ASEC Cement completes Zahana overhaul in Algeria

Citadel Capital announced today that a key subsidiary of portfolio company ASEC Cement has completed a significant overhaul.

“Zahana Cement Company, our key Algerian subsidiary, has just concluded the largest overhaul in the plant’s long history,” noted ASEC Cement CEO Giorgio Bodo. “This substantial intervention will lead to a 20% year-on-year increase in the production of both clinker and cement. Moreover, the deployment of new bag filters as part of the upgrade has dramatically lessened the plant’s environmental footprint.”

Following the overhaul, Zahana’s production capacity is rated at around 900,000tpa.

ASEC Cement has management control and a 35% equity stake at Zahana in partnership with the Government of Algeria.

ASEC Cement has also begun work on a US$30m project to construct a new raw mill at Zahana that will be fully operational by 2014, raising Zahana’s production capacity to around1.2Mta of clinker.  Moreover, procedures have already started to launch a new line of 1.5Mta. This further expansion should be completed by 2015, allowing the plant to reach 2.7Mta of clinker and 3Mta of cement.

Zahana, located in western Algeria 40km from Wahran, had a production of 650,000t of cement in 2008 when ASEC Cement took over management of the company.

The changes in the plant in the last few years have been very important not only in terms of production and profitability; they have also reduced the plant’s environmental impact and substantially improved the employee working conditions.

Meanwhile, ASEC Cement confirmed today that it is on track to start commissioning at the Arab National Cement Company (ANCC), its 1.9Mta clinker greenfield plant in the Upper Egyptian governorate of Minya, in the final months of 2012.

ASEC Cement is the largest shareholder in ANCC with a 45% stake in the project and expects to bring the US$335m plant into production in the first quarter of 2013.

Civil works on site were complete at year-end 2011. In a bid to accelerate construction following delays related to the events of 2011, ANCC and ARESCO — the contractor responsible for the steel fabrication and mechanical erection of the plant and an ASEC Holding portfolio company — are now implementing a recovery plan to complete mechanical and steel installation by the third quarter of this year.

“Moreover, we have concluded a contract to connect ANCC to the national electrical grid, and works are now underway on a 42km transmission line that will connect the plant to the Samalloot power station. ANCC has also secured the natural gas connection and water supply for the project, and infrastructure work is in progress,” Bodo said.

ANCC is on record as being one of Egypt’s biggest project finance deals. In September 2010 ANCC signed an EGP1.1bn loan to finance the construction of its plant in Minya. The syndicated loan agreement involves a consortium of seven leading Egyptian and regional banks, which will cover 52% of the US$ 335 million investment with the balance financed by the equity of ANCC.

Other shareholders in ANCC include Misr Qena Cement (13.9%), Safari Investments (30.7%), IFU/FLS (9.2%) and other shareholders (1.1%).

ASEC Cement is a portfolio company of ASEC Holding, Citadel Capital’s platform company in the regional construction, engineering and cement industries. ASEC Cement will control total production of 10Mta of cement by 2015.