Report No. 608-EGT

EgyptAppraisal ofTourah Cement Expansion Project(In Two Volumes)

Volume 11: AnnexesDecember 30, 1974Industrial Projects DepartmentNot for Public Use

Document of International Bank for Reconstruction and Development

This report was prepared for official use only by the Bank Group. It may not be published.quoted or cited without Bank Group authorization. The Bank Group does not accept respon-sibility for the accuracy or completeness of the report.

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VOLMtE II

CURRENCY EQUIVALENTS WEIGHTS AND MEASURES

Except where otherwise noted All units are metric exceptall figures are qoteod in noted otherwisemYPTIAN POUNDS (LE)

uS $ i LE.3922 1 Metri6 Ton - 1000 kilegrams (kg)L1E 1 a US $2.55 1 Metric Ton - 2p2O5 pouadsLE 1,000 - US $2,55o 1 Kilometer (km) 0.62 miles

1 Meter (a) ' 39.3 inches

ABBREVIATIONS AND ACRON!MS

Arab Nad Arab Fund for Economic and Social Derelep motARE Arab Republic of EgyptCEGA Cairo Electricity aad Gas AdinistrationCSAD Central State Audit DepartastMO Egypt Cemet Office0031 General Organization for Buildiag Materials asd CermissGaaI General Organization for IndustrializationOFP General Organization for PetroleumTCC, the Company T.urah Portland Cment CmpanTPD (Metric) Toas Per DayTPY (Metric) Tons Per Tear

TCC FISCAL YEAR

July 1 - Jne 30 -- Prior to June 30, 1971Ju3 1 - Decber -- 1971 to 1972Janury 1 - December 31 -1973 onwards

EYPT

APPRAISAL OF THE TO1JRAH CEMENT EXPANSION PROJECT

TABLE OF CONTENTS

VOLUME II

ANNEXES

1 Technical Terms and Process Description

2-1 Public Sector Companies in Egypt2-2 Organization Chart of Tourah Cement Company2-3 Description of Existing Facilities2-4 Historical Income Statements2-5 Historical Balance Sheets

3 Market for Cement in Egypt

4-1 Raw Material Availability and Analysis4-2 Utilities and Infrastructure4-3 Detailed Project Description4-4 Plant Layout4-5 Flow Sheets4-6 Ecology4-7 Labor Force Projections and Training Requirements4-8 Project Implementation Schedule

5-1 Capital Cost Estimate5-2 Working Capital Requirements5-3 Bank Financed Items5-4 Disbursement Schedule

6-1 Revenue Projections6-2 Production and Operating Cost Projections6-3 Notes to Financial Projections6-4 Income Statement Projections (with Expansion)6-5 Source and Application of Funds Projections (with Expansion)6-6 Balance Sheet Projections (with Expansion)6-7 Income Statement Projections (without Expansion)6-8 Balance Sheet Projections (without Expansion)6-9 Break-Even Point Analysis6-10 Financial Rate of Return and Sensitivity Analysis

7-1 Economic Rate of Return and Sensitivity Analysis7-2 Risk Analysis7-3 Foreign Exchange Savings

MAPS

IBRD 11196 - Quarries and Transportation ArrangementsIBRD 11195 - Location of Existing and Future Cement Plants

ANNEX 1Page 1

EGYPT

TOURAH CEMENT EXPANSION PROJECT

TECHNICAL TERMS AND PROCESS DESCRIPTION

A. Technical Terms

Following is a list of the most common technical terms used in thecement industry:

CEMENT A hydraulic binding material in the form of an amorphouspowder consisting basically of tri- and bicalcium sili-cates, tricalcium aluminates and tetracalcium alumino-ferrites. Cement is produced by heating a mix of rawmaterials (limestone, clay and sand) which transformsinto cement clinker through incomplete fusion at atemperature of about 1450°C. Clinker is ground togetherwith small quantities of gypsum, which acts as aretarder, controlling the setting time of the resultingcement.

CEMENT TYPES The most common cement types are:

Ordinary Portland Cement used in ordinary concretestructures.

Rapid Hardening Cement used in structures requiringearly strength which is achieved by quick setting ofthe cement.

Sulphate Resisting Cement used in structures exposed tosea water or sulfurous materials.

Low Heat Cement used in structures of massive concreteblocks (e.g., dams) to avoid overheating during setting.

Superfine Cement used for special structures requiringhigh strengths and for prestressed concrete.

Portland Blast Furnace Cement prepared, in part, fromblast furnace slag and used in ordinary cement structures.

Oil Well Cement used in the construction of oil wells(for lining).

Mixed Cement used for masonry work (mortar) and smallconcrete structures.

ANNEX 1Page 2

CLINKER Clinkering is the process of heating to produce incompletefusion in the material heated. Less than one-third ofthe material heated becomes fluid. The output of thisprocess is a rocky material called clinker. Cement-Clinker produced from limestone, clay and sand is groundwith small additions of gypsum.

COMBUSTION AIR Air which is used with the fuel to fire the kiln.

Primary Air, is the small amount of air injected intothe kiln together with fuel under high pressure.

Secondary Air, which constitutes the major part ofcombustion air, is provided by fans and is heated up toabout 800°C in the cooler prior to flowing into the kiln.

CONTROL A system to check and adjust the proportions and chemicalcompositions of materials in the production flow bytaking samples, analyzing them, and appropriately adjustingproportioning devices. In modern facilities this iscontinuous and automated. Sampling is achieved in by-passes, deviations from the main flow of materials.

COOLER Vessel in which the hot clinker leaving the kiln iscooled. The cooler is designed as heat exchanger heatingthe secondary combustion air. Three major types ofcoolers are in use:

Air Quenching Grate Cooler: a moving grate, slightlyinclined on which the clinker falls from the kiln to becooled by fans under the grate.

Planetary Cooler: this consists of 8 to 14 cylindricaltubes (incorporated into the shell of the kiln) intowhich the clinker to be cooled falls.

Rotary Cooler: (Internal Cooler) cylinder of sameconstruction as the rotary kiln and located under thefiring hood. It rotates on tires.

CRUSHING Raw materials are normally quarried in the form of largelumps and blocks and must be subjected to a reduction insize before being further processed into a slurry orraw meal which in turn is fed to the kiln. The reductionof raw materials from a maximum admissible size to anaggregate of a specified size is achieved in a crusher.Major known types are:

ATNEX 1Page 3

Roll crusher: particularly suited for moist materialliable to cause clogging.

Jaw crusher: particularly suited for large size lumps.

Impact crusher: such as hammer crusher and hammer millideally suited for raw materials of cement manufactureif these are not too moist or too abrasive. This typeallows drying during the crushing process.

Impeller crusher: overcomes impact resistance ofmaterial.

Gyratory crusher: suitable for hard materials whichare not too moist (liable to clogging).

DUST COLLECTION Dust pollution was traditionally a serious environmentalproblem posed by cement plants as dust is generated atnearly every stage of the production process, particularlyin the dry process technology. Furthermore, largequantities of emitted dust also represented lostproduction. Therefore the development of appropriatefilters has a long history in the production of cement.Common filter types are:

Bag filter: A series of chambers with bags of nylonor other material installed, which dedust the airstreamloaded with dust particles. A system of valves permitsreversal of the air stream in a particular chamber toclean the bag and collect the accumulated dust. Onlysuitable if temperatures of the airstream and particlesdo not exceed 1000 to 15000.

Cyclone: This consists of an upper cylindrical portionand a lower funnel shaped portion. The airstream entersthe cyclonic chamber tangentially at the upper portion.Through centrifugal force, dust particles strike thewall of the chamber and slide down to the dischargeopening of the funnel. The cleaned airstream leavesthe cyclone through a central outlet pipe. Cyclone'sefficiency can be enhanced by arranging several unitsin line (multicyclone batteries).

Gravel filter: A filter consisting of a series ofchambers filled with gravel. The dust-laden airstreamflows through the filter pockets thereby unloading thedust particles. Cleaning of the filter is by reversalof airstream and simultaneous stirring of the gravelbed. This filter is suitable for temperatures above500C and, therefore, often used for waste gases ofclinker cooler and kiln.

ANNEX 1Page 4

Electrostatic filter: Electrostatic dust precipitationmakes use of the forces generated in electrically chargedbodies while the dust laden gas passes between twoelectrodes connected to high tension (30,000 to 80,000 V).The positive electrode collects the dust particles whichhave received a negative charge, thereby neutralizingthem. Dust must be removed from time to time from theelectrode. Optimum operation is achieved at temperaturesof 90* to 180°C and 15-30% moisture. Therefore, aspraying tower for cooling the gas and moistening theparticles is often employed with the electrostaticfilter.

GRINDING Raw Grinding: Reduction of raw material size to specifiedfineness by means of a mill.

Wet Process: The hard materials (limestone) are subjectedto preliminary crushing and soft materials (clay) arestirred with water to form a slurry. Then both materials,mixed in the correct proportions, are ground to fineslurry.

Dry Process: Crushed raw materials are dried and groundinto fine raw meal powder.

Cement Grinding: The preparation of cement powder fromclinker and gypsum by means of a mill. The fineness ofgrinding (Blaine value) has a significant influence onthe properties of the resulting cement.

Grindability of a material depends on its properties,such as structure, cleavability, brittleness and hardness.

HOMOGENIZATION The thorough and complete blending of various raw materialsto prepare a homogenous mixture. This can be achievedin storage silos in which the pre-homogenized mix isstirred and mixed by a blower (dry process). Wet processplants use slurry tanks with installed rotating arms toachieve homogenization. The tanks serve simultaneouslyas storage facilities.

KILN A vessel in which the raw meal is burnt to be chemicallytransformed into clinker (clinkering) at temperatures ofaround 1450C. A Shaft kiln typically with a throughputof between 50 and 250 metric tons per day, formerlyoperated on a discontinuous basis using the dry process.New developments, using pelletization techniques, operatecontinuously. A Rotary kiln, a large cylindrical steeltube inclined to the horizontal by 1 to 3 degrees, slowlyrevolves, supported by tires and rollers. It is suitable

ANNEX 1Page 5

for wet as well as dry processes and is typically used inmodern large-scale plants with throughputs of 1,500 to4,000 metric tons per day.

MILL Grinding Mill: The facility in which material isground.

Raw Mill: Grinds raw materials. The types employed inmodern cement plants require prior crushing of rawmaterials. The most common type is the tube mill, ahorizontal cylindrical steel shell, equipped with liningand grinding media (e.g., cast steel balls - Ball mill)and which rotates at between 14 and 20 r.p.m. Thefree fall (tumbling) of the grinding media provides forthe impact by which the material is ground. Suitableboth for wet and dry processes.

Compound Tube Mills: (or combination mills, compartmentmills) have two or more compartments, separated byslotted diaphragms and filled with different types ofgrinding media, to achieve successively finer grinding.

