Blain’s Morning Porridge, 20^th Feb 2025: Something Positive – a $7bln new Petrochemicals Complex in Egypt shows the way towards a new Middle Sea Economy!

“Egypt was – and remains – a confluence of cultures, a result of being a crossroads geographically between Africa, the Middle East and Europe.”

I’m delighted to announce we’ve signed an agreement in Cairo to build a new $7 bln private sector petrochemicals plant in Egypt, a development that could herald a new era of economic growth and the emergence of the future Middle Sea economy for the Middle East, Europe and North Africa.

The Atlantic Age may be crumbling in a Trumpian cataclysm of lies and disinformation this morning, but it’s time for a really positive, forward-looking story in the Morning Porridge today!

I’m delighted to say my trip to Cairo this week proved extremely successful. On Tuesday and wearing my Shard Capital Partners hat, I was the designated signatory for a Landmark Framework Agreement that was signed at the EGYPES Energy conference in Cairo to construct a First-of-Its-Kind Petrochemical Complex. The $7 billion plant will be located in the New Alamein Industrial Zone close to the Mediterranean, West of the Nile Delta.

I’m writing about it in the Morning Porridge because it’s a great example of what’s possible in what I call the day job – private capital markets. It also points towards the emergence of a new the “Middle Sea” economy I wrote about earlier this week – the Mediterranean littoral nations becoming a driver of global trade triangle between Europe, Africa and the Middle East, which will be a critical pathway for trade with Asia.

Over the years we’ve been working on the deal I’ve been repeatedly told no-one would fund an oil-based petrochemicals plant because of ESG concerns. Not so. We may see the global economy electrify, but there will always be demand for oil-and-gas derived paints, glues, packaging, man-made rubbers and the 1001 other plastic based materials modern societies require.

Together with colleagues in Cairo we’ve spent a number of years ‘crafting” this deal, creating a robust transaction that is “oven-ready” to finance and construct. (We will be raising a further $4.6 bln to complete construction.) To get the project this far we’ve attracted substantial support from across the oil and petrochemical sectors, bringing together best-in-class multi-discipline partners in engineering, construction, technology, logistics, finance and legal. (Over multiple visits I’ve grown to love Cairo – it’s a fascinating place – and She-Who-Is-Mrs-Blain, (who has a masters-degree in Archaeology), has been using our companion vouchers to visit tombs, mummies, museums and markets.)

We’ve attracted support right from the very top in Eqypt. The agreement was signed with the Egyptian Ministry of Petroleum and the Ministry of Investment in the presence of the Prime Minister, His Excellency Mostafa Madbouly and the British Ambassador to Egypt, Gareth Bayley. The support of the Prime Minister and the Petroleum and Mineral Resources Minister, Eng. Karim Badwai, has been absolutely pivotal to moving it towards completion.

However, nearly all infrastructure deals in Egypt (and across emerging economies) are done with elements of government-to-business and government-to-government involvement.  Transactions involving G2B can become overly “bureaucratic”, and in some jurisdictions Government oversight can make them vulnerable to corruption.

This project is unique as it’s an entirely private sector led development backed by British, Emirati, and Saudi investors. There is strong government support behind what we seek to construct, but zero Egyptian government involvement or control. They agree with us that sound corporate governance, robust anti-corruption barriers, and private sector operating efficiency, will establish precedent for international private enterprise to come to Egypt to drive growth in the economy. The Egyptian government like the concept so much they’ve agreed to give the project considerable tax advantages to launch in the new Alamein economic zone.

Traditional infrastructure funders will typically want to see government construction and trade guarantees for such projects – this is not a deal for such investors. This transaction takes an “Alternatives” corporate approach to financing – raising funds from sophisticated institutional investors on the strength of the underlying business, based on sound corporate governance, sustainability, CGR and choosing the best partners in terms of the construction, design and technologies to mitigate risks, and a focus on margin, returns and results. The project will throw off reliable double-digit returns for the Equity LPs.

The complex will utilize crude oil as feedstock, integrating refinery and mixed steam cracker technologies to achieve one of the highest global conversion rates producing premium petrochemical products – which have already effectively been presold to off-takers, primarily in the emerging “Middle Sea” growth economy, with much of the production expected to go to Turkey and Southern Europe. We have analysed the markets and pricing outlook in these products to optimise the design of the plant and maximise returns.

The plant will play a crucial role stimulating Egyptian economic growth and global market competitiveness, engaging local and international contracts, creating some 20,000 jobs in construction and 3000 skilled-roles through the plant’s life cycle. These will all generate significant economic growth multiplier effects while boosting trade with product off-takers around the Med and globally, boosting Egypt’s position as an entrepot between East and West.

The refinery complex will implement cutting-edge technology, including licensed solutions from Honeywell and other leading global partners, to ensure unrivalled efficiency and sustainability. As part of our ESG strategy, we will be using advanced energy-efficient technologies to minimize environmental impact, reduce carbon emissions, and enhance sustainability while maximizing industrial output.

From a financing perspective, the Project is an excellent example of how Private Capital Markets can be employed to generate strong, risk-mitigated returns for investors from complex transactions. Deals may not be as liquid as public markets, but they tend to provide investors with improved returns and greater transparency as most deals are done on a fully negotiated basis.

Using a GP/LP structure we will be funding the construction though a mix of private equity and private credit (debt). The detailed financial model we’ve built around the project demonstrates how risks and returns have been carefully identified and addressed, giving equity investors reassurance on returns, and debt investors reliable information to their interest and principal will be paid in a timely manner. The returns the project creates are substantial and justifiable.

Naturally my colleagues and I will be more than happy to talk to potential investors – although I stress this is institutional only. We expect to move through the swift completion of the conditions precedent and all relevant construction and market studies to reach financial closure during 2026.. which means we want to be talking to potential investors… now.

Out of time, and back to the day job…

Bill Blain

Author of the Morning Porridge

Partner, Shard Capital

Founder, Windshift Capital