach 1.65 billion Egyptian pounds from 912 million pounds.

"We had to increase our capital to be able to finance our portion in new expansions," Heikal said.

Citadel Capital has stakes of 10 to 20 percent in its projects, while inviting co-investors to join for the remaining portion, but usually preserves the right to manage operationally, he added.

The private equity firm had a busy expansion phase in 2007 and early 2008. Apart from the Rally deal, its cement operations included two greenfield plants in Algeria and Iraq, and the finalisation of its purchase of a 35 percent stake and management control over Algeria's state-owned Zahana Cement.

The firm also expanded in food production, river transport and mining.

"We will be setting on these expansions for the next three to four months, digesting them and looking into operational efficiency," Heikal said.

Press reports said in March that Citadel was preparing for an initial public offering on the Cairo and Alexandria Stock Exchanges during 2008, but Heikal declined to comment on that.