Closed Circuit Mill with centrifugal separator andbucket elevators. The material ground in this tubemill is conveyed in a steady flow by a bucket elevator

to a separator, within which oversize particles arerejected by centrifugal action and returned to the mill-feed.

Air-swept Mill: Tube mill or ring mill, the output ofwhich is continuously assorted by an air separator.Oversize particles are returned to the millfeed.

Ring Mill: Grinding elements (balls or rollers) rollunder pressure on a circular path (the grinding ring).Variations of this type are spring pressure or spring-loaded mills, centrifugal ring ball mills, centrifugalsuspended roller mills, edge mills.

Cement Mill: (or Clinker Mill), a tube mill which refinesthe mix of clinker and gypsum to cement powder. Compoundmills with centrifugal separator are commonly in use.

Wash Mill: A concrete tank with installed rotating armsto break up and stir a soft raw material (clay). Theresulting slurry is screened to remove stones or otherimpurities prior to grinding. It is used in dry as wellas wet process plants.

ANNEX 1Page 6

PREHEATING SYSTEM The heat exchange system to recover the caloric contentof the kiln exhaust gases with which to heat up the rawmeal.

Grate Preheater: the preheating system of the semi-dryprocess, consisting of a traveling grate which movesraw material pellets through a drying and a preheatingchamber.

Suspension Preheater: the preheating system of the dryprocess consisting of one to four stages of simple ortwin cyclones on top of each other. The lower cyclonesare used as heat exchangers, the top cyclones as dustcollectors.

PREHOMOGENIZATION,BLENDING PLANT Storage facility which at the same time is used for

prehomogenization (blending) of raw material. Locatedbetween the crusher and raw mill, it consists of twostorage areas in line, one of which being restoredwith the deposit of the other for the purpose of pre-homogenization.

QUARRY Raw material deposit being exploited for production.

RAW MEAL A homogeneous powder consisting of the ground raw mix.It is used to feed the kiln to produce clinker (usingthe dry process).

RAW SLURRY Kiln-feed for the wet process kiln.

SAMPLING Taking samples from the material during the process forthe purpose of control. In modern plants, this isachieved by a by-pass sampling flow from the mainflow at critical points for continuous control.

B. Process Description

I. The General Cement Production Process

1. Limestone, clay and sand are mined in their respective quarries.The raw materials with a maximum specified block size (blasting) are reducedto aggregates of pre-specified maximum dimensions in the crushing departmentand stored; pre-homogenization is achieved through intermediate storage.After proportioning according to weight and volume, the raw materials areground to a fine raw meal powder in the raw mill. The raw meal is homogenizedand then transported, via conveyors, to the kiln department. Within the kiln,heat induces a clinkering process, in which an incomplete fusion of the rawmeal takes place. This clinker is then ground together with a small percentageof gypsum to produce cement, which is shipped either in bulk or in bags.

ANNEX 1Page 7

2. Basically, three types of processes have been developed; the wet,dry and semi-dry processes. These are described below:

II. The Wet Process

3. This process was developed with the rotary kilns as the firstcontinuous process for cement production. The raw materials, being wet inthe natural state, are mixed with water to create a slurry, whose titration(quantity ratio) can be controlled easily. By means of pumps and ducts theslurry is introduced into the kiln, where the clinkering takes place. Energyconsumption of the process is high (between 1350 to 2200 kcal/kg of clinker),since more than a liter of water must be vaporized within the kiln per kg ofclinker.

4. The main advantage of the process is its simplicity. As a result,operational control and maintenance are easy. However, for raw materialswith a natural humidity of below 10 to 15%, the dry or semi-dry processusually operates more economically because of lower energy consumption,even though investment costs for the wet process are normally lower thanfor the comparable dry process equipment. The recent increases in fuelprices have increased the upper limit of humidity for the dry process appli-cability to about 15%.

III. The Dry Process

5. This process leaves the raw material in its natural state ofhumidity up to the raw mill stage; within the raw mill the material isground and simultaneously dried to a specified limit. This dry raw mealpowder is homogenized mechanically or by means of blowers, then introducedat the top stage of a preheating system. Working as a heat exchanger, thesystem preheats the material by recovering the caloric value of the kilnexhaust gases whose flow is counter to that of the material (Counter flowsystem). Thus, part of the calcination takes place in the preheater, withthe final clinkerization taking place thereafter in the kiln. Within thecooler, the secondary air recovers heat from the clinker, thereby coolingit down.

6. The intricate thermic equilibrium stage in the raw mill - preheater- kiln - cooler section allows a total thermic consumption for the dryprocess plants of only between 750 and 950 kcal/kg of clinker. Nevertheless,the savings in fuel are, in part, outweighed by disadvantages such as amore complicated process flow, which is sometimes difficult to control andto maintain. Continuous and automated sampling for control is necessary.Investment costs are usually somewhat higher than for the wet process, despitethe use of a short kiln (about half the length of the wet process kiln).

7. The industry has developed several variations of the dry process,using long or short kilns and cyclonic preheaters of one to four stages withsimple or twin/type cyclones within the stages. The decision as to thetype of dry process to be selected is a function of:

ANNEX 1Page 8

(i) the supplier (some of the variations are patented);

(ii) the chemical components of the raw materials and fuel(particularly their level of harmful alkalies and chlorides);

(iii) fuel economy; and

(iv) initial investment costs and operating costs, particularlycontrol and maintenance.

To illustrate the considerations involved in making a selection, threecharacteristic variations are described below:

(a) Short kiln with four stage suspension preheater

8. The most common variation uses a four stage suspension preheaterwith short kiln. The preheater consists of three stages of heat exchangercyclones and one stage of twin dedusting cyclones. Fuel economy (onlyaround 800 kcal/kg of clinker) makes this variation very competitive. How-ever, if high alkali and chloride levels prevail in the raw material and thefuel, their vaporization absorbs valuable heat and reduces the effectiveradiation of the flame. Within the preheater system the vapors, moving upwith the kiln exhaust gas, may condense around dust and could cause build-upand choking in the lower parts of the preheater, which would require frequentcleaning in such cases.

(b) Short kiln with preheating column

9. To overcome the problem of clogging as well as to reduce investmentcosts for the expensive preheater building, an alternative development usesa short kiln with a preheating column. This column, a self contained,vertical steel cylinder, acts as a heat exchanger and is therefore clad withspecial linings and compartments. Its efficiency is only slightly lowerthan the four stage suspension preheater, thermic consumption being about875 kcal/kg of clinker.

(c) Long kiln with two stage preheating system

10. This variation consists of a heat exchanger cyclone and twindedusting cyclones in the second stage, in combination with a long kiln.Although the use of the long kiln permits evacuation of the harmful alkalicomponents with the dust in the electrofilter, the system lacks efficiency indissociating the calcium carbonates in the preheater, as the kiln exhaustgases enter it at too low a temperature. The thermic consumption is about950 kcal/kg of clinker. The higher investment costs for the long kiln (whichis about twice as long as a comparable short kiln) are partly offset bylower costs for the preheater system.

ANNEX 1Page 9

IV. The Semi-Dry Process

11. In this process the raw material is pelletized in a balling drumby means of between 12 to 20% of water. Tne wet pellets with a diameter ofabout 1.5 cm discharge from the drum directly into a hopper on the feed endof a traveling grate preheater. The grate conveys the pellets through adrying zone of about 300°C, then through a preheating zone of about 87500.Kiln exhaust gases flow partly via a bypass through the drying zone, partlydirectly through the preheating zone. After passing through the preheatingchamber, the hot pellets are stripped from the travelling grate and cascadeinto the short kiln where they are heated further to clinkerize at about 145000.The pelletized clinker is then cooled over a grate cooler.

12. The thermic consumption of this process is about 850 kcal/kg ofclinker, thus comparable to dry process figures. However, the process ismore expensive both in initial investment and operating costs, particularlycontrol and maintenance costs, as it contains many moving parts. Its suit-ability is confined to raw materials which lend themselves to pelletization.Its advantage lies in the stability of the process, the accuracy with whichit can be adjusted and controlled, and the removal of harmful alkalies andchlorides from the raw material in process. (This is achieved by collectingthe dust from the bypass in a cyclone dust collector.) The resulting cementhas, therefore, a lower alkali content than could have been achieved withdry process equipment.

V. Conclusions

13. After these discussions it is clear that the basic difference isbetween the wet process, on the one hand, and the dry and semi-dry processes,on the other. For raw materials with a natural humidity of above 15%, thefuel economy of the dry processes is generally offset, as these materialshave to be dried by substantial use of thermic energy. For a humiditybetween 5 and 15% a careful evaluation of the technical and economic feasi-bility of the various processes should lead to the right choice between wetor dry (or semi-dry) process. This evaluation should take into accountchemical and physical properties of the materials as well as investment andoperating costs of feasible wet and dry process equipment. For materialswith a humidity below 5%, the dry (or semi dry) process is economical andthe decision on the type of dry process mainly depends on the chemistry ofthe raw materials, the producer of equipment and, to a lesser extent, onfinancial comparison between the processes.

Industrial Projects DepartmentAugust, 1974

ANNEX 1EGYPT Chart 1

TOURAH CEMENT EXPANSION PROJECTFLOW SHEET FOR CEMENT MANUFACTURF

,-SPPROCESS DRY PROCESS

LIIE. CLAYCLAY ~~~~~~STONE on'

OUARRY~~~~~~~~~~~~~~~~~~~~~~O RR

MILLS R ROA

AOOCA~~S CC CO LIS MILE

!WET GRINDINCI (IRY C,RI'DN,t&

STORY HE ~~~~~AAILIEEIFESE

ROTRY 'IPULVERIE KIL ROT4RY

| K'.LN j ~~~~~OIL OR &41GASHFI K.

T COO-ER COOLER

PLANT PL NT

A,ROCESSNG E9PAENT

_|STRGEvAaITE

ANNEX 2-1Page 1

EGYPT

TOURAH CENENT EXPANSION PROJECT

PUBLIC SECTOR COMPANIES IN EGYPT

1. In 1956, following the Suez War, the Government nationalizedforeign-owned companies and in early 1960's it extended its nationalizationto most large and medium-scale companies. Since then these companies aresubject to a well-defined central planning system. One of the major objec-tives is to accelerate full-scale industrialization of key industries withparticular emphasis on economic independence; in part, import substitutionis one of the major goals.

2. Public sector companies operate under the general guidance andsupervision of the respective ministries. In the case of public sector com-panies of an industrial nature, this role is usually assumed by the Ministryof Industry. In order to assist the ministries to execute the Government'sgeneral policy and its follow-up in the sectors they supervise, in 1961, thePresidential Decree No. 1899 created the General Organizations for differentsub-sectors. The organizations are holding companies which undertake withinthe scope of their activity the participation in the development of thenational economy and assists the ministry in achieving the targets of the de-velopment plan. Management of public sector companies is controlled by threelevels of government bodies: Ministries, the General Organizations and themanagement of the Companies. Appendix I to this annex shows the hierarchicalstructure of control and the position of TCC. Further details are given below.

