DFF - Horus Bond

Location:

Egypt

Project number:

50937

Business sector:

Natural resources

Notice type:

Private

Environmental category:

B

Target board date:

02 Apr 2019

Status:

Signed

PSD disclosed:

14 May 2019

Translated version of this PSD: Arabic

Project Description

Provision of an investment of USD 28 million in a USD 325 million fixed-rate, five-year Eurobond offering, issued by Ades International Holding ("ADES" or the "Company") and listed on the London Stock Exchange.

The bond will enable ADES to extend its debt maturity profile, diversify the sources of funding and partially hedge its interest rate exposure by issuing a long-dated fixed-rate instrument. By swapping an amortising loan with a 5-year bullet facility, the company's new back-loaded repayment profile will increase cash available for debt service and help building a more robust capitalisation.

Project Objectives

The bond proceeds will be used for general corporate purposes including: (i) financing of a training academy, an educational programme established by ADES for the provision of technical training to its employees and external audiences in the areas of technical skills, health, safety and environment; and (ii) debt refinancing under the existing syndicated facility.

Transition Impact

The transition impact will stem from the following two transition qualities:

The primary transition impact quality is "inclusive" thanks to the promotion of skills and employability of young labour market entrants in the drilling oil and gas service sector by expanding the availability of high-quality technical training as well as establishing a High Level Public Private Steering Committee ("Committee") on education and training policy in drilling oil and gas service in Egypt.

The second quality is "resilient" as the investment in a corporate Eurobond issued by an Egyptian company will contribute to the development of a capital market instrument that improves market access for issuers and investors.

Client Information

ADES INTERNATIONAL HOLDING PLC

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 is a public limited 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 28,000,000.00

USD 28,000,000 investment in USD 325,000,000 Bond

Total Project Cost

USD 325,000,000.00

USD 325,000,000 Bond

Environmental and Social Summary

Categorised B (2014 ESP). Due to the nature and rules associated with capital market transactions, the Bank has not been in a position to undertake detailed due diligence before the bond issuance, and only review of publicly available information has been undertaken. The use of proceeds for the Bond will be targeted at refinancing existing debt and no Capex investments are envisaged. It should be noted that the Bank has existing relationships with the client and thorough due diligence has been carried out in the past, with agreement reached on Environmental and Social Action Plans which were designed to structure client operations in line with the Bank's Performance Requirements.

Environmental and Social Due Diligence (ESDD) shows that the Client has standards in place with regards to Labour and health and safety, but limited public information is available regarding environmental risks management.

ESDD focussed primarily on review of the client's 2017 Annual Report to gain an understanding on how Environment Health and Safety (EHS) issues are managed, and evaluate the Client's capacity to comply with Bank's Environmental and Social Policy and relevant Performance Requirements.

The Annual Report includes statements regarding alignment with EBRD Performance Requirements, in line with the actions required under the Environmental and Social Action Plan (ESAP) described above. A CSR Manager was appointed in 2017. The HR Policy covers child labour and nondiscrimination; monthly turnover per rig is used to assess employee satisfaction; and the worker grievance mechanism was updated in 2017 to include an online reporting system. Recordable injuries statistics over the last years are below the International Association of Drilling Contractors worldwide average (Recordable Injury Frequency Rate of 0.41 against 0.56 in 2017 and 0.62 against 0.65 in H1 2018). According to ADES Policy, no land acquisition will be carried out that could result in physical or economic displacement of communities. It is understood that updates to environmental risk management practices have been outlined in the existing ESAPs and these are being implemented in a timely manner. Given the information reviewed and the nature of the investment, there is no requirement for additional action items to be detailed in a further ESAP. The EBRD Environmental and Sustainable Department (ESD) will discuss with the team and the Client any requirement to warrant continued adherence to the Performance Requirements in the bond Framework Agreements. There is no GET component associated with this project.

Technical Cooperation

Inclusive TC (TCRS ID #1256): Technical cooperation (up to EUR 75,000) activities under the "Inclusion Technical Assistance Framework" will be deployed. Under this technical cooperation consultancy services will be utilized to setup a High Level Public Private Steering Committee on education and training policy in drilling oil and gas service.

Company Contact Information

Hussein Badawy

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

Business opportunities

For business opportunities or procurement, contact the client company.

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Email: procurement@ebrd.com

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Text of the PIP

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.