RAKIA Sukuk (continued...) - Islamic Finance News

Deals of the Year 2007 Handbook
Engro Chemical Pakistan US$150 million
Project Finance Facility
THE COMPANY AND ITS BUSINESSES
Engro Chemical Pakistan is a public limited company listed
on the stock exchanges of Karachi, Lahore and Islamabad.
It was incorporated in 1965 as Exxon Chemical Pakistan.
In 1991, when Exxon decided to divest its fertilizer business
on a global basis, its employees, in partnership with leading
international and local fi nancial institutions, bought out
Exxon’s equity. The company was renamed Engro Chemical
Pakistan.
While Engro’s primary business line continues to be fertilizer,
it has diversifi ed into other businesses, including dairy
products, seeds, energy, storage of bulk liquid chemicals,
and manufacture of polyvinyl chloride (PVC).
THE PROJECT
On the 11 th December 2006, Engro Chemicals was
allocated 100 MMCFD (million cubic feet per day) gas
from the Qadirpur gas fi eld, to be delivered via a pipeline
constructed by Sui Northern Gas Pipeline Company. Engro
was to construct a modern urea plant (the project) on the
land adjacent to its existing plant location in Dharki. The
project cost is US$950 million — the largest private sector
project in Pakistan’s history. With a capacity of 1.3 tpa, the
new plant will be the single largest urea plant in the world
when it comes online in 2010, thereby making Engro the
largest fertilizer producer in Pakistan.
The project will allow Engro to leverage on its expertise
and utilize its well-established distribution network, with the
result of increasing market share which will afford it greater
pricing power.
TRANSACTION STRUCTURE AND DOCUMENTS
The transaction was structured as an Istisna-Ijarah.
Investment agency agreement: The fi nanciers appoint
one of their own as investment agent to be the nominal
owner of the fi nanciers’ undivided interest in the project,
to receive rentals from the company, and to send and
receive notices to/from the company.
Istisna agreement: The investment agent appoints Engro
as a procurer to procure an undivided percentage interest
in the project and to deliver such ownership interest on a
continued...
(As Procurer)
Purchase
Price
Delivery of
Ownership
interest in
Project upon
Completion
(As Servicer)
Service Agency
Expenses + Service
Agency Fee
Investment
Agent
Purchase/Sale
Undertakings
Purchase/Sale
Proceeds
(As Obligor)
Advance
Rentals/
Rentals +
Service
Agency
Expenses &
Fees
Usufruct
(As Lessee)
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