Engro Polymer signs $35m Ijarah-based financing facility with IFC

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KARACHI: Engro Polymer and Chemicals Limited (EPCL) has announced financing of $35 million from International Finance Corporation to expand its production plant of Polyvinyl Chloride (PVC) – a chemical used in making numerous plastic products construction materials like water and sewerage pipes, cables, and consumer items like shoes, packaging films – according to a bourse filing on Thursday.

This financing was a part of the initial Rs10.3 billion expansion plan announced earlier, out of which Rs5.4 billion has already been raised from the issue of right shares.

Engro Polymer has been associated with IFC, a member of the World Bank Group, since its inception. EPCL, which remains the industry leader being the sole producer of PVC resin in Pakistan, disclosed adding a new production line of PVC after demand for the chemical continued to surge significantly in the country mainly owing to a boom in construction activities.

Speaking on the occasion, EPCL CEO Syed Abbas Raza said, “This financing of $35 million would not only fund our expansion plan but would also bring precious foreign exchange to the country. The funds from IFC will contribute towards the completion of the expansion project, paving the pathway for development of construction activities in Pakistan.”

EPCL announced investing over Rs10 billion for expansion of the plants, including those producing other related chemicals like VCM (raw material for PVC), and adding a new product to its portfolio named ‘caustic soda flakes’. While expanding the business, EPCL will add a new PVC plant with a capacity of 100,000 tonnes (taking total capacity to 295,000 tonnes per annum) and increase production of VCM by 50,000 tonnes through debottlenecking of the existing plant by the third quarter of 2020.

Engro Polymer aims toward converting all its long-term debts on principles of Islamic finance mode. EPCL Treasury Head Bilal Ahmed stated, “The company is also in a process of issuance Sukuks to refinance the existing debt on the company’s balance sheet. We aim to complete the exercise before the end of 2018.”

IFC Asia and Pacific Vice President Nena Stoiljkovic said, “Engro Polymer’s success highlights the potential of the private sector to build capacity and transform industries through the adoption of better technology and standards. This investment will send a strong market signal on the positive outlook for the chemical sector, besides showcasing Pakistan’s promise to mitigate climate change.”