Ministry of Industry

3. The Ministry of Industry covers most segments of the industry widelyranging from textiles, paper, fertilizer, chemicals, leather, cement, bricks,glass, refractories, steel, automobiles, engineering goods, electrical goods,minerals, sugar and oil; over 120 companies belong to this Ministry. Thesecompanies are managed through seven "General Organizations" (Appendix I).They are for (1) Food, (2) Textiles, (3) Chemicals, (4) Building materials,(5) Engineering, (6) Metallurgical, and (7) Mining. In addition to theseseven General Organizations, there is the General Organization for Industrial-ization (GOFI), which is responsible for conceiving, fostering and coordinatingexpansion programs as well as establishing new plants in the industrial sector.Unlike other General Organizations, GOFI basically serves staff functions.

4. The Ministry of Industry is the highest authority over the publicsector companies under it; this ministry, in consultation with other relevantministries such as the Ministry of Planning and the Ministry of Finance, for-mulates the budget for public sector companies under it, decides sales pricesand policies of their products and provides directives in various areas of

ANNEX 2 -1Page 2

operation and management. This ministry also approves major projects in thesubsectors for which it is responsible and recommends them to the CentralPlanning Committee.

General Organization for Industrialization (GOFI)

5. As mentioned earlier, GOFI is one of the General Organizations underthe Ministry of Industry and its board is chaired by the Minister of Industries.GOFI also provides its services to other ministries. Generally, GOFI, in col-laboration with various companies and their General Organizations, identifiespossible projects, formulates project preparation and implementation programsand tries to secure financing. A formal feasibility study is then preparedby GOFI in consultation with the General Organization and the company concernedand it undertakes the responsibility to clear the proposed project throughthe Ministry of Industry and the Ministry of Planning. The latter ministryaggregates the proposals into national plans for submission to the CentralPlanning Committee, a cabinet branch, which in turn after consideration submitsthe national plan for approval by the Parliament. In the case of TCC, sincethe project is primarily an expansion of the existing facilities, the role ofGOFI in the project preparation is rather limited, although the project isapproved by GOFI. The Tourah expansion project has gone through the abovementioned process and has been included in the approved National Plan.

6. GOFI also plays an important role in the project execution stage,since it is responsible for concluding all necessary foreign supply contractson behalf of the companies. GOFI is responsible for the preparation of tenderdocuments, inviting tenders from various suppliers, bid evaluation with theassistance of the company concerned, contract negotiation and signing of con-tracts. Once the contracts are signed, they are assigned to the company con-cerned which is the principal organization responsible for project implemen-tation. In cases where there are disputes between the company and the supplier,GOFI provides assistance in solving the disputes. When the project is of keynational importance, GOFI also monitors the progress of the project and actsas advisor for proper implementation.

General Organizations

7. The General Organization, which is a holding company for all enter-prises under it, is an executing agency of the Ministry concerned, for theexecution of the State's general policy and its subsequent follow-up. GeneralOrganizations are divided on a sectoral basis and each General Organizationis responsible for the performance of the sector it supervises. It deals withall matters of its sector as a whole and is thus involved in major facilityplanning decisions and supervision of company operations. General Organiza-tions are authorized, without interference with the executive affairs of thesubordinate company, (i) to lay the targets for production, exports, market-ing, investment, profitability and labor and to follow-up the company'sachievements of these targets; (ii) to lay general plans to develop new products,improve quality, increase efficiency and utilize facilities in a sound manner;

ANNEX 2-1Page 3

(iii) to coordinate among the companies to increase sector efficiency and tosolve any disputes which may arise among subordinate companies; and (iv) toevaluate the functioning of the subordinate companies in accordance with theset standards and to recommend improvements wherever necessary.

8. General Organizations assist the subordinate companies in surmountingthe difficulties and problems of general nature which obstruct the achievementof their targets. They have experienced management experts, engineers, tech-nicians and other specialists to perform those services including research anddevelopment, which the individual companies belonging to them cannot be effi-ciently supported by themselves. Therefore, the General Organizations do playa significant role, though advisory in nature, in the project preparation andimplementation as well as plant operations of subordinate companies.

9. General Organizations, with the approval of the appropiate ministry,have the right to the following matters:

Wi) Ratification of the financial statements of subordinate companiesand distribution of their profits within the legal stipulations;

(ii) Modification of the statutes of subordinate companies;

(iii) Liquidating or dissolving of companies;

(iv) Increase or decrease of share capital of companies;

(v) Authorizing companies to utilize assets for purposes other thanthose originally planned for;

(vi) Establishing new companies, merging and consolidating of two ormore subordinate companies and dividing a company into two ormore companies;

(vii) Guaranteeing loans of subordinate companies; and

(viii) Borrowing from different agencies or issuing bonds, when sanc-tioned by the Council of Ministers.

10. In summary, each General Organization serves both line and staff func-tions. Under the line function, it oversees the implementation of Statepolicies and is responsible for subsequent follow-up to ensure that thesepolicies are properly carried out, thus serving as the connecting link betweenthe policy makers and the operating units, thus reducing somewhat the detailedcontrol that the ministries concerned have traditionally exercised over themember companies. This type of organizational structure also allows for moreefficient sector planning and development as well as economies in the alloca-tion of resources. Under the staff function, each General Organization worksclosely with GOFI and the company concerned in formulating, preparing and im-plementing major capital projects. Each General Organization is also respon-sible for solving problems related to its sector as a whole; and it providesgeneral staff support to its subsidiaries whenever required.

ANNEX 2-1Page 4

11. The General Organization's capital consists of: (a) the State'sshare in the capital of the companies belonging to the Organization; and (b)the funds which the State appropriates to the Organizations. Each GeneralOrganization receives a portion of each subordinate company's profits whichis stipulated by the law for distribution (see Annex 2-4), as management fee.This fee is mostly used to meet its operating costs, which consist mainly ofwages and salaries and administrative costs. It also receives a major portionof each company's profits as dividends but it turns these funds over to theTreasury. The Government allocates funds to General Organizations for speci-fic purposes. The Organizations can also contract loans if required. Forits services and activities rendered to others, they receive funds from theseservices.

General Organization for Building Materials and Ceramics (GOBM)

12. GOBM is one of the General Organizations established in 1961. Itwas made a legal holding company in 1971 incorporating a group of manufactur-ing companies covering the following activities: the cement industry, pipeand asbestos cement products, the glass industry, the pottery and porcelainindustry, the ceramics and refractories industry, sand-lime bricks, gypsum andthe lime industry, marble and mineral products, and vinyl flooring products.There are 13 manufacturing companies under GOBM as shown below:

Company Name Established in Main Products(year)

1. Tourah Portland Cement Co. 1927 Ordinary cement, rapidhardening cement, mixedcement, etc.

2. Helwan Portland Cement Co. 1929 Ordinary cement, rapidhardening cement, mixedcement, white cement, etc.

3. Alexandria Portland Cement Co. 1948 Ordinary cement, rapidhardening cement, mixedcement, etc.

4. The National Cement Co. 1956 Slag cement.

5. The Egyptian Company for Pipe 1931 Asbestos, cement pipesand Cement Products (SIEGWART) and sheets, concrete

lighting poles, concretesleepers and certainrubber products.

ANNEX 2-1Page 5

Company Name Established in Main Products(year)

6. El Nasr Glass and Crystal Co. 1932 Various types of glasssheets, glassware, andpolyester chairs andtables.

7. The General Company for Ceramics 1955 Table ware, sanitaryand Porcelain Products articles and wall tiles.

8. El Nasr Company for the Production 1956 Refractory materials,of Refractories and Pottery ordinary building bricks,(Sornaga) pottery and ceramic prod-

ucts and lining brakes.

9. Egyptian Company for Refractories 1962 Refractory bricks, tubsfor laboratories, acid-resisting ceramic floor-ing, white plaster andporcelain electric in-sulators.

10. The Cairo Sand Brick Co. 1910 Various types of sandand clay bricks, lime,and marble products.

11. The General Company for 1957 Crushed blast stones,Mineral Wealth processed stone, processed

marble blocks, and marblefurniture.

12. The Egyptian Gypsum, Marble 1908 Different varieties ofand Quarries Co. industrial and ornamental

stones, feldspar, quartz,dolomite, glass sand, lime-stone, bentonite, etc.

13. Canaltex Company n.a. Vinyl flooring andItIsmalon" flooring.

n.a. = Not available.

13. Apart from the above mentioned production units, the Egyptian CementOffice (ECO) is also under GOBM. The Office is responsible for the marketingof different types of cements according to an established program. This Officealso distributes Egyptian cement in the local and foreign markets. Furtherdetails of ECO are given in Annex 3.

ANNEX 2-1Page 6

14. GOBM supervises the activities of all the aforementioned companies,coordinates their activities and plans for their proper functioning. GOBM isalso responsible for the development of the sectors it supervises. The totalinvested capital of GOBM's subsidiary companies is LE 126.3 million (US$332.1million), and the aggregate value of their production during 1973 was LE 44.1million (US$112.5 million). Total exports in 1973 of all the affiliated com-panies of GOBM amounted to about LE 6 million (13.6% of their net sales) com-pared with the total imports of spare parts and raw materials of about LE 7.1million. The total number of employees under GOBM, including the employeesin its subordinate companies, is about 26,000. The following table summarizesthe consolidated data of GOBM for the five-year period, 1968/69-1973:

GOBM: Summary Data /1

1968/69 1969/70 1970/71 1971/72__ 1973

Number of Companies 10 12 13 13 13Number of Employees (1,000 persons) 18 21 23 24 26Total Capital Employed (LE million) 75.0 91.3 102.4 116.0 126.3Total Share Capital (LE million) 10.7 11.8 12.1 12.1 12.1Net Sales (LE million) 27.3 32.9 38.4 62.0 44.3Export Sales (LE million) 5.1 4.0 5.1 7.7 6.0Imports (Raw Materials and Spares)

(LE million) 4.5 5.2 7.3 10.3 7.1

/1 GOBM, like all other General Organizations, was made a legal holding com-pany only in 1971 and does not yet publish consolidated financial state-ments. It plans to begin consolidated accounting in the near future.

/2 The fiscal year before 1972 covered the period July 1-June 30. Beginningwith 1972, the fiscal year was changed to coincide with the calendar yearand, therefore, 1971/72 figures cover an 18-month period.

15. GOBM reports directly to the Ministry of Industry. Its Board ofDirectors consists of the Chairman, Eng. Ahmed Aly Shaker; the General Manager;the Chairmen of all 13 affiliated manufacturing companies; and the GeneralManager of ECO. The organizational chart given in Appendix I shows the maindepartments. The Organization is divided into three main divisions: (1)Technical and Economic Affairs; (2) Financial and Administrative Affairs; and(3) Development Center.

