Cordiant funds a $671 million Jordan-India Fertilizer plant
July 7 2011
Issued on behalf of Cordiant Capital by Mattison Public Relations
Cordiant funds a $671 million Jordan-India Fertilizer plant
• Investing in solutions to the global food crisis
• Generates hundreds of direct jobs in Jordan – boosts agricultural productivity in India
Cordiant Capital Inc. (“Cordiant”), the Montreal based fund manager that specialises in loans to private borrowers in emerging markets, has committed a $10 million loan to the Jordan-India Fertilizer Company (“JIFCO”).
The loan will finance the construction of a new $671 million plant in Jordan, using phosphate rocks from local mines to produce phosphoric acid, a fertilizer intermediate, for the Indian market.
With the recent dramatic rise in the cost of basic foodstuffs in India, demand for fertilizer is increasing rapidly across the country. Demand for phosphoric acid is likely to keep rising in the longer term as the growth of the Indian middle class and their demand for higher protein content food put more pressure on food supply.
The plant’s strategic location near the Eshidiya phosphate mines and its proximity to India will keep production and transport costs to a minimum, making the JIFCO phosphoric acid very competitive.
The quantity of fertilizer used per hectare in India is much less compared to that applied in developed economies leaving the potential of increasing productivity of Indian agriculture far less productive. JIFCO’s phosphoric acid exported to India makes fertiliser production in India competitive, improves the productivity of agricultural production and contributes to ease India’s food shortage.
The project will also have a substantial developmental impact on the Jordanian economy. The construction and operation of the plant is expected to generate new jobs of about 800 to 1600 during construction phase and about 400 during operation on daily average basis in South Jordan where the average income is much lower than in the rest of the country. Local transportation activity will generate indirect employment of about 400 people in addition to economic activity of tanker manufacturing and transport. About 2 million tonnes of rock phosphate will be supplied by JPMC to the project annually, which will lead to increased mining activity, generating additional employment for about 150 persons and other business opportunities.
The project is sponsored by the India Farmers Fertilizer Cooperative Ltd (“IFFCO”), a major institution that produces and distributes fertilizers on behalf of 40,000 farmers’ cooperatives across India, and the Jordan Phosphate Mines Company (“JPMC”) who own and operate phosphate mines in Jordan.
Total global consumption of phosphoric acid, a key ingredient in fertilizers, is forecast to increase from 33.1 million tons in 2008 to 38.3 million tons by 2013 and to 54.7 million tons in 2028.
The Jordan-India Fertilizer Company will produce 1,500 tons per day (475,000 tons per annum) of phosphoric acid, a minimum of 70% of which will be exported to India and used as feedstock for IFFCO’s fertilizer operations.
The new plant will also be equipped with state-of-the-art technology to convert the steam produced in the manufacturing process into electricity – enough to make the entire factory self-sufficient and for the excess to be sold to the national power grid. The plant will also recycle water, a rare commodity in the Jordan desert, with high efficiency.
David Creighton, President and CEO of Cordiant Capital, says: “This landmark project is a great investment opportunity offering our fund an attractive return and a very low risk profile. Demand for phosphate in India has been growing at a compound annual rate of 5% over the last 15 years and the trend is expected to continue.”
“Long term growth in the demand for fertilisers makes this a sensible, low risk proposition for us.”
“The plant will boost the living conditions and economic prospects in this part of Jordan while providing Indian farmers with access to a secured long term, low-cost supply of top quality fertilizer to help them to meet the booming demand for food.”
Investing in solutions to the global food crisis
Earlier this year, international food prices soared to levels last seen in 2007-08, when food riots occurred in 30 countries, including Egypt, Haiti and Cameroon. According to the UN’s Food and Agriculture Organisation, the global price for a basket of basic foods is now 37% higher than in June last year.
David Creighton explains: “As the people in developing countries become richer, their consumption of meat and dairy increases. This has led to a boom in animal farming and higher demand for agricultural produce for animal-feed, which is inflating the price of basic foodstuff and making them unaffordable for many low income people in emerging economies.”
“Improving agricultural productivity will be critical in alleviating food crises in poorer countries and this need is creating a number of interesting investment opportunities for private capital in agribusiness in emerging markets. We are continuing to watch the sector closely. ”
In the last ten years Cordiant funds have provided loans to several agribusinesses in emerging markets, including a sugar producer in India, a crusher and exporter of soybean and ancillary products in Argentina, a banana exporter in Ecuador and a leading farm operator and agribusiness group in South-America that produces a diversified combination of grain crops such as soy, corn, wheat and barley.
The Jordan-India Fertilizer Company project will receive a $125 million loan arranged by the International Financial Corporation (IFC), in addition to $90.1 million IFC B Loan raised from a syndicate of commercial banks and Cordiant Capital. The European Investment Bank (EIB) is also providing a parallel loan of $120.4 million.
About Cordiant Capital
Founded in 1999, Cordiant pioneered the creation of emerging market corporate loan funds that invest in partnership with International Financial Institutions. Cordiant has managed over $2.2 billion in subscriptions from some of the world’s largest institutional investors in three emerging market loan funds; the ICF Debt Pool; and one private equity fund, the Canada Investment Fund for Africa. The firm has made investments in nearly 200 companies in more than 50 countries. It has exposure to all major sectors, including a large number of infrastructure investments. Cordiant is a signatory to the UN Principles for Responsible Investment.
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