* Fertiliser projects to bear fruit from November
* Chairman sees construction order backlog growth
* Expects OCI group demerger in October
* Clients to share cost of Egypt subsidy cuts
By Tom Pfeiffer
CAIRO, Sept 5 Egypt's Orascom Construction
Industries will build a $1.4 billion fertiliser plant
in Iowa and is buying a U.S. construction firm, as it targets
growth outside its main Middle East markets, the company said on
The plant in the main U.S. corn-growing region will make
between 1.5 and 2 million metric tonnes of products including
ammonia, urea and urea ammonium nitrate annually, reducing U.S.
reliance on imports, OCI said in a statement.
Construction is due to begin this year for completion by
mid-2015 and will be funded using equity and bonds.
The Iowa investment comes after a sharp drop in the price of
U.S. natural gas, a key input for fertiliser.
"It costs $100 to (import fertiliser) to Iowa on a $400
product," OCI Chairman Nassef Sawiris told Reuters in a phone
interview. "The Iowa plant will keep that $100 dollars in its
OCI's construction arm took the contract worth over $1
billion to build the plant, which will use technology from
Kellogg Brown and Root, Maire Tecnimont and ThyssenKrupp
Orascom Construction Group also said it was buying The Weitz
Co, an Iowa-based commercial, federal and industrial
construction specialist whose revenue tumbled by more than half
in recent years because of the U.S. economic downturn.
Weitz had an orders backlog of $788 million on June 30, half
of it made up of federal projects. It will bolster OCI's
U.S.-based construction business Contrack International.
Sawiris said recent fertiliser investments meant a 60
percent increase in OCI's profit-generating assets during the
second half of 2012.
"As this ... asset improvement comes to an end in November
and December, people are going to see month after month of quite
significant growth," said Sawiris, whose family founded some of
the biggest companies in Egypt, in industries ranging from
telecoms to hotels.
He said OCI now had enough new projects on its plate until
2013 when it would address fresh growth opportunities.
CONSTRUCTION MARGIN SQUEEZE
Sawiris said markets such as Libya and Egypt had suffered
from the Arab Spring uprisings that began in early 2011. But
Saudi Arabia remained very strong.
Asked if OCI's construction business would see growth in its
order backlog in the coming year, he said: "Sure ... We are
working on other sizeable opportunities and we are always
bidding for work".
His optimism comes despite a slide in investment and tourism
into Egypt in the wake of last year's popular uprising.
The Egyptian government has spent most of its foreign
reserves to limit a decline in the pound against the U.S.
dollar. That helped cap inflation, but left some foreign
investors wary of stepping back into Egypt for fear of a slide
on the pound.
"We have to get the currency obstacle behind us even with a
not very significant devaluation, but some kind of adjustment
has to happen. The faster it happens the faster we will get the
(Egyptian) economy growing," said Sawiris.
Sawiris said he expected a demerger of OCI's fertiliser and
construction businesses, first planned for the third quarter of
this year, to be completed in October and that government
approval for the split appeared imminent.
He said it was possible OCI would see a one-off impact from
a move by Egypt's government to rationalise or phase out
gasoline and diesel subsidies for industry, but its customers
would share some of the added costs.
"All our construction contracts have cost-adjustment
formulas so ... clients will participate in the implications,"
he said, adding it was time Egypt got rid of subsidies that
drained precious funds from education and health.
"Every time I go on vacation in Egypt, I feel disgusted that
my motorboat is receiving subsidised fuel," he said.