Agrium Inc. said June 20 that the Egyptian Peoples Assembly has voted to recommend the relocation of the EAgrium facility to an unnamed location, and the Egyptian Prime Minister has indicated he will support the recommendation. The Peoples Assembly ratified the Fact Finding Committee Report that EAgrium satisfied all of the requirements of Egyptian law in acquiring the necessary permits and approvals to construct the EAgrium project on land zoned for industrial projects, in partnership with the Egyptian Government.
Agrium has previously stated, and remains of the opinion, that movement of the facility from the existing industrial-zoned site would require new financing, permitting, and the negotiation of new engineering, procurement, and construction contracts, and that it is not a viable option.
Agrium said it will be aggressively pursuing full recovery of its costs, equity contribution, and future lost profits.
The Egyptian Prime Minister has offered two possible options to resolve the matter. These options include a buyout of Agrium’s investment in the project, and/or the transfer to Agrium of an interest in an Egyptian government-owned nitrogen facility currently being commissioned adjacent to the EAgrium site. Agrium will be evaluating all options and may have to write off the approximately $280-million invested in the project in the second quarter of 2008.
Earlier in the week, Agrium reported that the $1.2 billion project had been cleared by the Egyptian Parliamentary Committee of all substantive issues relating to the project. Yet, the project was still on hold. Agrium was in negotiations with the government about returning the project to construction.
Construction on the project was stopped in late April. Agrium says it and its partners and international banks have already invested over $500 million and the project is now 42 percent complete from an overall engineering, procurement, and construction perspective.
Agrium had expressed disappointment that it was being singled out from other projects, considering it has advanced the project to world standards and has followed the same procedures as other world-class capital projects located at or adjacent to the industrial port of Damietta. Citing the Egyptian press, Agrium said special interest groups have organized a misinformation campaign within the local community in order to gain access to EAgrium’s land for other purposes.
Agrium noted that there are significant implications to Egypt if the project were not to proceed. In addition to the funds already invested, Egypt would be assuming a potentially significant lost profit claim, said Agrium. Given the Egyptian Government’s one-third investment in the project, it would be susceptible to a potential loss of approximately $150 million. Also, the local community and national economy would forego substantial economic benefits associated with the project, estimated to be in the hundreds of millions of dollars. Given the political uncertainty that this raises, Agrium said there are reports that various other international projects and investments have recently been suspended, including two large refineries and various other investment projects.
Agrium has been in Egypt for over four years, developing local community ties and obtaining all necessary permits for the development of the world-scale facility. The Agrium facility would be the sixth nitrogen facility in the country; there have been no environmental issues raised with any of these facilities.
Agrium, noted as an example, there is an Egyptian-owned nitrogen facility (MOPCO) directly across a small canal from EAgrium that is currently commencing production, and, to Agrium’s knowledge, these types of issues were not raised at that facility.