Shearman & Sterling represented project sponsor Egyptian-listed private equity firm Citadel Capital and project company Egyptian Refining Company (Takrir) on the US$3.7 billion financing for the redevelopment of its refinery at Mostorod, near Cairo. The financing, which closed today, is the largest-ever project financing in Africa.
Financing for the project includes US$2.6 billion in debt and a further US$1.1 billion in equity.
For Egypt, the refinery is strategically important for many reasons. It will be the first to produce European-grade diesel and IATA-grade jet fuel and to comply with World Bank and EU environmental standards. Among the refinery’s liquid fuels output will be more than 2.3 million tonnes of Euro V diesel (the cleanest-burning diesel fuel in the world). The upgraded refinery will also reduce sulphur/SO2 emissions by 186,000 tonnes per year—a 29.1% reduction in Egypt’s current SO2 emissions.
Importantly the refinery redevelopment will enable Egypt to reduce its present level of diesel imports by approximately 50%. (The refinery’s entire liquid fuels production will be sold to the state-owned Egyptian General Petroleum Corporation [EGPC] under a 25-year offtake agreement at international prices.) As well as decreasing Egypt’s subsidies bill for imported fuel, it is estimated that the upgraded refinery will create more than US$300 million in direct annual benefits to the state through avoided transportation and insurance costs and from revenues generated from storage and processing fees.
The project will also create significant employment opportunities for people in the Mostorod area, where the refinery is being built. At the height of construction work around 10,000 employees will be needed. And once the new refinery is operational more than 700 permanent staff will be employed.
Tim Pick, Shearman & Sterling’s head of project development and finance, said, “Having been personally involved since the project’s inception in 2006, I am delighted we have finally reached this milestone. This is the result of a huge team effort from Citadel Capital, the Egyptian Refining Company, the project finance advisory team at Société Générale and us—all working closely together, not to mention the hard work of the various equity investors, the lenders, the EPC contractor and their respective advisers.”
The Shearman & Sterling team of lawyers in the firm’s London and Abu Dhabi offices included project development and finance partner Tim Pick and associate Suzanne Szczetnikowicz, supported by finance partner Patrick Clancy and associates Alexandra Jeffreys, Anna Duncan, Jean-Louis Neves Mandelli, Natasha Kirby, Christy Wong and Sara Couling. Tax advice was provided by associate James Leslie.
Engineering at the site is under way and is expected to be completed in late 2013, at which time construction activity will begin. Refining is scheduled to start in 2016.
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