The Hindu Business Line : FACT submits report on Egypt project

Overseas venture
35% of equity is likely to be brought in by the new consortium member, while 15 per cent is earmarked for FACT.
The project is likely to be completed within a matter of 24-30 months given the built-up infrastructure and other facilities at the site.

Kochi March 15 Having visited the site for the Rs 3,000 crore one million tonne per annum urea project at the Suez Industrial Development Company in Egypt, The Fertiliser and Chemicals Travancore Ltd (FACT) has submitted a detailed feasibility report to the Union Ministry of Fertilisers.

Based on the report, a Ministry level delegation is expected to visit Egypt during the last week of March to evaluate and finalise all the project details, Mr George Sleeba, Director-Technical of FACT, said at a press conference. The delegation is likely to consist of representatives from the Ministry, FACT and some other fertiliser company, who is likely to be co-opted as consortium member.

There are several inherent synergies between the cash-strapped FACT and profit making National Fertilisers Ltd (NFL) including having the same Chairman and Managing Director, Mr G.S. Mangat. The choice on the consortium partner is likely to fall on NFL. Mr Mangat is reported to have expressed his keenness on taking up the project.

The major points of discussion that are likely to come up before the delegation would be the price and allocation of gas for the project as well as the price and buy-back agreement for the 10 lakh tonnes per annum of urea produced from the proposed plant, Mr A. Ashokan, Director, Marketing, said.

Gas Prices

The setting up of a company comprising of the consortium members is a pre-condition from the Government of Egypt to allocate its gas resources.

The project is the outcome of an Expression of Interest sought by FACT for setting up an international urea project, for which FACT Engineering and Design Organisation was to undertake the formulation, construction and execution. The Adi Group of Syria responded and identified the site at Egypt, which has far cheaper gas prices and is in close proximity to the Sokhna port.

Since FACT did not have sufficient capital to invest in the project, Adi Group promised to the fund the total project cost and earmark 15 per cent of the equity to FACT for the construction, erection and execution. With an estimated shortfall of close to 50 lakh tonnes of urea in the country this year that is slated to grow to 80 lakh tonnes by 2010, FACT was expected to negotiate a buy-back of the urea at a pre-determined price between the Government of India and the Adi Group.

Equity Participation

But the Ministry countered by pointing out that FACT does not have the capability or expertise to market 10 lakh tonnes of urea on its own and advocated the need to bring in from fresh equity participation from within the country. NFL is a likely candidate since it has the resources, also five units producing urea in the country and is into the marketing of urea in a big way. With an expected 2:1 debt equity ratio, the equity component is likely to be Rs 1,000 crore. Of this, 35 per cent is likely to be brought in by the new consortium member, while 15 per cent is earmarked for FACT for the execution of the project.

The Adi Group has identified 250 acres of land in Egypt, which could be stepped up to 400 acres. Unlike most Indian projects, this one is likely to be completed within a matter of 24-30 months given the built-up infrastructure and other facilities at the site, which is a private SEZ, Mr Sleeba pointed out.

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