16. The Technical and Economic Affairs Division deals with the followingfunctions: (i) participation with affiliated companies in the preparation ofthe expansion of existing facilities as well as major replacement and renewalprojects; (ii) coordination between the companies and GOFI with respect to for-mulation and preparation of new projects; (iii) participation in the financial,economic and commercial matters of the companies' activities; (iv) reviewingand commenting on the decisions taken by the Boards of Directors of the affil-iated companies in accordance with the law; (v) assisting the companies insoiving their problems with the competent authorities, especially with theMinistry of Industry and GOFI; and (vi) preparation for general meeting ofGOBM.

AiNEX 2 1Page 7

17. The Financial and Administrative Affairs Division deals mainly with:(i) participation with the affiliated companies in administrative matters,such as preparation of organizational charts for the companies, training sys-tems, public relations, advertisements, international affairs, etc.; (ii) par-ticipation in financial studies, improvements in the profitability of the com-panies, and arranging for financing when required; (iii) checking personnelaffairs, such as promotions, increments, transfers, incentive systems, etc.;and (iv) participation, in collaboration with the Technical and EconomicAffairs Division, in the preparation of the companies' planning budgets andthe financial accounts.

18. The Development Centre is primarily responsible for the developmentof the industry as a whole in which the affiliated companies' activities areconcentrated. This includes keeping pace with the most up-to-date technolo-gies available in the world to improve the technical base of the companies,introducing new processes and products, solving major technical problems ofaffiliated companies and controlling the quality of the products of the com-panies.

19. GOBM has competent and experienced management experts, engineers,and other specialists to provide general staff support to its subsidiarycompanies. The present Chairman of GOBM was the Chairman of the Tourah CementCompany (TCC) until 1973. In the case of the Tourah Cement Expansion Project,GOBM has played an important role in project preparation. It will also playa key role in project implementation, as advisor to TCC, and subsequent opera-tion of the plant. This organization is considered competent to perform suchfunctions.

Tourah Cement Company (TCC)

20. This is the oldest and largest cement company in the country. Thiswas established in 1927 as a private joint stock company (with Swiss andEgyptian private capital) with a share capital of LE 200,000, and startedproduction in 1929. In 1961 this company, along with other major companiesin Egypt, was nationalized. With various expansion programs, by 1967, theproduction capacity of this company was increased from the original 100,000TPY to 1.4 million TPY; due to aging of some of the old facilities, the pres-ent rated capacity of this plant is about 1.35 million TPY. The present sharecapital of the company is LE 2,230,608, which is wholly owned by GOBM and fullypaid in.

21. The Board of Directors of the Company, which meets once every month,consists of 9 members: the chairman, four senior officers and four labor re-presentatives of the Company. The five senior management members of the Com-pany are appointed by the President of the Republic and the four labor repre-sentatives are elected for a period of 3 years. Members are always eligiblefor re-election. The present chairman of the Company, Eng. Mohamed HaguibAbdel Hady, who has been with the Company for the last 20 years, was appointedin 1973 when the previous chairman was appointed chairman of GOBM. Almost all

ANNEX 2-1Page 8

the senior management staff of the Company have been with the Company for morethan 10 years. The Company management is considered satisfactory and laborrelations appear to be good.

22. The Company is organized along functional lines (see Annex 2-2 fordetails). The management controls the day-to-day operation of the Company,within the constraints defined by the nationalization laws of 1961 and subse-quent legislation. As a profit center the Company is expected to survive onits own financially, but it has little or no direct control over the unitcosts or sources of its inputs. Selling prices are determined on a cost-plusbasis and are mutually agreed upon by all the companies in this subsector,the GOBM and the Ministry of Industry, usually at a margin of about 25% overcosts. The Company has only one customer--the Egyptian Cement Office whichis the agency responsible for procurement and distribution of cement insideand outside the country. Investment decisions and the flow of funds of theCompany are defined by law and illustrate the degree to which the Governmentparticipates directly in major decisions. The Company submits its budgetforecasts and year-end accounts to GOBM for supervision and auditing. TheCompany can utilize its depreciation reserves and 10-15% of its net profitat the discretion of the Company's Board of Directors, but any proposal forexpansion must be cleared by GOBM, GOFI and ultimately by the Ministry ofIndustry and the Ministry of Planning.

Industrial Projects DepartmentSeptember 1974

EGYPTTOURAH CEMENT EXPANSION PROJECT

ORGANIZATION CHART OF THE GENERAL ORGANIZATION FORBUILDING MATERIALS AND CERAMICS

G-1.1 CI-

El I I

RY

t(y ~ ~ ~ ~ ~ ~ ~ ~ w 9 m_97r4rlGe

EGYPTTOURAH CEMENT EXPANSION PROJECT

ORGANIZATION CHART OF TOURAH PORTLAND CFMFNT COMPANY

G7.ENERAL RANIZ.' ATION FORtC

| U L DING MATEPALS AN CERAMICS

BOARD GE

CHAIRMANEO

l ~~~~ _

g PLAND 1 CMAG

| ORGANIZATION | | DEPARTMFNCTA

TRAINING

IN-LSTRI P1ROJECTS SEPAST.-O UARUL lOlA 19

SC,AT 8938 DOEIS

ANNEX 2-3Page 1

EGYPT

TOURAH CEMENT EXPANSION PROJECT

DESCRIPTION OF EXISTING FACILITIES

1. The plant of TCC is located near the town of Tourah-El-Asmant about15 km south of Cairo on the east bank of the river Nile and is about 25 m abovesea level. It is well connected by road transport (Highway Cairo-Helwan), railtransport (Railway Cairo-Helwan), and inland water transport (600 m from theNile's east bank). The plant, spread out on an area of about 25 ha, consistsof two sections, referred to as the "Old Plant" and the "New Plant" (see layoutas shown in Annex 4-4), which have respective nominal capacities of 1,650 TPDand 2,150 TPD of clinker. This is equivalent to a total production capacityof about 1.35 million TPY of finished cement under the current productionprogram. TCC has leased the areas west and south of the plant, where thelimestone, clay and sand quarries are located. (See Map IBRD 11196). TCCis currently in the process of establishing a lime factory close to the lime-stone quarry, which is planned to produce about 90,000 TPY of lime by 1978.TCC also owns a foundry, located at Maassarah, 3 km south of Tourah, whichproduces most of TCC's required iron castings including spare parts, grindingmedia, mill plates, etc. The existing principal facilities of the TCC plantare as follows:

A. Quarries and Raw Material Transport

Limestone

2. Details of the limestone deposit of TCC are given in Annex 4-1. Thequarry contains a workshop for the equipment used to exploit the deposit, suchas drills, shovels, loaders, bulldozers and lorries. Some of the equipment,particularly the drilling equipment, is very old and no longer suited to therough and dusty quarry conditions. The project will provide replacement forsome of the existing equipment. The quarry contains two crushers (combinednominal capactiy of 450 TPD) to reduce the size of the quarried material. Oneof these machines (200 t/h capacity from 1956) needs replacement as it can nolonger be operated without maintenance problems. The project will provide anew crusher of 500 t/h capacity to replace the existing machine and to providefor the expansion. The crushed material is transported by an existing beltconveyor system (nominal capacity 500 t/h, installed in 1967) to an intermediatestockpile of 30,000 t and from there to the plant. The stockpile extractionsystem (vibrating feeders) is currently unable to draw more than 10,000 t fromthe stockpile as it was calculated under a wrong reposing angle assumption(70° instead of 45°). The project will provide a rectification of this problem.

ANNEX 2-3Page 2

Clay

3. Details of the clay deposit are contained in Annex 4-1. The clayis currently trucked to the plant, after having been extracted by shovels.A project is underway to transport the clay from a new clay crusher withinthe quarry via the conveyor belt system to the plant. This project has beendelayed by several months because of problems with some foundations in diffi-cult soil conditions (clay). The system is, however, scheduled to be inoperation by the end of 1974.

Sand

4. A sand quarry is located between the clay quarry and plant. Thesand is quarried by loaders and trucked to the plant.

Gypsum

5. A gypsum quarry is operated about 20 km from the plant site; thematerial, a thin overburden, is quarried by loaders and hauled to the plantby dump trucks.

B. The Plant

General

6. Construction of the first facilities of the factory started in 1927with production start-up in 1929. Since then, many alterations, additions andmodifications have been made. Table 1 of this Annex shows existing equipmentand their characteristics as well as modifications and expansions under theProject.

Raw Meal Preparation

7. Both existing "old" and "new" plants use the wet process. They arefed by the same slurry prepared in two washmills (clay only, 100 t/h each)stored in four clay slurry basins (1,000 m3 each) and then ground in five rawmills (total capacity 335 t/h) together with limestone, to form a white slurry.The white slurry is stored and homogenized in two slurry basins with a totalcapacity of 7,000 m3. From here it is either fed to the old or the new plant.

Old Plant

8. The old plant contains four kilns ranging from 300 to 600 TPD ofclinker capacity and with a total capacity of 1,650 TPD of clinker. Two startedoperation in 1929, one in 1935, and another in 1948. All kilns have been main-tained very well and operate at high efficiency. Kilns I and II are currentlybeing equipped with electrostatic filters, whereas existing electrostatic filtersof Kilns II and IV are being modernized by the Polish Foreign Trade Company for

Electrical Equipment Ltd. in cooperation withi Walter & Cie of tile FederalRepublic of Germany. These undertakings will reduce dust pollution at Tourahconsiderably and will increase production of these kilns by reintroduction ofthe retained dust. The clinker produced at the old plant can directly be fedinto one of the four cement mills or into the clinker storage vard (35,f0J0tons) of the old plant.

9. The cement mill department contains four tube mills (3 compartments,open circuit for eacih) ranging from 12 to 40 t/h throughput capacity with atotal capacity of 69 t/h. Two small and old mills (12 t/h, 1932; 15 t/h, 1936)are to be replaced under the expansion program by one mill of 40 t/h. Theother two are in good condition and are presently being equipped witht electro-static filters. The clinker is ground together witlh gypsum and sometimes withsand or slag (for mixed cement). These raw materials are stored in the appro-priate storage yards of the old plant. Gypsum is crushed by a crusher of 15t/h capacity prior to being fed to the mills.

10. The cement produced in the mill departmaent of the old plant is storecin a battery of 28 silos with a capacity of 315 tons each, or in one large cy-lindrical silo of 13,000 tons which gives the old plant a total storage capa-city of about 22,000 tons of finished cemenit. The old plant comprises apacking plant with four packing machines (total capacity, 255 t/h). Bags canbe loaded onto trucks or railcars via portable belt conveyors. The projectwill provide additional storing and packing facilities on the Nile (Nile di-spatch) to take care of increased output of mixed cement from the new cementmil .

