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Citadel Plans to Construct Refinery This Year

Source: Bloomberg 1/27/2012, Location: Egypt

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Citadel Capital SAE (CCAP), the Egyptian private equity firm that has raised $3.7 billion to build an oil refinery, plans to start construction in the second quarter. The refinery will have a capacity of 4.2 million tons of refined products a year and construction will take four years, Chairman Ahmed Heikal said in an interview in Davos, Switzerland, where he is attending the World Economic Forum.

Citadel has more than $9 billion in investments through companies investing in 15 countries including Uganda, Sudan and South Africa in industries such as food, transport, cement and energy. The Cairo-based company raised 1.05 billion Egyptian pounds ($173.9 million) in a capital increase last year. It also raised $234 million in equity and debt for its railway investments in Kenya and Uganda, as well as $150 million from the U.S. Overseas Private Investment Co.

“We have agreed with our investors, our shareholders, that the best risk-reward ratio that we have today is to put capital at work within our existing portfolio,” Heikel said.

Part of the company’s plans this year is to pay “a lot of attention to a number of our portfolios that are underperforming,” he said, listing Rally Energy Corp., a Cairo- based upstream oil and gas exploration company. Citadel will also sell some of its “non-core investments” and “recycle” the cash to other assets, Heikal said.

Citadel’s shares gained 11 percent this month. Egypt’s benchmark EGX 30 Index climbed 22 percent after the Arab country inaugurated its first parliament following the uprising that ousted President Hosni Mubarak last year and the government requested a $3.2 billion loan from the International Monetary Fund to contain record borrowing costs. Heikal said rising public debt and widening budget deficits in Egypt and around the world will create opportunities for private companies to invest more in services that governments used to provide.

“Governments cannot invest in infrastructure, cannot invest to provide some of the services they used to provide,” he said. “If the governments can’t provide those services, the private sector will.”

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