Egypt secures $3.7bn fund for Mostorod oil refinery project

Egyptian Refining Company (ERC) has secured $3.7bn for the redevelopment of a refinery at Mostorod, near Cairo.

The financing, which includes $2.6bn in debt finalised in August 2010 and $1.1bn in equity, is the largest ever project financing in Africa.

Shearman & Sterling represented both the project sponsor, Egyptian-listed private equity firm Citadel Capital, and ERC on the financing.

The greenfield second-stage oil refinery will produce European-grade diesel and International Air Transport Association (IATA)-grade jet fuel, including over two million tonnes of EURO V diesel.

Shearman & Sterling head of project development and finance Tim Pick said, "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."

The upgraded refinery will prevent 186,000 tonnes per year of sulphur from being released into the air and enable Egypt to reduce its present level of diesel imports by nearly 50%.

It is estimated that the upgraded refinery will generate more than $300m in direct annual benefits to the state through savings in transportation costs of imported refined products and from revenues through storage and processing fees paid by ERC to Egyptian General Petroleum Corporation (EGPC) companies.

Mostorod oil refinery’s entire liquid fuels production will be sold to the EGPC under a 25-year offtake agreement at international prices.

Construction will begin by the end of 2013 and the refinery is scheduled to be operational in 2016.