Egyptian refinery deal defies turmoil When Citadel Capital, the Egyptian private equity firm, decided to build a refinery in greater Cairo, it did not expect the financing to take five years. First announced before the collapse of Lehman Brothers and the global economic crisis - not to mention the toppling of Egypt's president and the 18 months of political turmoil that followed - the $3.7bn finance needed to build a diesel refinery looked as if it might never materialise. But the closing of the funding last week has sent a positive signal to investors that big deals can be done in Egypt, even at the height of political and economic uncertainty. With international banks reluctant to take risks in the region, an emerging coalition of development banks, multilateral lenders and oil-rich Gulf states are now supporting some of the Middle East's most valued infrastructure projects. "We had to dig a lot deeper to pull this off," says Katan Hirachand, director of energy project finance at Société Générale, who advised on the deal. Commercial banks did not shy away totally from the deal, but the amount they were willing to lend decreased - and government agencies and institutions stepped up to take their place, says Mr Hirachand. The deal included $2.6bn in debt and $1.1bn in equity. Asian banks were well represented in the debt tranche, with Bank of Tokyo-Mitsubishi acting as global co-ordinator for banks and agencies. The European Investment Bank and African Development Bank were among the non-Asian creditors. Qatar, which has made clear its political and economic ambitions throughout the unrest in the region, played a central role on the equity side of the deal through state-backed Qatar Petroleum International, which committed more than $362m for a 27.9 per cent stake. The Egyptian government took 23.8 per cent for $270m through the Egyptian General Petroleum Company. The scale of this deal is unusual, and unlikely to be repeated in Egypt in the near term, bankers say. The size, while large for the region, is dwarfed by the $10.4bn secured for the Barzan natural gas project in Qatar last year. Asian banks also emerged as strong backers of that deal, as European banks retreated from the region and other emerging markets. The Citadel refinery deal has come as a relief to Egypt's private equity industry, which once benefited from a growing and globalising economy and a government committed to privatisation and economic reform. Deals have waned since the downfall of former president Hosni Mubarak and his government. The rise of the old guard of the Egyptian state - whose public face is represented by Field Marshall Mohamed Hussein Tantawi, who chairs the interim ruling council of army chiefs - has halted the economic policies of Mr Mubarak's regime, which in its final decade became a darling of international investors. It has also resulted in significant players in the economic circles of the Mubarak regime being prosecuted and jailed, with onlookers saying the military rulers are keen to scapegoat the businessmen, who were unpopular among the general public, rather than target members of the equally disliked security apparatus. The chiefs of some of Egypt's biggest public companies have found themselves in interrogation rooms and cells, and the deals of the past - from privatisations to sales of public land - have been reviewed and in some cases reversed. Concerns over the relationships between bankers and dealmakers and the former regime have been highlighted in a recent case against officials at EFG-Hermes , the country's biggest investment bank. Its two co-chief executives are set to face trial alongside Mr Mubarak's two businessmen sons, Gamal and Alaa, over allegations of stock market manipulation. The wider consequence has been a tough environment for dealmaking, as bankers and middle men keep a low profile during Egypt's transition. But Citadel's refinery deal continued to evolve, even as commercial bank underwriting became taboo for international lenders. One plan to include an Islamic tranche to the funding crumbled as the sharia-compliant creditors would not lend beyond 10 years and conventional lenders refused to make special allowances. "Given the impact of the eurozone crisis on banks" appetite to invest balance sheet in the region, sponsors and advisers are having to be a lot more creative on how they manage large financing requirements above $500m," says Steve Perry, the regional head of syndications for Standard Chartered. When the uprising erupted in Egypt, the priority for many commercial banks was to mitigate political risk. Development banks such as the European Investment Bank have stepped in to insure the political risk of the debt, according to one banker. The role of international institutions remains a hot topic among Egypt's political class, which remains sceptical after the rampant corruption of the Mubarak era. But as job creation and economic realities form a growing part of the country's political dialogue, projects such as Citadel's may eventually be seen in a new light. An estimated 10,000 jobs will be created in the construction phase of the project, with hundreds more permanent positions once the refinery is operational. And the cash-strapped state, which imports diesel at world market prices to sell at a subsidised price locally, is expected to save an estimated $300m a year and halve its imports of the fuel. "This is a big, growing economy with enormous demand," says Angus Blair, the head of the Cairo-based Signet Institute, a think-tank. No matter who is in government, the needs will remain the same.