New Plant

11. The production in the new plant is based on two kilns, one from 1956with a nominal capacity of 750 TPD, and the other one from 1967 with a nominalcapacity of 1,400 TPD of clinker output. The latter was originally designedfor 1,600 TPD but created substantial difficulties and problems when startedup. A rnaiii reason is the air quenching cooler which was apparently under-designed. (All other kilns at TCC have planetary coolers or internal coolersof sufficient capacity). The supplier (Five Lille Cail) finally reduced theprice of the installation and the new nominal capacity was agreed upon. Apossible future conversion of this kiln to the dry process tecinology couldimprove its output substantially, as a new cooler would be required anyway.This kiln also has problems with its installed electrostatic precipitator.The project envisages modifying or replacing this filter to bring the dustcontrol for the kiln back to acceptable standards.

12. Clinker transport (Drag chain system, 165 t/h) and gypsum crusher(25 t/h, frovq 1956) in the new plant both need substantial miaintenance andrepair. The project will replace both with new equipment adequate forrequirements of existing plant and expansion.

ANINEX 2-3Page 4

13. Cement is ground in four ball mills of 40 t/h throughput capacityeach, which were installed in 1956, 1962 and 1967 (2) respectively. One hastwo compartments and closed circuit, the other three have three compartmentseach and open circuit. All are equipped with electrostatic filters.

14. Finished cement is stored in one of five cylindrical concrete siloswith a total capacity of 20,500 t and packed into bags by one of five rotarypacking machines with a total capacity of 440 t/h. Bags are loaded onto trucksvia portable belt conveyors. A small bulk loading facility is provided. Theproject will increase these loading facilities according to increased output.

C. 1Iiscellaneous Departments and Project's Power Supply

15. One-third of the Company's present power consumption (120 millionkWh) is provided by a power station within the plant, operating five boilerswith steam power generators of a capacity of 11,800 kW, and five gas generatorsdriving gas turbines with a capacity of 3,000 kW. The remainder of the powerrequirements is drawn from the Cairo grid. Although the power plant runsproblem-free, it requires a Iiigh amount of maintenance expenses. Thus, thegenerated power is more expensive than the purchased power. TCC will, there-fore, in the context of the project, install a substation of 30 MVA capacityto draw adequate power from the grid. Nevertheless, the substation will bekept operational as a standby unit in case of a failure in the public grid.

Production of Paper Sacks

16. TCC operates a modern plant producing paper sacks required for thebagging of cement. It also sells paper sacks to other cement companies, tolime factories and fertilizer plants. Annual output of the plant is 32 mil-lion bags.

Foundry

17. TCC operates a foundry 3 klm soutn of Tourah, which produces castingsfor spare parts, grinding media, mill plates and other items, whlich the plantrequires for operation. The foundry also sells castings to other customerslocally. The project includes some equipment for the modernization of thefoundry.

Workshops

18. TCC mechanical and electrical workshops are well run. They providemaintenance and repair for the whole plant, and assist in the erection andinstallation of new projects. The expansion project includes substantialequipm,ent for the modernization and expansioni of these workshops.

ANNEX 2-3Page 5

Lime Plant

19. TCC currently is executing a project for the installation of a newlime plant. The plant is located in the limestone quarry and is to be con-structed in two phases. Phase I will provide production capacity of 20,000TPY of quick lime and is scheduled to start operations in early 1975. PhaseII will add another 70,000 TPY capacity of quick lime and is scheduled tostart production in 1976. The project execution was hampered earlier thisyear due to delays in delivery of the Polish equipment. The start-up datesare already revised to take these delays into account.

Training

20. TCC operates a new training center, which not only trains TCC staffbut also staff from other cement factories in Egypt and other Arab countries.The training offered in this center is described in more detail in Annex 4-7.

Consultants' Services

21. TCC staff of the Research and Industrial Organization Departmentprovide consultants' services for cement and lime plant projects within theArab world. At present TCC staff act as consultants for the erection andstart-up of a cement factory in Homs, Arab Republic of Libya. This factoryis designed to produce 300,000 TPY of cement and will operate on the dryprocess (four-stage suspension preheater type).

Miscellaneous

22. TCC operates various services departments, such as a staff canteen,staff residences and recreational facilities, an ice factory, a water-treatmentplant, a well-equipped fire fighting department, and a security department.

Industrial Projects DepartmentSeptember 1974

AODNOX 2-3

Table S

TISOdAH C1411T? EXPddbd PROJECT

Soe-dfitocttaof E-ntl,, and Scooted M.a K.,hai-eey c-t Stora.ge F-acitte-

meat ta~~~~r cad Nam of Yea ad Capacity crte

Dri'liog rigs (2 do-to Die-l0.e S/326 deep

Srilliao rig (1) dales Copo drot 0 0>..2/ PilidIr rtgs S - opese d l Pat aterde

Di-1 2.3~nc 23e

D-p-(7) -i. ~b,i Dies. - - Pm

BR d. 2~~ disel- hpO

FutF L 3ih eer cc. b,0.p0.0. naa Iwdidacer ~ ~ ~~~~~-id Dtdbe end - Pt> O

tractor locOereF. L. mcg. m nc. 11t

Mt-i.l H-d iase -i lg

Li-~~- ~~..kpil Coil ltt so.da nabeer 1W6 5 t-DOY 1 sea.f-d.;,= :ti.. 10,000 -t-I 3510 odd000 st

cOnole Diceeto transport dI t dtw ependd teds I26 30C, t/h 136tS ab eiid 010 t/4

1) -sstseet pile dm0fe;ntaig 16 313,326),01, ::~~~~~~~~eae eotaoia I00> cotal32I

t)Cla ,, dpl is p- et ,7b1,

dado eo.Slo ~~~~F. I. d1th do lt aros3 6t,'h

lOo55t/h da5ta/h

Raepstd N. 1 2. 1.iteidob I tO

No.A- S '~F. SR~ 1956 i00 t/3 7p 00

do--. -. iP ' 0967 t t/t

ti N.or .s3rg F. I. OStidthi t l-.713 dOd t/3 7323D ,/S

lltsOer braisePll, .1r i96 /dPit /

0102 '~~~~~~~1 W, l.., 1 1296 dLOO t/d)01Fltdo 3 F. 1. CdOr 2et,pStesrtromerU035 2,0 t?) 575Ol

lliamr trasaport 951 t P1.5 did' i16f..d3c"O olpd5eD

s) Olisler etarage s.cH-. flats13 Peedt3P,C Old pleat )7 1

Syen sooile - -- 0,750st,1,

o od..atsionosco3±nePtloe: .. 36 i/

ded N toaiA F. L.13,,5th 31,50-

9 Seer m5

drlssib ISko- 9L 22tt'~

No.difi-tisld1 301t6hLdT.Sl.ld 2l1oNo. 5" t -~ -; l d i 133 12/h 7 t1

toF.St L. iL 22s/ot

No. Id 1. 1. mldtt cocesteets,obase 00562 AO/ .t Oc 32sS10.01 3 ' , oyeo~ ~ ~~~ 1962 500 t/h -7

to. 12 3 , 19067 ilsI/o hspa

,-i) Ceeee storage old plea 2Nc31i 8,t20 t1.3000 13,d0d0

oeo pSoet ~~~~~~~ ~~~2.1210 2,300t

pi~~~~~~, 6-14, ~~~~~~~~9t~ t 6,2

lopeaeOoo: 3scs mica ~~~~~~~~~ ~~~~~~~~~~~~~~~~~~3032060 t r. twit elidp-ete

Perkteg Ne-Ire to..1 3. L, SedO 1 tde

N..11)0 5/h

* Nc. 130 s/hNa. 3 1916 ~~~~~~~110 /i ,9;t

No. 0 ~~~~~ ~~~~~~~~~~~~~~~~~~~19567 132 tde

to. I '10 t /

Nt. 3 110~~~~~~~~~~~~~~~~~~~~~~~~~97 101' tO

wccac,(2 pcocer) 201260t/n o ile despeth 2 renre-oldd

12 tiNe roeooq Stasios 1.28m3

/-e Ta be repoaed N e 0~

a xt -lr: poop Sa0, Sns3

/

o dodlcte mew capact to be rz--wd coer the pro eon

dagac 1971

IMIIEX 2-4Page 1

EGYPT

TOURAH CEMENT EXPANSION PROJECT

HISTORICAL INCOME STATEMENTS-

(in 000 LE)

1969/70 1970/71 1971/72-2/ 1973(18 months)

Net Cement Sales (Tons) 1,206,510 1,337,019 1,983,935 1,217,678

Net Sale Cement 6,023 5,981 9,673 6,819

Others-/ 593 676 1,067 834

Total Net Sales 6,616 6,657 10,740 7,653

Cost of Goods Sold:Materials, Utilities & Supplies,/ 3,069 3,162 5,267 3,587

Labor6, 263 319 568 440

Maintenance Cost./ 1,3283 1925 1,272

Gross Profit 1,894 1,893 2,980 2,354

Operating Expenses:Administrative Sales Expenses8/ 154 239 375 273

Depreciation9- 862 769 961 851

Other!P0/ 289 204 294 156

Operating Profit 589 681 1,350 1,074

Other Income.UL 300 230 366 221

Financial ChargesL2/ 173 109 119 65

Net Profit Before Taxes 716 802 1,597 1,230

Taxe sL3/ 85 90 167 200

Profit After Taxes 631 712 1,430 1,030

Distribution of Profits-4/Reserves 25% 158 178 358 258

Others 12 13 139 -

Surplus To:Workers 106 120 214 177

GOBM (share) 320 360 642 529

GOMB (supervision) 35 41 77 66

lj Fiscal year ended June 30 through 1971. Changed to December 31 from 1972 onward.2/ For 18 months ended December 31, 1972. All prior years ended on June 30.

3/ Net sales of cement products net of inventory changes.4/ Includes sales of cement bags, revenue from foundry and workshop operations and

revenue from services rendered.5/ Cost of direct materials, utilities and supplies for production.6/ Direct labor cost including social taxes.7/ Maintenance materials and labor.

8/ Administrative costs including wages and salaries of administrative personnel.

l/ This includes depreciation of items which have no book value. According to law

50% of normal depreciation of these items is applied and this is charged to reserves

in the Balance Sheet.10/ This includes expenses such as estate taxes, donations, rents, capital loans, etc.

11/ Revenue from Bonds, interest on credits and sundry revenues.12/ Interest charges on bank overdrafts and foreign credits.

13/ 37.2% of taxable profit. No tax is levied on the amount distributed to workers and

GOBM.14/ Details of distribution of Profit are given in page 2 of this Annex.

ANNEX 2-4Page 2

EGYPT

TOURAH CEMENT EXPANSION PROJECT

ALLOCATION OF PROFITS

In ARE companies in which Government is a shareholder much distributetheir profits according to a formula prescribed by the law. The formuladescribed below applies to both companies in which the Government is thesole shareholder (such as Tourah Cement Company) and to companies with mixedpublic/private ownership. The actual distribution of profit of Tourah CementCompany for the past four years is given below.

