Syndicated facility to ADES International Holding Limited

Overview
Project Summary Document
Environmental and Social Documentation
Procurement
Complaints

Project ID 49638

Status Complete

Location

Egypt

Business Sector

Natural Resources

Notice Type

Private

Project timeline

Exploratory
Passed Concept Review
Passed Structure Review
Passed Final Review
Board Approved
Signed
Implementing
Completed

Project ID 49638

Status Complete

Location

Egypt

Business Sector

Natural Resources

Notice Type

Private

Environmental Category

Approval Date

13 Dec 2017

Disclosure date

23 Mar 2018

As per section 1.4.2 (iii) of the Directive on Access to Information: "For Projects approved by Bank management where the Board of Directors has delegated the approval authority, the PSD shall be disclosed at the start of the relevant no-objection notification period to a member country of the Bank in accordance with Article 13 (iii) of the Agreement Establishing the EBRD."

Translated version of this PSD: Arabic

Project Description

The provision of USD 125 million debt financing as part of USD 450 million syndicated facility to enable ADES International Holding Limited to expand its offshore and onshore drilling fleet in Egypt and in the Middle East and North Africa ("MENA"). The syndicated facility consists of (i) a tranche to refinance ADES's existing debt, (ii) a working capital tranche and (iii) a CAPEX tranche to finance capital expenditures for acquisition of new rigs or entities and related expenditures in order to execute the Company's expansion plan post the successful IPO.

Project Objectives

Contribution to the expansion of ADES outside of its home market in Egypt via the purchase and refurbishment of rigs or acquisition of entities operating such rigs, leveraging on the Company's key
competitive strength (trained labour and low cost structure) and facilitating expansion of this successful model to new markets.

Transition Impact

The expected transition impact of the Project is based on improving Inclusive and Well-Governed transition qualities in Egypt by contributing to youth and women inclusion and transfer of skills in the
upstream oil sector in Egypt and improving corporate governance standards of ADES with significant demonstration potential.

Client Information

ADVANCED ENERGY SYSTEMS SAE

ADES is a leading oil and gas drilling and production services provider in MENA region that provides primarily offshore and onshore contract drilling and production services. ADES International Holding
("ADES International") is a limited liability company incorporated in the United Arab Emirates and listed on London Stock Exchange ("LSE"). Advanced Energy Systems SAE ("ADES Egypt") is a joint
stock company incorporated in Egypt and wholly owned by ADES International.

EBRD Finance Summary

USD 125,000,000.00

USD 125,000,000 million senior loan for the Bank's own account (including USD 25,000,000 underwriting amount).

Total Project Cost

USD 695,000,000.00

Total Project Cost is USD 695 million.

Environmental and Social Summary

Categorised B (2014 ESP). The provision of an onshore oil and gas services, such as drilling operations and field development, may be associated with various environmental and social (E&S) impacts and risks including the risk of oil spills and health and safety risks. These impacts and risks can be readily identified and addressed through the implementation of Good International Industry Practice (GIIP). ADES is an existing client of the Bank and previous due diligence in 2014 and E&S monitoring, including by a consultant in 2016, has shown that the Company has improved its implementation of GIIP and overall improved its E&S performance through implementation of an ESAP. ESD-led due diligence for the Project has included a review of the progress made against the existing ESAP; a review of the proposed use of proceeds; and consideration of the findings of independent E&S monitoring, which included a visit to one of the Company's offshore rigs. The existing ESAP has been updated based upon this due diligence and agreed with the Company.

E&S issues are managed through the Company's integrated management system which has seen substantial improvements since 2014. The management system is supported by appropriate resources and a robust approach to performance monitoring. E&S practices and performance offshore, including occupational health and safety, are in line with GIIP. Health and safety management provisions include a structured permit to work system, job risk analysis, worker training, emergency response, etc. Emergency response and major accident prevention/management provisions have been reviewed against the requirements of the EU Offshore Safety Directive, which came into force in the EU during 2015. The Directive focusses primarily on field operators but includes requirements that would apply to an operator's contractors, such as the Company. Company emergency response provisions are generally adequate but would benefit substantially from adopting a risk assessment approach, putting in place a Major Accident Prevention Policy and development of safety cases for each rig to ensure all hazards and risks are adequately considered and controlled in line with the Directive. These requirements have been captured in the updated ESAP. Under the 2014 ESAP the Company has implemented measures to consider and manage biodiversity and social risks offshore in liaison with field operators. These measures will need to be applied across the Company's operations. A review of HR provisions confirmed that they are in line with the Bank's requirements. Further, the Company has enhanced its approach to stakeholder engagement and disclosure and is implementing a corporate stakeholder engagement plan which is tailored to each project. Onshore E&S issues are managed through the same integrated management system and the same principles regarding impact and risk avoidance and reduction are applied. These provisions will need to be extended to consider potential land use and livelihood impacts. The due diligence included a review of the potential E&S impacts and risks associated with the proposed use of Bank proceeds and confirmed that existing E&S provisions are adequate to manage these impacts and risks.

