The Egyptian General Petroleum Corporation (EGPC) raised its stake in Egyptian Refining Company (ERC) to 24.2 per cent, up from 15 per cent, leaving the Arab Refining Company’s stake at 75.8 per cent.
This would raise the public sector stake to 49.5 per cent of an oil refinery to be built in Mostorod, north of Cairo, where there is already a refinery project owned by EGPC’s Cairo Oil Refinery Company, which will lease land and provide ERC with fuel oil as feedstock.
Public sector institutions already collectively hold a 25.3 per cent stake in the Arab Refining Company, which is shared by the Egyptian General Petroleum Corporation, National Investment Bank, Banque Misr, the Social Pension Fund and Egypt Post.
The increase was decided on December 2010, but was not announced at the time.
“There is a possibility that the public stake will, again, increase slightly. “The National Investment Bank is asking to be represented on board by an army official,” reveals Abdel Fattah Abou Zeid, chairman of ERC. “However, the final structure of capital participation is not settled yet,” he emphasises.
The project will cost some $3.7 billion, of which the capital accounts for a little over $1b.
The major stakeholder in ERC, the Arab Refinery Company, is gathering Arab and Egyptian funds along with the International Finance Corporation (a World Bank affiliate) and the German and Dutch governments.
Among the Arab investors are: Al Rajhi Saudi Group, the sons of the United Arab Emirates’ president and Citadel Capital.
The International Finance Corporation (a member of the World Bank Group) is also an equity investor.
The rest of the cost, i.e. $2.6 billion, will be covered through international loans. These loans are secured by international institutions, including, the African Development Bank and the Japanese Bank for International Cooperation and the European Investment Bank.
“These loans are already secured,” says Abou Zeid.
Zeid adds that these institutions imposed very strict environmental requirements. “Even more than the local environmental watchdog. So, we had to make sure that overall, we actually improve environmental conditions in the area,” argues Seif Eddin Fateen, environmental advisor to ERC. Moreover, ERC had to comply with 19 conditions imposed by the local watchdog, according to Fateen.
The ERC faces criticism from environmentalists and workers that would have to be relocated for the refinery to be built. The refinery is planned to be built in a densely populated industrial area already suffering from high levels of pollution and there have been protests against them from local residents.