Distribution of Profit~s(in 000 LE)

1969/70 1970/71 1971/72 1973(18 months)

A. Net Profit after taxes (A) 631.1 712.3 1429.8 1030.2

B. To Company's Equity Account:1. Statutory Reserves /A (5% of A) 31.6 35.6 71.5 51.52. Reserve for Purchase of Government

Bonds L2 (5% of A) 31.6 35.6 71.5 51.53. Reserve for increase replacement

cost of fixed assets - (5% of A) 31.5 35.6 71.5 51.54. Reserve for Consolidation / (10% of A) 63.1 71.2 143.0 103.15. Other Reserves L5 11.9 12.9 139.9 0.7

Total Retained by the Company (B) 169.7 190.9 497.3 258.3

C. Surplus for Distribution (C)=(A)-(B) 461.4 521.4 932.5 771.9

D. First Distribution (5% of share capital)(D) 111.5 111.5 167.3 111.5

E. Balance (E)<(C)-(D) 349.9 409.9 765.2 660.4

F. Payments to GOBM for its service(10% of E) 35.0 41.0 76.5 66.o

G. Total Available for distribution toemployees and GOBM (G) =(D)+(E)-(F) 426.4 480.4 856.0 705.9

H. Workers Share (25% of G) 106.6 120.1 214.0 176.51. For direct cash bonus (10% of G) /6 42.6 48.1 85.6 70.6

AN1EX 2-4Page 3

Distribution of Profits(in 000 LE)(Continued)

1969/70 1970/71 1971/72 1973(1l months)

2. For internal social service 21.3 24.0 42.8 35.33. For central social services 2.

(10% of G) 42.7 48.0 85.6 70.6

J. GOBM's share (75% of G) /8 319.8 360.3 642.0 529.4

/1 This reserve could be used for investments with approval of Government.7i This reserve is invested in Government Bonds which pay an interest rate of

4-1/2% per annim. The interest on this bond is taxable./ This reserve is primarily for replacement investment._1 When the liquidity of the company is strained, i.e. when current liabilities

are in excess of current assets, the company is allowed to retain 10% ofprofits as resources to strengthen working capital.

/ This includes profits from sales of assets as well as depreciation chargesof assets which have no book value (see footnote 9 of Annex 2-3, page 1).

/6 The maximum cash bonus that any one employee can receive is LE 50. Ifthe allocation to any one comparn's employees is not fully utilized, theexcess is paid to G0&BM for redistribution to other companies' employeesunder 500M. The Minister of Industry decides which companies' employeeswill receive supplements from the total accumulated surplus, based onspecific recommendations of GORM.

/7 These allocations are paid by the Company directly to the Central Bank.7' Paid to GOBM which in turn pays the Treasury.

Industrial Projects DepartmentJuls 1974

AliAE 2-

EGYPT

TOURAH CEnENT EXPANSION PROJECT

IIISTORICAL BALANCE SHEETI/(in 000 LE)

June 30 June 30 Dec. 31?/ Dec. 311970 1971 1972 1973

ASSETS

Current AssetsCash and Banks 12 6 6 19Receivables 258 777 269 334Inventory 2 881 3,028 2.998 3 424

3,151 3,o1i33,811 3,273

Pre-paid Expenses)/ 191 - 305 217__3 __ 3,711T 3___3

Fixed AssetsGross Assets4/ 12268 12,123 1206362 126808Less: Accumulated Depreciation-/ 5,183 5,o76 5 946 6,775

Net Fixed Assets 7,0 6 4166,033

Projects Under Constructiong/ 1,371 1,471 2,414 4,053

Other Assets76 870 961 1,399 1,545TOTAL ASSETS 12,668 13,290 13,807 15,625

LIABILITIE

Current Liabilitie sAccounts Payablet/ 1,768 2,4412 3,146 3,395Short Term Credits2/ 2,471 2 413 1 714 2,522

4,2395 5,917

Long Term Debti 2 / 363 66 91 343Other Liabilities 386 323 166 252

EguityShare capital 2,231 2,231 2,231 2,231Government Participation_12/ 2,461 2,461 2,464 2,464ReserveslY/ 2'988 3,345 3,995 4,418

7,680 8,046 8,690 9,113

TOTAL LIABILiTIES 12,668 13,290 13,807 15,625

Current Ratio 0.7 0.8 0.7 0.6Debt/Equity Ratio 5:95 1:99 1:99 L:96

1/ Fiscal year ended June 3C through 1971. Changed to Decenber 31 from 1972 onward.2/ For 18 months ended Deceriber 31, 1972. All prior years ended on June 30.3/ Includes advance paymunts made to GOPM.:/ Operating Assets only./ This does not include the depreciation charges of assets which have no book value

(see footnote 9 of Anrnx -- 4, .- y6/ This im ludes the lime plants under construction as well as some conveyor systems

which have not been put into operation.7/ Includes investments in Government Bonds and local securities as well as deposits

with Central Bank.8/ This includes not only accounts payable, but also tax and dividends payable.9/ This is mostly Bank overdrafts.TO/ This includes currert position of long term debt.TT/ This is primarily tax provisions and debts under dispute.T7/ This amount represents the amount of equity contributed by the Government for

capital projects.13/ This includes all reserves retained by the Company. For details see Annex 2-4,

page 20

Industrial Projects DepartmentJuly 1974

ANNEX 3Page 1

EGYPT

TOURAH CEMENT EXPANSION PROJECT

MARKET FOR CEMENT IN EGYPT

A. THE SUPPLY OF CEMENT IN EGYPT

Development of the Cement Industry

1. The development history of cement producing capacity and actualcement production is shown in Table 1. The manufacture of cement in Egyptstarted at the beginning of the century with two vertical shaft kilns havinga total capacity of 100,000 tons per annum. Production from these unitscontinued until 1929, when the kilns were superseded by the introduction ofmodern wet process rctary kilns. At present there are four major cementcompanies in Egypt. The Tourah Cement Company was established in 1927 bySwiss and Egyptian investors and was the first company to introduce modernwet process manufacture into Egypt. Production started in 1929 with a rotarykiln unit of 160,000 tons rated capacity, and since that time four successiveextensions have increased capacity to 1,400,000 tons per year in 1967 (sincereduced by re-rating as explained below). No further extensions have sincebeen carried out.

2. The Helwan Portland Cement Company was established in 1929 in thesame area as Tourah and production of cement started in 1930 with a yearlycapacity of 100,000 tons. Major extensions since its establishment haveincreased the installed capacity of the factory to its present 1,400,000tons per year. In 1967 the Helwan Company installed a unit with an annualcapacity of 40,000 tons/year for the production of white cement only, inresponse to market demand.

3. In 1948 the Alexandria Portland Cement Company was formed andstarted production in 1950 with a 120,000 tons per year unit. The output ofthis factory was enlarged in 1963 when a new kiln of 190,000 tons per yearrated capacity was installed. In 1966 a third kiln was erected increasingthe total installed cepacity to 500,000 tons yearly.

4. The National Cement Company was established in 1956 for specializingin the production of blast furnace cement. For this reason the factory wassited near the iron and steel mills at Helwan. The company started producingblast furnace slag cement in 1960 with two rotary kilns having a yearlycapacity totalling 360,000 tons per year. A third kiln was erected and putinto operation in 1969 bringing the total capacity of the plan to 700,000tons yearly.

ANNEX 3Page 2

5. The total installed capacity of the four factories described aboveis, theoretically, 4,000,000 tons per annum of cement. However, some of theequipment in the Tourah and Helwan factories is now over 40 years old, andit became necessary to re-rate the capacities of these factories. The presentrated capacity is 1,350,000 tons per annum for the Tourah factory and 1,300,000for the Helwan factory. The resulting revised industry capacity is thus 3.85million tons per annum.

6. The entire production of Egyptian cement is carried out by thefour factories described above, and all employ the wet process for productionof cement clinker. Production has increased from 2,300,000 tons in 1960 tomore than 3,800,000 tons in 1972. Difficulties in maintaining production atthis level began to be experienced by the two older companies, Tourah andHelwan during the following year, particularly by the Helwan factory. Asstated above some of the old kilns were badly in need of reconditioning,and their condition became worse because of the difficulty in obtaining spareparts, which could not be imported owing to the scarcity of foreign currency.As a result of this situation, plant shut downs became more frequent andproduction suffered accordingly.

7. Both the Tourah Cement and the Helwan Cement Company have factoriesfor making paper sacks from imported Kraft paper. These factories manufactureenough paper sacks to supply the whole cement industry. During the latterhalf of 1972 the world shortage of Kraft paper began to make itself felt inEgypt. Importation of bulk Kraft paper and paper sacks fell which causedthe cement factories to reduce their output of bagged cement. Rising stocksof bulk cement and clinker soon absorbed the limited storage capacity. Thisresulted in a decrease in production of approximately 200,000 tons of cementduring 1973, and for 1974 it is estimated that production may be down to only90% of capacity. The following table illustrates the decrease in utilizationof rated capacities over the last three years as a result of the shortages ofbags, storage space, and spare parts, all exacerbated by the age of some ofthe equipment.

ANNEX 3Page 3

Capacity and Actual Production 1970-1973(000 tons)

Jul '71 - De '721970/71 18 months 1 1973

Present Actual % Utili- Actual % Utili- Actual Z Utili-Rated Pro- zation of Pro- zation of Pro- zation of

Company Capacity duction Capacity duction Capacity duction Capacity

Tourah 1,350 1,320 97.8 1,970 96.6 1,235 91.5Helwan 1,300 1,330 102.3 1,931 99.0 1,204 92.6National 700 635 90.7 1,049 99.9 668 95.1Alexandria 500 529 105.8 823 109.7 510 102.0

Total 3,850 3,814 99.1 5,773 100.0 3,617 93.9

/1 In 1972 the cement companies changed their financial year from July1st - June 30th to January 1st - December 31st.

Types of Cement Manufactured

8. The four cement companies produce eight different types of cementto satisfy the requirements of the building and construction industry. Tourahand Helwan each produce a range of seven types; the National Plant only pro-duces blast furnace cement and the Alexandria plant only produces ordinary andmixed portland cement, rapid-hardening cement and blast furnace cement.Approximately 50% of cement produced is ordinary portland, though the im-portance of mixed Karnak and blast furnace cement, which now accounts foralmost 40% of production, has increased in recent years.

New Supply Facilities Planned

9. In the light of the Government's priorities for restoring fullutilization of existing industrial capacity with imported inputs, rebuildingthe infrastructure, rehabilitating and developing the Suez Canal area, andprogressing with new investments for industry, tourism and other sectors, thedevelopment of the cement industry, which produces one of the basic materialsfor implementing these plans, has become of primary importance. Consequentlythe General Organization for Building Materials and Ceramics (GOBM), theagency responsible for the cement industry in Egypt, has initiated a compre-hensive program of extensions to existing cement factories and the constructionof new factories. This program is intended to double the supply of cementby 1981. The three extensions and four new factories planned are listed below.

