KARACHI (November 27 2006): A consortium of major local and foreign banks in Pakistan on Sunday signed a loan agreement of Rs 23 billion to fund a new fertiliser complex for Fatima Fertiliser. This is the largest ever 'greenfield' industrial project by Pakistani entrepreneurs financed in local currency.

The total cost of the plant is expected to be above Rs 35 billion, including Rs 23 billion in debt and Rs 12 billion in equity, and will manufacture up to 1.5 million tons per annum of nitrogenous and phosphatic fertilisers.

Fatima Fertiliser is a joint venture between Fatima Group and Arif Habib Group. The two groups already own Pak-Arab Fertiliser, which was privatised by the Government in mid-2005.

Fatima Fertiliser will be owned 70 percent by Pak-Arab Fertiliser (which is a 50:50 joint venture of the two groups), 15 percent directly by Fatima Group and 15 percent of the equity has reserved for a public issue, which is being underwritten by Pak-Arab Fertiliser.

Fatima Fertiliser and Pak-Arab Fertiliser will together have the capacity of manufacturing over 2.3 million tons per annum of fertilisers.

The Fatima Fertiliser complex will consist of plants having a capacity of manufacturing 1,500 tons per day (TPD) of ammonia, 1,500 TPD of nitric acid, 1,500 TPD of urea, 1,000 TPD of nitro phosphate, 1,400 TPD of calcium ammonium nitrate and 1,000 TPD of nitrogen potassium phosphate compound fertiliser.

The plant will be located at Mouza Khuda Bux, Sadiqabad, nearly 3 km from Fauji Fertiliser plant. The complex has been allocated 75 mmcfd of gas from the Man Field, which will allow it to produce 1.1 million tons fertilisers in the first phase.

If the allocation is increased to 110 mmcfd, the plant is capable of producing its full capacity of 1.5 million tons fertiliser at no additional capital cost. The production by the company will alleviate the shortage of fertiliser in the country and will make available phosphatic and compound fertilisers to increase farm yield. The local production of fertiliser would also enable the government to save on the import subsidy for fertilisers and would increase employment opportunities.

Renowned companies like Kawasaki Plant Services of Japan, Stamicarbon of Holland and Kellogg of USA have been engaged by the sponsors for providing services for the implementation and management of the project.

CNCEC, which is directly administered by the State Counsel of China, is providing the NP plant and is responsible for the civil and mechanical construction of the Project. Kawasaki and Stamicarbon are also providing the brand new urea plant with the latest technology.

In addition to the fertiliser plant the sponsors have contracted with UHDE of Germany to install a nitrogen oxide (NOX) removal plant. NOX is a greenhouse gas implicated in global warming and, in addition to improving the environment, the removal plant will also generate 'carbon credits' under the United Nations Clean Development Mechanism (CDM) which can then be sold internationally.

This will be Pakistan's second fertiliser CDM project. The first CDM project shall be operational in January 2007 by Pak-Arab Fertiliser.

The Lead Advisers and Arrangers for the Rs 23 billion loan facility are Habib Bank Limited, National Bank of Pakistan, United Bank Limited, Faysal Bank Limited and Standard Chartered Bank.

The Lead Arrangers are Allied Bank Limited, Bank Al Falah Limited, Askari Commercial Bank Limited and the Bank of Punjab and loan participants are ABN AMRO Bank, Habib Metropolitan Bank, MCB Bank Limited, Saudi Pak Commercial Bank and Saudi Pak Agriculture and Industrial Investment Company.

Copyright Business Recorder, 2006