The 2014 ESAP has been revised and updated to reflect the proposed use of proceeds and findings of the due diligence. Key actions include measures to ensure compliance with the Offshore Safety Directive such as the development of a Safety Case for each rig and ensuring appropriate risk management. Various actions within the ESAP require investments to the Company's offshore fleet. These actions have been rolled out on a continual basis since 2014 and the ESAP has been updated to acknowledge the investment and improvement schedule. The Company will continue to be required to report to the Bank on an annual basis on E&S performance and ESAP implementation.

Technical Cooperation

EUR 124,800 TC Project: "Review and Enhancement of the Corporate Governance Practices of ADES" (TCRS: 7612) funded by the Shareholder Special Fund ("SSF") on cross sharing basis with 10% of the project amount contributed by ADES. The Project includes two assignments:

- Assignment I: Improvement of corporate governance of ADES - TCRS ID #39761, for EUR 74,800; and

- Assignment II: Review and enhancement of ADES' internal audit function (the "Internal Audit Review") - TCRS ID #39762, for EUR 50,000.

EUR 75,000 TC for the "Strategy Development Support" funded by the SSF on cross sharing basis, with 10% of the project amount contributed by ADES.

Up to EUR 75,000 TC for skills development "Economic inclusion of young women and men through improved and standardized high quality training in Egypt" (TCRS: 1256), funded by DFID with 15% cash contribution by ADES.

Company Contact Information

Hussein Badawy
ir@adesgroup.com
+2 (0)2 2527 7111
investors.adihgroup.com

Implementation Summary

The project aimed to contribute to the expansion of ADES outside of its home market in Egypt via the purchase and refurbishment of rigs or acquisition of entities operating such rigs, leveraging the Company's key competitive strength (trained labour and low cost structure) and facilitating expansion of this successful model to new markets. As a result of this investment, ADES expanded the number of oil rigs from 13 rigs in 2018 to more than 50 rigs in December 2020. In addition, the Bank’s investment facilitated the training of youth and their inclusion in the oil services sector as well as improving the client’s corporate governance.

The project was Categorised B (2014 ESP) and it was determined that while ADES’s activities may be associated with various environmental and social (E&S) impacts and risks including the risk of oil spills and health and safety risks, these impacts and risks can be readily identified and addressed through the implementation of Good International Industry Practice (GIIP). ADES was an existing client of the Bank and previous due diligence in 2014 has involved development of an ESAP. This ESAP was updated as part of this transaction and has been largely implemented (with various actions regarded as ongoing actions) and the Company’s E&S performance was satisfactory to the Bank. The Company has demonstrated its capacity to operate in line with the Bank’s requirements.

The Project included EUR 124,800 TC Project: “Review and Enhancement of the Corporate Governance Practices of ADES” funded by the Shareholder Special Fund (“SSF”) on cost sharing basis with 10% of the project amount contributed by ADES. The Syndicated loan was prepaid in full in July 2021.

Transition impact

ETI Score:71

PSD last updated

19 Jun 2019

Business opportunities

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Text of the PIP

Environmental and Social Documentation is not available for this project.

Selected procurement notices related to this project may be shown below. Further procurement opportunities related to this and other projects, if available, maybe be viewed in the EBRD Procurement Portal.

The EBRD's Environmental and Social Policy (ESP), Access to Information policy (AIP) and Project Accountability Policy (PAP) enable sound and sustainable development in its projects. The Independent Project Accountability Mechanism (IPAM) deals with complaints about environmental, social and disclosure matters related to the Bank’s investments.

No complaints about this project have been made so far.

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