1. National Cement Company Extension

10. This extension to the existing factory is designed to produce anadditional 650,000 tons of Portland cement clinker per year. The new exten-sion will take up the additional quantities of slag produced by the expansion

ANNEX 3Page 4

of the nearby iron and steel mills and will produce 850,000 tons per yearof blast furnace cement (65% clinker, 35% blast furnace slag). The contractfor this project was signed in early 1974 and erection of the plant is ex-pected to start in mid-1975. Commencement of production is planned for theend of 1976. Financing of the project is planned to be partly through USSRcredits.

2. Alexandria Cement Company Extension

11. Raw material analysis for this project has been completed and theresults are reported to be satisfactory. Yugoslavia will supply extendedcredit facilities; the contract was signed in mid-1974. Planned productioncapacity for the new extension is 300,000 tons yearly and the plant is ex-pected to come on-stream in early 1977.

3. Tourah Cement Company Extension

12. The project being considered for Bank financing is designed toincrease the nominal capacity of the factory by 700,000 1/ tons of normalportland cement yearly, utilizing the dry process with gas suspension pre-heaters. Full details are contained in Annex 4-3. The new extension isexpected to be on-stream by the end of 1977.

4. Cairo New Plant (at Tourah)

13. Although located almost alongside the existing Tourah cement factorythis project will be an entirely separate development and will take the formof a joint venture private company. The basic problem to be solved is thefinancial arrangement between Kuwaiti investors and GOBM, between whom recentdiscussions have been held. The GOBM recommendation is for 40% non-Egyptian(private Kuwaiti) participation, 40% GOBM and 20% private Egyptian. Theseconditions are still under review, but GOBl is optimistic that the programwill be carried out. Meanwhile some raw material analysis has been done butthe final tests have not yet been completed. Presumably, as the raw materialdeposits are in the same area as those of the Tourah Cement Company, thesetests will eventually prove to be satisfactory. Raw material availabilitymay be a problem, however. The new factory is designed to produce 1,000,000tons of portland cement which, together with the 700,000 tons yearly to beproduced by the new Tourah extension, will require about 2,900,000 tonsyearly of raw materials to be extracted from the deposits. While the lime-stone deposits are known to be very extensive, there is a scarcity of infor-mation about the clay deposit reserves, and these should be proved beforeany further new project in this area is contemplated. If the financialarrangements at present under discussion are concluded satisfactorily thecontract is expected to be signed by the end of 1975 and the new plant shouldcome into operation in mid-1978.

1/ Under given product mix of cement types, this capacity will yield720,000 tons of cement per year.

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5. Suez New Plant

14. This project is still in the early stages of preparation, but GOBMfeels that its implementation program is realistic. Most of the limestonetests in the nearby deposits have been satisfactory, but some problems havebeen encountered with testing clay deposits. One difficulty has been thedelay in obtaining suitable samples due to the recent withdrawal of themilitary forces and the problem of disposing of the many unexploded minesremaining in the area. Detailed analysis of the clay has, therefore, notyet been undertaken. This plant would also be a joint venture company withEgyptian and non-Egyptian participation. Discussions are at present beingheld with financial organizations in Europe, but details of the discussionshave not yet been disclosed. It is understood that the shareholding of thenew company would be 40% non-Egyptian, 40% GOBM, and 20% private Egyptian.Nominal capacity will be 1,000,000 tons of cement per year, and if the fi-nancial arrangements are concluded satisfactorily, it is possible that thecontract will be signed at the beginning of 1977 and production will startin mid-1979.

6. Alexandria New Plant

15. This project will also be a joint venture company but details ofthe organization have not yet been revealed. Raw material analysis has beencarried out by Polysius A.G. and found to be satisfactory. The extension isdesigned to increase the nominal capacity of the factory by 500,000 tonsyearly and is expected to come on-stream towards the end of 1980.

7. Assiut New Plant

16. The original plan for this project included financing with USSRcapital, but it appears that some difficulty has been experienced in thesupply of Russian credit. The general feeling in GOBM was that the projectwould be unlikely to go through, but in any case it would not be likely tocome on-stream before 1981.

Total Supply of Cement in the Future

17. The planned production build up is given in Table 2, which showscapacity increasing from 3.85 million tons in 1976 to 8.37 million tons by1983. This is based on the assumption that the capacity of existingfactories will drop to about 3,500,000 tons by 1980, due to the scrappingof some production units. The reasons for this are increasing antiquityof some of the units and their small and uneconomical size resultingin high operating and maintenance costs per ton. Meanwhile, until the newplants come into operation, the old machinery is being kept in operationto decrease the supply/demand gap.

ANNEX 3Page 6

18. This projection, however, ignores the possibility of delays inimplementation of some of the proposed projects. Raw material tests forsome have not yet been started and the availability of raw materials, pro-blems associated with their transport and the outcome of the proposed dis-tribution study could result in the scaling down of some of the plants.Also, a shortage of funds could postpone or cancel some projects. The pro-duction capacity build up planned by Egyptian authorities is certainly anambitious program which could well prove over-optimistic. Further analysisof likely future supply will be included in the market and distributionstudy which it has been agreed will be carried out by consultants, workingwith the Institute of National Planning and the ECO (see para. 62).

B. DOMESTIC CEMENT CONSUMPTION AND DEMIAND

1. Historic Consumption

Cement Sales

19. The sales of all cement produced in Egypt are managed by theEgyptian Cement Office in Cairo, as described in the section of this Annexon Distribution and Sales. The history of domestic sales for the 10 yearsto 1973 is shown below:

Domestic Cement Sales History('000 tons)

Ordinary WhiteYear Cement /1 Cement Total

1963/64 2,486 2,4861964/65 2,143 - 2,1431965/66 2,194 20 2,2141966/67 2,279 26 2,3051967/68 2,286 27 2,3131968/69 2,566 28 2,5941969/70 2,833 29 2,8621970/71 2,854 31 2,8851971/72 3,133 37 3,1701973 n.a. n.a. 3,033

/1 Includes all non-white types.

Source: Egyptian Cement Office, Cairo.

20. Most of the cement is sold directly to the end-user, but a pro-portion is sold through dealers, of whom there are thousands throughout thecountry. The broad breakdown of sales has been as follows:

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Proportion of Cement Sales to Dealers and End-Users

Sectors 1967/68 1968/69 1969/70 1970/71 1971/72

*() (%) (%) (%) (%)

Housing 11.7 14.6 11.7 9.6 9.0Dealers 38.4 32.5 26.9 26.1 31.9

Cement Tile Plants 3.0 2.2 2.6 2.9 3.1

Public Sector 46.9 50.7 58.8 61.4 56.0

Total 100.0 100.0 100.0 100.0 100.0

Source: Egyptian Cement Office, Cairo

21. The housing and public sector customers include private and govern-

ment contractors as well as government departments. More details on actual

consumption by sector are given later in this section. Sales to dealers are

for resale and differences between sale quantities and consumption quantitiesoccur due to fluctuations in customer stocks and quantities still in the

distribution system. These stock fluctuations also partially obscure any

trends in consumption by region, which is further distorted by the practice

of recording sales to customers relocated from the war zone under the region

in which they were originally registered. While this may lead to overestim-

ation of consumption in the Suez and Sinai regions, it does not affect the

domination of the heavily populated Cairo and Delta regions, which accountedfor 45.2% and 27.6% respectively of cement sales in 1971/72. In comparison

with those regions, Upper Egypt accounted for only 12.8%, Suez and Sinai

for only 3.5% and Alexandria for 10.9%.

Cement Consumption

22. The actual consumption of cement, as distinct from sales, has been

estimated by sector of usage by the Ministry of Planning. The level of

cement consumption bears a direct relationship to the volume and type of

building and construction completed, in which concrete is a major material

component. Building and construction volume in turn bears a relationshipto the volume and type of fixed capital investment. A portion of cement

consumption is attributable to maintenance (roads, structures, etc.) and

to the manufacture of concrete products (tiles, pipes, railway ties, etc.),

but these activities are themselves related to the construction industry.

The Ministry of Planning has made separate estimates for these latter areasof usage, the consumption for maintenance being a function of current ex-

penditure on that activity, and the "indirect" consumption of cement being

a function of the production volume of concrete products. The cement con-

sumption estimates are summarized in the table below. Detailed consumption

figures by sector for the period 1967/68 to 1971/72 are included in Tables

3 and 4.

ANNEX 3Page 8

Historical Fixed Capital Investment, Building andConstruction Expenditure, and Cement Consumption

Cement Consumption (000 tons)Total Fixed Construction Tons per

Capital Expenditure LE '000Year Investment (Incl. Maintenance) Direct Indirect Total Construction

LE LE % of Invest- (Concretemillions millions ment /1 Products)

60/61 225.6 111.5 49.4 1,144 198 1,342 12.061/62 251.1 142.4 56.7 1,427 205 1,632 11.562/63 299.6 165.8 55.3 1,704 233 1,937 11.763/64 372.4 206.3 55.4 2,035 261 2,296 11.164/65 364.3 181.2 49.7 1,972 301 2,273 12.565/66 383.8 197.9 51.6 2,134 287 2,421 12.266/67 365.8 188.0 51.4 2,106 326 2,432 12.967/68 298.0 186.3 62.5 2,014 418 2,432 12.968/69 343.5 227.7 66.3 2,369 268 2,637 11.669/70 355.5 244.5 68.8 2,776 284 3,060 12.570/71 361.0 245.5 68.0 2,804 299 3,103 12.671/72 384.0 259.8 67.7 2,639 305 2,944 11.3

/1 This ratio is artificially high, particularly from 1967/68 on asconstruction expenditure includes a proportion of current expenditure,most of which was for defense purposes, and some for maintenance.

23. Although cement consumption is more directly related to construc-tion expenditure than to fixed capital investment, some comparison of Egypt'scement consumption/investment ratio with other countries is interesting.There can be considerable variation in this ratio due to differing invest-ment mixes (i.e., construction vs. other investments), different constructionmixes by sector, different design and construction methods, different labor/material cost relationships, and so on. Nevertheless, it can be seen fromthe data below that a number of developing countries in the same region havea ratio similar to that of Egypt. It should be noted that these data arealso subject to error due to statistical inaccuracies, especially as apparentcement consumption figures are used (production plus imports less exports).

ANNEX 3Page 9

Fixed Capital Investment and Cement Consumptionfor Selected Countries, 1971-1972 /1

ApparentCement

Country Investment /2 Consumption /3 Consumption/Investment(US$ Million) (000 tons) (Tons per $1,000)

Egypt 883 2,639 3.0Portugal 870 2,677 3.1Turkey 2,000 7,267 3.6Morocco 570 1,620 2.8Syria 330 1,340 4.1Iran 1,870 3,634 1.9Lebanon 310 960 3.1

/1 Data are for 1971 for some countries and 1972 for others./2 From World Bank country economic reports./3 From Cembureau Statistical Review, 1973.

