Eleme Petrochemical

Indorama_Eleme


Country:

Nigeria

Sector:

Chemicals

Signing Date:

Jan 2007

Total Project Cost:

USD 400M

Lender of Record:

IFC

Cordiant Exposure:

USD 20M

 


Company Description

The Project is a polyethylene and polypropylene plant based in Port Harcourt, Rivers State, Nigeria, which was established in 1988 and commenced operations in 1995. The Niger Delta region of Nigeria is an area hard hit by terrorist attacks on foreign oil installations. In 2006, Cordiant participated in financing Indorama’s acquisition of Eleme, a polyethylene and polypropylene plant privatized by the Nigerian National Petroleum Corporation. Increasing incidents of violence in the region are the by-product of a community alienated from the economic benefits generated by the oil industry.

Deal Logic

Nigeria is a large producer of gas and for years was a significant importer of plastic resin. The modernisation of the plant will fulfill local demand and add value locally to natural resources.

Investment Rationale

  • Low Cost Producer: With ample feedstock in close proximity, the company could withstand the cyclical nature of the petrochemical industry.
  • Strong Domestic Market Demand: Prior to the transaction, the domestic market was almost completely dependent on more costly imports of polyethylene and polypropylene. The company supplies a large number of customers and plays an important role in the developing Nigerian plastics processing industry. By the end of 2007, Eleme had made a significant contribution to the Nigerian GDP.
  • Inclusive Deal Structure: Proactive management of community relations will almost always yield tangible economic results to an investor. The acquisition of Eleme was structured in a manner that gave local stakeholders – including employees and the community itself – ownership of the plant. Creating this local ownership has fostered unprecedented community involvement and support for Eleme.
  • Solid Sponsor: The acquirer of Eleme had an impressive track record of managing manufacturing operations in difficult locales.
  • Well Structured Transaction: The loan followed best practices in using an off shore structure to mitigate Nigerian sovereign risk.
  • Strong Environmental Oversight: A management system was setup to address the environmental, health and safety aspects of Eleme’s operations.  The system will be used to ensure compliance with IFC’s environmental and social policies, performance standards and guidelines.