Sepco Polyester Complex, Alexandria, Egypt

Saudi Egyptian Petrochemical Company (Sepco) has constructed what is said to be the largest polyester complex in the Middle East.

The plant is located in Alexandria, Egypt and is capable of producing 100,000tpa of partially oriented yarn (POY) and textile chips, 50,000tpa of staple fibres and 150,000tpa of polyester resin.

When the project was first announced, in 2000, estimated investment costs were around $650m.

POLYESTER COMPLEX SPONSOR

Saudi Egyptian Petrochemical Company (Sepco) is an Egyptian joint stock company. Sepco's principle backers are the Saudi Arabian Jehan Group Holding Company and Al-Muwakaba for Industrial Development & Overseas Commerce (Midroc). In addition, the Egyptian General Petroleum Corporation contributed around 10% of the investment.

PROJECT ADVISORS

Sepco called on the services of a number of experts to get its project off the ground. The PCI Consulting Group was hired to provide advice on the polyester industry, while Pace Consultants advised on engineering, marketing and financial matters. Legal advice was provided by Cadwalader, Wickersham & Taft, one of the US's oldest law firms. Financial advice was provided by local investment house Sigma Capital and the Cairo office of Arthur Andersen.

CONSTRUCTION

During the first quarter of 2001, construction work began on the Sepco polyester complex. The contract for the design and construction of the plant was awarded to Germany-based Lurgi Zimmer AG ($30m contract) who also provided a continuous process technology for the plant using purified terephthalic acid and ethylene glycol.

Swedish-based Midroc Engineering was awarded the project management contract. The plant was developed in conjunction with Fluor Daniel and also licensed some technology from DuPont Technology for the polyester units.

SUPPLY OF RAW MATERIAL

In the first quarter of 2001, Sepco announced that it had signed a letter of intent (LoI) with Spain-based chemical company Interquisa, for the supply of the required feedstock purified terephthalic acid (PTA). Interquisa supplies Sepco from a 350,000tpa PTA facility, which become operational in 2002.

OFFTAKE AGREEMENT

At the same time as agreeing a supply of raw material, Sepco also reached an agreement with Polytrade to purchase 80,000tpa of the new plant's polyester resin (PET) production. Polytrade is a wholly owned subsidiary of Lurgi Zimmer AG.

POLYESTER PRODUCTS

The complex produces a range of polyester products. Partially oriented yarn (POY) is used in clothing, textiles and some industrial applications. Sepco produces 100,000tpa of POY. Polyester staple fibre is also used extensively in carpets and non-woven fabrics and the plant contributes 50,000tpa to the market. The SEPCO plant also produces 150,000tpa of PET bottle resin.

START-UP

When Sepco first announced its project in 2000, it was expected that the plant would become operational in 2002. This date has subsequently moved to 2003 and then finally put back to 2004. There was no statement as to the reason for the change in start up date but it was probably due to a problem with finance.

BACKGROUND

Reducing Egypt's dependence on imports is one of the factors behind the decision to develop the polyester project. It is estimated that eliminating the need to import polyester fibre saves Egypt some $125m each year in foreign currency. The output from the plant now generates annual sales of over $400m.

A significant portion of the output is exported (to Europe and Asia), reflecting a growing demand for polyester. Sepco said that the exports will generate over 60% of the foreign currency needed to service its debt and cover raw material import costs.

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