Displaying items by tag: Development Bank of Ethiopia

Ethiopia: Derba Cement is planning to build a US$300m expansion to its cement plant. The new plant in Chancho City, Sululta will have a production capacity of 2.5Mt/yr. The project is expected to take 18 – 24 months to complete once started, according to the Cihan News Agency.

The subsidiary of MIDROC is in talks with China National Building Materials Company to build the new plant. It is negotiating with the Development Bank of Ethiopia, International Financial Corp, the World Bank Group investment arm, the African Development Bank and the European Investment Bank to finance the project, according to Derba Cement CEO, Haile Assegide.

Haile added that Derba Cement’s decision to build an upgrade in a market with excess production capacity made sense due to the project’s cost efficiency. The new plant will use existing infrastructure to cut its costs. The plant will also benefit if the government implements the Second Growth and Transformation Plan (GTP II) increasing demand for cement.

Derba Cement has a 2.5Mt/yr cement plant at Chancho City. However, the plant is producing 0.5Mt/yr less than its capacity due to power supply interruptions. The Gilgel Gibe III Dam, that started producing electricity in late 2015, is expected to normalise the electric supply to the plant.

Ethiopia: The Development Bank of Ethiopia (DBE) has signed a loan agreement with Habesha Cement for US$33m to build a 1.4Mt/yr cement plant at Holeta in Oromia State. Additional loan agreements were also signed in late November 2013 between Habesha, the DBE and the Preferential Trade Area (PTA) Bank, the financial arm of the Common Market for Eastern & Southern Africa (COMESA). The PTA Bank is co-financing the Habesha project by lending US$50m.

According to Addis Fortune, Habesha is now seeking a letter of credit to allow equipment for the cement plant to be imported. Chinese engineering firm Northern Heavy Machinery Industries have been hired to import and erect machinery for US$80m.

Previously the DBE approved a loan for US$83m to cover 70% of the project costs but it withdrew the offer in early 2013. The current DBE loan only covers 30% of the project costs. Other investors, including PPC and South Africa's Industrial Development Corporation (SAIDC) paid US$21m for nearly half of Habesha Cement in 2012. The plant was originally scheduled to start production by 2012.

Ethiopia: The Development Bank of Ethiopia (DBE) has approved a loan of USD90m for Habesha Cement. This represents 70% of the estimated USD120m that the company requires to build the first cement plant to be owned by an Ethiopian company.

Habesha Cement secured the first 30% by selling shares up until 2009 and from a USD79m deal with Northern Heavy Machinery Industries (NHI) Group in October 2010 for the provision of a turnkey cement plant. Habesha Cement was hoping to secure the rest from DBE in 2010.

However the devaluation the Ethiopian Birr by 20% in August 2010 prevented the loan being secured. The board was forced to recommend floating more shares at its second general assembly. Now Habesha Cement has raised a total of USD32m, which is still short by 8.4% of the 30% equity it needs to receive the loan.

"We are confident that we will raise the remaining funds as there are still lots of people asking to buy our shares," said Mesfin Abi, general manager of Habesha Cement. "Our worry was getting the 70% loan approved from the DBE."

The construction of the cement factory, which is to be located in Holeta, west of the capital in Oromia regional state, is to start once NHI is paid 10% (USD7.9m) of the agreed-upon amount, according to the agreement signed in 2010. The advance payment is to be paid in US dollars.

As Habesha Cement does not have access to foreign currency, it has to wait for DBE to grant it the loan so that the bank can make the payment in dollars on its behalf. Once the advance has been paid, NHI is expected to finish the construction of the factory within 20 months according to the agreement.

Habesha Cement expects to produce 85% and 95% in its first two years of production and 1.2Mt at full capacity in its third year, according to its prospectus. Once it starts to produce at full capacity, Habesha Cement will be the third largest producer of cement in Ethiopia next to Mugher Cement and Messebo Cement, which produce 1.9Mt/yr and 1.7Mt/yr respectively.

The total production of cement in the country is expected to reach 27Mt over the five years to 2016, according to the government's draft economic plan. There are currently 11 companies with a combined production of 5.4Mt/yr.