March 10, 2008

Engro Chemical Pakistan Limited confirmed on Monday that it was interested in forming a joint venture with Ferphos, a National Iron Ore & Mining Company of Algeria, setting at rest weeks of speculation on whether the Pakistani fertilizer- to –food manufacturing giant was setting its sights on Algeria, the second largest country in Africa.

Ruhail Mohammed, Vice-President Finance & Admin Services at Engro, talking to Dawn from Italy on Monday evening, said that the majority holdings in the joint venture company would be that of Engro and the cost of the project to develop the proposed Phosphatic Fertiliser Complex would range between $ 1 to 1.5 billion.

He said that exact modalities would be determined later as the company was still waiting for official confirmation of its selection as Ferphos’ partner from the concerned government authorities of Algeria. “This decision is expected within the next few weeks after the resolution of some issues regarding the exact location of the project site”, he informed. The company had earlier endorsed this view in a statement in Karachi.

Engro announced that the fertilizer complex in Algeria would constitute a 3,000 tons per day units of DAP; three 4,500 tons per day units of sulphuric acid, three 1,500 tons per day units of phosphoric acid and the associated utilities facilities.

The company stated that the project was expected to be constructed in a period of around four years after the completion of successful feasibility study by the joint venture.

Engro had participated in an open and transparent international tendering process that took place in May 2007, the company stated and added that it had secured “top position” as Ferphos’s preferred partner for creation of the joint venture.”

However, the official communication of the position had not been made as certain approvals from the government of Algeria were awaited. “In Feb 2008, the Algerian Council for State Participation (relevant Algerian government body for taking decisions on foreign investments) approved the creation of the joint venture between Ferphos and a foreign partner (as evident from the local Algerian print media); however, the name of the foreign partner has not been disclosed at this stage,” Engro said.

Mr. Ruhail said that the production from the Algerian complex would be predominantly for exports.

Amal Haider, analyst at Elixir Securities Pakistan commented that the investment in the project was expected to further boost Engro’s bottom-line growth due to the heightened DAP demand. He expressed positive outlook on the company “on the back of diversified portfolio basket, urea expansion and now investment in a DAP plant.