In search for power, Ethiopia turns to growing sugar
Netafim in Ethiopian talks to sell $200m irrigation systems
By Irit Avissar and Ron Stein
A consortium of Israel financial institutions is providing financing for an Ethiopian government company.
Drip irrigation technology company Netafim Ltd. is in advanced negotiations for a $190-200 million deal to supply pumping and underground drip irrigation systems for sugar cane to an Ethiopian government company. A consortium of Israel financial institutions, headed by Bank Hapoalim (TASE: POLI), is providing financing for the Ethiopian company.
The project is complex, and its terms, including the financing question, have not yet been finally closed. Netafim, managed by CEO Ran Meidan, is carrying out the work in Ethiopia in cooperation with Global Africa Industries, owned and managed by Itai Terner. In addition to the complex deal itself, one of the interesting things about it concerns the question of financing. The bank’s customer is Netafim, but the party receiving credit from the bank is an Ethiopian company controlled by the Ethiopian local government, with the money being paid to Netafim as payment for the project. The finance transaction is a complicated scheme called buyer credit, in which the bank is actually financing the company receiving services from its customer. Credit granted to an Ethiopian company, however, is considered high-risk credit, because it involves a company operating in a country defined as an emerging market, and which does not have large foreign currency reserves. This loan is therefore designed to be secured through a credit insurance company. The parties have apparently not yet settled the question of the insurance, and it has not yet been determined whether the party providing it will be the government credit insurance company or a foreign credit insurance company.
The advantage of the deal for Bank Hapoalim is that the risk is being transferred to the credit insurance company (these companies have high debt and financial strength ratings), which means that Bank Hapoalim’s risk is determined by the credit risk of the insurance company insuring the loan, which is low, rather than by the Ethiopian company’s risk.
Quite a big deal
The negotiations for putting together a financing package have reached an advanced stage, although they have not yet been finally approved. The deal is a rather large one, and the bank is therefore expected to recruit other financial institutions to take part in it, apparently mainly foreign institutions specializing in this type of transactions. Bank Hapoalim is also providing credit to Netafim directly through a consortium that includes Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS), Harel Insurance Investments and Financial Services Ltd. (TASE: HARL), Amitim (the older pension funds for which an arrangement has been made), Mizrahi Tefahot Bank (TASE:MZTF), Israel Discount Bank (TASE: DSCT), Union Bank of Israel (TASE: UNON), and HSBC. Some of these institutions may also participate in financing this contract.
Netafim, controlled by the Permira private equity fund, uses drip irrigation that saves water and reduces erosion and soil exhaustion. Netafim exports $800 million annually. The company has 16 plants in 11 countries, and 13 of its plants are outside of Israel. The company has 4,000 employees.
Dr. Tedros holds talks with Chairman of Ezdan Holding Group
Foreign Affairs Minister Dr. Tedros Adhanom held talks on Tuesday (August 26) with Dr. Khalid bin Thani Al Thani, Chairman of Ezdan Holding Group of Qatar.
He welcomed the choice of Ethiopia as an epicenter of the company’s investment and expressed the hope that the Ezdan Holding Group’s investment would create a new era for the development of Ethio-Qatar bilateral ties.
Dr. Tedros, noting that Ethiopia was a champion of macro-economic stability and socio-economic development, mentioned the country’s remarkable economic performance registered over the last ten years with an average real GDP growth of 10.9%.
This, he said, was the result of the right-mix of development policies and strategies and tremendous public investment in infrastructure, agriculture and services.
He said major international rating firms had recently appreciated Ethiopia’s impressive growth trajectory, giving a rating of “B” and “B+”.
He detailed the priority areas of investment, including manufacturing, building and the development of industrial zones, renewable energy and health.
All these, he said, would surely bring win-win outcomes and tangible benefits to Ethiopia and the Ezdan Holding Group.
He also mentioned that Ethiopia had signed agreements on investment promotion and protection and avoidance of double taxation with Qatar, and hoped these agreements would provide additional impetus to the Ezdan Group’s engagement in selected areas of investment.
Dr. Tedros added that Ethiopia had also become an important force for regional peace, security and stability, and emphasized its valued links with neighboring countries as mutually cooperative partners to consolidate an integrated, stable and prosperous region.
Dr. Khalid bin Thani Al Thani said Ethiopia’s present economic takeoff and future economic and political trajectory were the major driving forces to encouragement in investment and add value in the country’s national renaissance in the areas of health, real-estate development and hotels in which his company was ready to invest.
Dr. Tedros said the Ministry was a significant point through which to engage in Ethiopia’s investment and business opportunities, and he recommended the value of participating in the Government’s efforts to make Ethiopia a nucleus of medical tourism in Africa.
The Qatar delegation also met with President Dr. Mulatu who highlighted the government’s readiness to offer all possible support to encourage foreign investment in Ethiopia through available facilities and incentives and policies that protect investments in the country.
Sheikh Khalid said building long-lasting strategic relationships between the private sectors of the two countries should benefit the efforts and attempts to open new markets and promote new joint ventures locally and internationally, including attractive strategic projects for local and foreign investments.
He said he observed a clear interest from the Ethiopian side in the Qatari investment and serious attempts to provide suitable and attractive environment for investments that could play an influential role in moving the wheel of development in the country and finding new job opportunities.
First Addis Abeba tram rolls out
ETHIOPIA: The first of 41 trams being built for the two-line network under construction in Addis Abeba was unveiled at CNR Changchun’s plant in China on August 26.
The trams were ordered in March 2014 and are scheduled to be delivered by January, being shipped via Tianjin and Djibouti with a journey time of about 50 days.
CNR said the arrival of the first Chinese-built trams in Africa would act as demonstrator for Chinese technology, opening the door to other African markets including proposed light rail lines in Kenya, Congo, Zimbabwe, Egypt and Nigeria.
The three-section 70% low-floor cars have an entrance height of 350 mm and a steel and aluminium body designed to combine strength with lightness. They are designed to operate in pairs at speeds up to 70 km/h.
To cope with the effects of strong sunlight at altitudes of 2 400 m, the trams have tinted windows designed to filter out 90% of the ultraviolet rays, and the rubber components and cables are specified to avoid premature ageing. The roof is designed for rapid drainage to cope with sudden heavy downpours, with roof-mounted components in weather-sealed housings. Reflecting typical year-round temperatures between 6°C and 28°C, the trams will have opening windows to save the energy and maintenance costs of air-conditioning.
Two lines are being built by China Railway Eryuan Engineering Group for completion by January 2015. One will run 16·9 km north-south from Menelik Square to Kaliti, and the other running 17·4 km east-west from Ayat to Tor Hailoch. The routes will share tracks for a 2·7 km section between Lideta and Meskel Square. Export-Import Bank of China is providing loans to cover 85% of the cost of the project.
As well as supplying the trams, CNR is to provide staff training, with 50 Ethiopian drivers and maintenance personnel to begin courses during September.