Global Signs Agreement for New Cement Plant and Acquires Quarry in Tunis
Global Investment House (Global) announced today that it has signed an agreement with Bina Holding of Tunisia to jointly develop Carthage Cement, a Greenfield cement plant with capacity of 2 MTPA along with a ready mix and brick plant.
The highlight of the investment is the acquisition of one of the largest quarries in North Africa, spread across 220 hectares, of which 30 hectares are presently excavated and already into gravel production and generating revenues. The quarry, with estimated limestone deposits of 250 million tons, is located close to the capital and the main commercial port of Tunis.
It is worth mentioning that PEG of Switzerland is the project manager and HSBC is the advisor to the project.
In the Maghreb region, including Morocco, Algeria, Tunisia and Libya, the building materials sector is undergoing profound changes. Considered as emerging markets; these countries are becoming urbanized and are experiencing unprecedented growth. This growth is predominantly driven by urban and demographic development, as well as the flow of foreign direct investments, particularly in the infrastructure, construction and residential sectors. Cement consumption in Tunisia grew from 4.2 millions tons in 1998 to over 7.0 millions tons in 2007.
Production of cement in Tunisia has multiplied 13 fold during the last 30 years growing from 500,000 tons a year in 1976 to reach almost 7 million tons in 2007. Four cement producers are responsible for 75% of Tunisian production, while the remaining 25% are produced by two public companies plants.
With its 11th Five Year Development Plan under preparation and discussion, a Plan that incorporated an average annual real GDP growth of around 6.1% until 2011, the government is aiming at modernizing and expanding the infrastructure by developing new highways and expanding existing roads’ networks, urban freeways, bridges, airports and oil refineries.
Expenditures incorporated in the Plan call for increases by 50% of governmental spending on infrastructure and equipment over the previous plan. Most of these huge projects are planned to be implemented through the BOT route.
Various large real estate projects have been granted to experienced GCC investors. The sports city, development of the Tunis Marina, South Lake projects, and the touristic project of Al- Qoussour are examples of large real estate projects underway.
Tunisian cement plants are under pressing demand from exports especially from Libya and
Algeria. Demand from the Mediterranean basin is also strong. Considering the above and unsatisfied export demand estimated in excess of 2 million tons per year currently, there is enough room today for the establishment of a new production capacity equivalent to 4 to 8 million tons to meet demand from 2010 to 2015.
The cement prices in Tunisia used to be regulated, except for HRS cement. When privatizing most of its cement plants Tunisia committed to free pricing of cement. Due to have happened by 2005/2006, full liberalization of cement prices have been postponed to 2008 to coincide with the entering into force, its partnership agreement, with the European Union, states that custom duties as well as regulations have to be lowered/removed latest by the end of 2008. To do that, the government has already accelerated the appreciation of cement sale prices in the past few years to be freed eventually.
According to Mr Omar El-Quqa, Executive Vice President at Global “The cement plant has come at an appropriate time, and it will help in facilitating the large scale infrastructure and real estate investments taking place in Tunisia. The quarry which constitutes a key element for development of a cement plant is readily available in this case, has huge deposits of prime quality limestone, marl and clay, has opened fronts enabling industrial extraction right away and benefits from an exceptionally strategic location of 25 km from the capital city, which accounts for more than 50% of the country’s cement consumption.”
El-Quqa further added, “there is no need to wait for the completion of the cement plant for revenue generation, as the quarry is substantially excavated and already selling 4-5 million tones of gravel per year. The revenue stream will be complemented by the ready mix plant which can be started immediately. Global through its partners are also looking at similar opportunities in building materials in North Africa, mainly in Algeria and Morocco which offer a lot of potential. Global has continuously built on its competencies and skill sets to identify and develop building-material transaction in MENA region.”
According to a statement given by the Chairman of Bina Holding, he was pleased with the partnership with Global and the rationale being Global’s contribution, ambition and financial expertise in MENA region. He also added that North Africa and particularly Tunisia are set for a sustained growth of their real estate and construction sectors, which constitutes the required ground for Carthage cement to build itself, further into one of the largest cement conglomerates of the region.
