Carbon Holdings – Convertible Loan

Country:

Egypt

Project number:

48698

Business sector:

Manufacturing and Services

Notice type:

Private

Environmental category:

B

Target board date:

21 Mar 2017

Status:

Disbursing

PSD disclosed:

05 Apr 2017

Translated version of this PSD: Arabic

Project Description

The Project is a convertible loan to Carbon Holdings (CH), which aims to support CH's plans to develop projects in the petrochemicals industry in Egypt.

Project Objectives

The EBRD funds will support CH's development of projects in the petrochemical industry in Egypt, through the financing of one of CH's operating companies - Egyptian Hydrocarbon Corporation (EHC, or the Company).

Transition Impact

The transition impact of the proposed Project derives from (i) increased competition in the sector - the EHC plant is currently the main licensed MGAN operation in Egypt. The start and ramp-up of EHC's plant will encourage competition in the sector, which has only two key competitors in the region, and (ii) improve standards-setting that will go beyond local levels in several dimensions - the Project will contribute to improving environmental, health and safety standards; energy efficiency standards; and sustainability reporting - all to a level beyond current local industry practice.

Client Information

CARBON HOLDINGS LIMITED

CH is a holding company focused on developing, and operating petrochemical plants, primarily centred in the Ain Sokhna industrial zone, in the Northwest Gulf of Suez in Egypt. CH has the following portfolio of projects: (i) EHC: a 370,000 tpa MGAN plant, (ii) OPC: a polypropylene production plant, with a capacity of c. 180,000 tpa, and (iii) TPC: currently in the development / financing stage; a greenfield integrated plant for the production of polypropylene and other
petrochemical products.

EBRD Finance Summary

USD 11,000,000.00

Total Project Cost

USD 168,000,000.00

Environmental and Social Summary

Categorised B (2014 ESP). The production of nitric acid and mining-grade ammonium nitrate is associated with moderate environmental and social impacts although these are site specific and readily addressed through the implementation of standard mitigation and management measures.

The manufacturing plant is generally in line with the EBRD#s environmental and social (E&S) requirements although some improvements are required to align the plant fully with EU standards for the sector. These improvements, which are described below, are captured in an E&S action plan, which has been agreed with the Company.

Environmental and social (E&S) due diligence was conducted by ESD and included a site visit to  the plant, pipeline route and unloading jetty, and a review of various E&S documentation. IFC is an existing lender to the Company and agreed an action plan, which has since been fully implemented.

The plant became operational in 2016 after being subject to an ESIA in 2010 and ESIA addendum in 2014, both of which were done to international standards. E&S performance and risks associated with the plant are managed by a robust, integrated management system, which will be certified to ISO standards. The management system is implemented by a strong management team and also applies to contractors. E&S requirements will be extended to suppliers.

Ammonia is the key raw material in the production process and is supplied by ship to the jetty and pumped via underground pipeline to the plant.

Company HR and labour provisions are in line with EBRD requirements. Workers are not unionised but free to join or form a union. Appropriate HR policies and procedures are in place, as is a grievance mechanism. The Company supports an equal opportunity and non-discriminatory work environment but the nature of the Company#s business, and the remote location of the facility, is such that female representation in the workforce is low.

The plant was reviewed against EU Best Available Techniques (BAT) for the sector. The facility is generally aligned with EU BAT although abatement equipment will be installed to reduce emissions of nitrous oxide (N2O), a gas with high global warming potential, from the nitric acid plant to below BAT limits. Other emissions, such as NOx and dust, are below BAT limits. The Company will also install a continuous emission monitoring system. An assessment of plant emissions as part of the ESIA, and annual monitoring, confirmed that the plant will not significantly impact on local air quality. GHG emissions are in the region of 174 000 tonnes CO2e/year. This will decrease with the abatement of N2O and will be monitored and reported to the Bank through an annual GHG inventory.

The plant uses brackish water abstracted from onsite wells. Water is treated, used in the process and for cooling, and recycled on site. Wastewater is treated on site and there is no discharge of wastewaters off site. Solid waste materials are handled by licensed contractors.

Plant and worker safety is managed through the integrated management system. As part of the ESIA the plant was subject to a Quantitative Risk Assessment (QRA) which considered a range of risk scenarios including major accidents and off site impacts. The nearest residential area is 1.1km away. The findings of the QRA, and the findings of various HAZOPs (hazard and operability studies), have been included in the design of the plant and have influenced management and monitoring provisions. The plant triggers the EU Seveso Directive due to the storage capacity for ammonium nitrate, a product associated with explosion risks. The plant meets many of the requirements of the Seveso Directive including a safety review, emergency planning and response plans, crisis management plan, etc. The plant will, however, also develop a standalone Major Accident Prevention Policy (MAPP) and also review the findings of the QRA against current operational performance and implemented any updates and improvements if required. Furthermore, as part of its stakeholder engagement activities, the Company will communicate information to stakeholders on major accident and emergency prevention and response provisions. Specific provisions are in place for the transport of ammonium nitrate from the plant as are management provisions for the prevention and management of risks at the unloading jetty.

As part of the ESIA process, the Company held various local stakeholder meetings in line with Bank requirements. It maintains a communication strategy, communicates regularly with local stakeholders, and has in place a corporate and plant level grievance mechanism.

The Company will be required to report to the Bank on an annual basis on E&S performance and implementation of the ESAP. ESD will monitor the Project as required including undertaking site visits.

Technical Cooperation

None

Company Contact Information

Ibrahim Hamdy
hamdy@carbonholdings.net
+20 (2) 3344-4774
+20 (2) 3344 4776
www.carbonholdings.net
1 Sphinx Square, Mohandeseen, Giza, Egypt

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Project Complaint Mechanism (PCM)

The Project Complaint Mechanism (PCM) is the EBRD's accountability mechanism. It provides an opportunity for an independent review of complaints from individuals and organisations concerning EBRD-financed projects which are alleged to have caused, or are likely to cause, environmental and/or social harm.

Please visit the Project Complaint Mechanism page to find information about how to submit a complaint. The PCM Officer (pcm@ebrd.com) is available to answer any questions you may have regarding the submission of a complaint and criteria for registration and eligibility, in accordance with the PCM Rules of Procedure.