The EBRD is considering providing a loan of up to US$ 25 million to the Egyptian German Company for Construction Industries (“EGIC”) to finance capacity expansion in Egypt.
The transition impact of the project is primarily derived from setting standards for corporate governance and business conduct through:
- Corporate Governance (CG): EGIC will follow a Corporate Governance Action Plan (CGAP), which includes crucial aspects for the Company to achieve its target of becoming an international player in the market. The measures outlined in the CGAP clearly exceed the local standard for unlisted companies (the governance structure of the Company will be in line with international best practices), and they are expected to have a strong demonstration effect among industrial firms seeking to improve their standards and planning international expansion / IPOs.
- Environmental, Health & Safety (EHS): Through the Bank’s involvement (and EGIC’s confirmed commitment to the proposed and approved ESAP), the Company will set EHS standards that go beyond legal requirements in Egypt as well as what it is understood to be common practice, according to the Environment and Sustainability Department.
- Business Conduct: EGIC is striving to achieve operational restructuring through improvement of the management systems and increased production efficiency and cost effectiveness, which are expected to increase the Company’s competitiveness and value proposition in the local and international markets. The Company’s operational improvements will be perceived in the market and are expected to positively affect other industrial players. In particular, the significant operational improvements to which the Company is committing to via the Project include the introduction of a comprehensive accounting and management reporting system (SAP).
EGIC is a significant player in the Egyptian plastic pipe market; it manufactures sanitary pipes with a wide product range including polypropylene, PVC and polyethylene pipes for water supply, drainage and gas supply usages. The company’s production has been mainly targeting the domestic market, which is expected to change with the acquisition in Turkey that will open a large number of export markets to EGIC.
EBRD is considering providing a long-term secured senior loan of up to US$25 million.
Up to US$25 million.
Category B. Potential environmental and social issues and risks associated with this project will be assessed, such as land acquisition, construction and the safety of the manufacturing process and products.
Environmental and social appraisal will cover the two major components of this project, that is, the Egyptian expansion project and the acquisition of the Turkish company.
For the expansion project at 6th of October, due diligence will involve an audit of existing operations and an appraisal of the proposed expansion project. For the acquisition component, an environmental and social audit of the acquisition target company’s operations and EHSS management systems is required.
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