Investment, Construction and Direct Cement Consumption by Sector

24. The historic consumption data shown in Tables 3 and 4 is dis-torted by the impact of defense expenditure on "Other Services" and theconcomitant depressant impact on other sectors, particularly housing. Fewof the years in the last decade could be called "typical," especially inview of the mix of expenditure and consumption likely to take place in thenext decade. The data does serve to indicate the differences betweensectors, as well as the wide range of investments attributable to construc-tion in any one year, even within the same sector.

25. Under "normal" circumstances, housing and industry are the largestcement consuming sectors. It is difficult to make international comparisonsof sectoral consumption rates due to the paucity of comparable data. Suchcomparisons would be difficult in any case, due to differences in designs,costs and practices as well as differing statistical bases, but the data onhousing construction vs. cement consumption in the table below indicateEgyptian cement consumption per dwelling ratios which seem reasonable inview of the ratios published I/ for various European countries as follows:

Ireland, Netherlands 11 tons/dwellingGreece, Portugal, U.K. 12 tons/dwellingFinland, Spain 14 tons/dwelling

/1 European Cement Association; "Where Does the Cement Go?" 1972.

ANNEX 3Page 10

Egypt

Housing Construction vs. Cement Consumption

No. of Housing Cement Cement ConsumptionYear Units Built /1 Consumed /2 Per Unit

(000's) (000 tons) (tons)

1965/66 48.4 460 9.51966/67 56.0 396 7.11967/68 48.8 401 8.21968/69 34.7 462 13.3 /31969/70 48.5 379 7.81970/71 32.9 252 7.7

/1 Statistical Abstract of ARE; Central Agency for Public Mobilizationand Statistics.

/2 Ministry of Planning, ARE./3 Statistics are possibly distorted in this period due to defense

reallocations.

2. Future Demand Projections

26. For most of the last six years, the Egyptian economic situation hasbeen difficult, with defense expenditures at a high level and investmentstagnating. The result has been continuing deterioration in much of thenation's infrastructure and deferment of many projects in industry, agri-culture, tourism and other sectors.

27. Egypt is presently confronting a new era in its economic develop-ment. The prospects of a continuing peace present an opportunity to trans-fer resources from military to civilian uses. The government is nowevolving a new development strategy envisaging expansion of the private sectorand the encouragement of private foreign investment, as well as giving priorityto improving the utilization of industrial capacity. Included in this are thecompleting of ongoing projects and advancing new projects to expand output inagriculture, industry, tourism, etc., rebuilding infrastructure, rehabilitatingrun-down and obsolete equipment and reconstructing and developing the Suezregion.

28. Preliminary Development Plans for the next decade are currentlybeing revised and estimates now available for development programs and growtheven for the next two years are far from definite. Prospects beyond thisare speculative and depend on many factors, the most vital of which is theavailability of investment capital and particularly foreign exchange. TheBank economic mission to Egypt in May 1974 has estimated that GDP could growat 6-1/2% per annum for 1974 to 1980, and at a higher rate in some interveningyears. Average investment growth is projected at 14% annually over the sameperiod.

ANNEX 3Page 11

29. Such a rate of development indicates strong growth in the construc-tion sector, which, in a now out-dated government projection, was expected togrow at an average rate of 9% from 1974 to 1982. Present indications arethat this rate may well be exceeded.

30. In February 1974, the Egyptian Institute of National Planning (INP)published an Economic Study of the Egyptian Cement Industry, which containedprojections by sector of investment, construction expenditure and cementconsumption to 1992. Particularly ambitious targets were indicated, especiallyfor industrial investment and for reconstruction and development of the Suezregion. Some modifications have been made to these projections, in light ofthe findings of the economic mission and the recent industrial sector and urbandevelopment missions to Egypt. The summarized results for cement consumptionare set out in Table 5.

31. In view of the highly tentative nature of investment plans and ofthe likely supply/demand situation, it has been agreed that a comprehensivemarket and distribution study should be carried out for cement which should becompleted in 1976 (see para 62). In the absence of the specific informationthat this will be able to provide, the general thrust of development is expectedto be along the following lines:

(a) Agriculture, irrigation and drainage. Agriculture will remainthe most important sector and mav grow at up to 3-1/2% per annumover the next decade. Based on the INP program, cement consump-tion should increase to 600,000 tons, excluding plans for Sinaior other reclamation schemes.

(b) Industry and petroleum. Notwithstanding a recent decline inoutput, industry will play a critical role in development,particularly through expansion of the private sector, both foreignand domestic. Assuming an average investment growth rate of12.7%, industrial value added could grow by an annual 10% to1980 at the same time as exports would increase by 5% perannum. Cement consumption in this sector is expected to reach1.68 million tons by 1984.

(c) Housing. Plans call for gradual easing of the existing backlog,particularly by construction of low income units. Even thoughlarge-scale construction might be delayed, the sector shouldconsume 1.45 million tons of cement in 1981 and 1.88 million tonsannually by 1984.

(d) Public Utilities. Less than 20% of Egyptian towns have sewagefacilites and 3 million people have no access to fresh water.To alleviate this, it is possible that up to LE 4 million annuallywill be spent on programs which will be substantial consumers ofcement.

ANNEX 3Page 12

(e) Other. Substantial infrastructural investments are expected inrailways, an expansion of which has recently been assisted bythe Bank, power, both conventional and nuclear, and telecommuni-cations.

32. In addition, a new Ministry of Reconstruction has been establishedto coordinate reconstruction of the war-damaged areas of Suez, Port Said andIsmailia and to develop the Sinai peninsula, the north-west coast, the westerndesert and social infrastructure in Cairo and Alexandria. The need for suchinvestment is readily apparent; it has been estimated that 85% of the buildingsin the Suez region alone will have to be demolished and major replacements tobasic infrastructure will have to be made before substantial resettlement andeconomic growth can resume. Should the Government implement a comprehensiveprogram of rehabilitation and reconstruction on the scale recently indicated,the magnitude of the necessary investments would dominate economic planningthrough at least the mid-1980s.

Summary of Projected Investment, Construction Expenditure and CementConsumption

33. As already mentioned, Table 5 of this annex contains details bysector of the projected cement consumption in Egypt from 1974 to 1984. Theaverage growth rate of construction expenditure from 1974-1984 is likely to bein the region of 10.4%, though the annual variation will probably be wide.While constructior expenditure in 1974 is expected to be about LE 217 million,by 1984 it is anticipated that it will have grown to about LE 685 million.This should, in turn, generate an average growth in cement consumption ofabout 11.4% for a 1984 consumption figure of about 8.3 million tons.

34. The sectoral investment priorities and projections take into accountthe government's outlook and objectives as at early 1974, adjusted somewhatin light of the findings of various Bank missions during the year, particularlyfor the earlier part of the forecast. The government is still in the processof revising its ten-year plan, but indications are that the revised projectionsfor the later 70s and early 80s will be similar to those assumed for this re-port. The construction expenditure/investment and cement consumption ratiosused to compile projected cement demand reflect historic ratios in Egypt asoutlined earlier, with some modification to allow for the shift in emphasisfrom defense to civilian works and the different mix of projects envisaged forthe future.

Alternative Method of Demand Projections

35. The cement demand projections by sector depend on a number of assump-tions about the growth and pattern of investment in Egypt over the next 10years, as well as on several implicit assumptions about the more specificnature of projects, the nature and methodology of construction involved, andso on. Furthermore, the projections rely heavily on figures supplied by theInstitute of National Planning, the Ministry of Planning and the Ministry of

ANNEX 3Page 13

Housing and Reconstruction. It is difficult to confirm these figures as Egypt'sfuture development plans are still very much in a state of flux and subject tofurther review.

36. In order to apply some check on sectoral cement demand projections,an alternative approach has been taken to prepare another set of overallforecasts, using Egyptian and international macro-economic figures as a basis.It has already been demonstrated that there is a direct relationship betweencement consumption and construction expenditure. The latter variable is inturn related to fixed capital investment, which it has been shown is relatedto cement consumption in a similar way for a number of developing countries.The consumption of cement per capita is often used as one index of the levelof development in a country, which is in turn reflected in the Gross NationalProduct per capita. Egypt's future growth ambitions are reflected in thefairly rapid rise in GNP per capita already projected in the earlier part ofthis section on demand. To relate cement consumption per capita to GNP percapita, a number of countries were chosen whose level of development rangesboth below and above that of Egypt's at present and its expected level at theend of the forecast period. Furthermore, the countries chosen are primarilyin the Europe, Middle East and North Africa region, and those countries havebeen excluded where GNP per capita figures are substantially distorted throughthe combination of low population levels and GNP greatly increased by oilrevenues. The countries chosen, with their respective data on cement con-sumption and GNP, are shown in Table 6.

37. Using linear regression analysis, the data in the table resulted ina relationship as follows:

CCPC = 0.652 (GNPC) - 82.380

where CCPC = cement consumption per capita in kilograms

GNPC = gross national product per capita in US$

38. Using this relationship, together with alternative GNP and populationprojections for Egypt, alternative projections of cement demand were determinedas shown in the table below:

ANNEX 3Page 14

Egypt

Projected GNP per Capita and Cement Consumption

Total CementProjected Consumption

Projected Cement Cement Projection byYear GNP/Capita /1 Consumption /2 Consumption /3 Sectoral Analysis

(US$) (kg/capita) (000 tons) (000 tons)

A B C A B C A B C

1974 252 252 252 81.9 81.9 82.9 2,987 2,987 2,987 3,0291975 264 264 264 89.7 89.7 89.7 3,350 3,350 3,350 3,1091976 281 281 281 100.8 100.8 100.8 3,855 3,855 3,855 4,1381977 291 293 303 107.3 108.7 115.2 4,203 4,257 4,512 5,7781978 301 304 315 113,91 115.8 123.0 4,568 4,644 4,933 6,1961979 312 317 330 121.0 124.3 132.8 4,969 5,105 5,453 6,5331980 323 329 344 128.2 132.1 141.9 5,391 5,555 5,967 6,5811981 334 342 361 135.4 140.6 153.0 5,830 6,054 6,588 6,7741982 346 356 376 143.2 149.7 162.8 6,314 6,601 7,178 7,5151983 358 370 391 151.0 158.9 172.5 6,818 7,175 7,789 7,8271984 370 385 411 158.9 168.6 185.6 7,347 7,795 8,581 8,325

/1 Case A assumes 6.0% growth rate for GNP, Case B - 6.5%, Case C - 7.0%for the period 1977-84. All cases are based on a rate of populationgrowth of 2.4%.

/2 From regression analysis./3 Per capita consumption x population.

39. The median macro-economic projection falls short of the sectoralprojection, including Suez reconstruction. The macro-economic approach, how-ever, is linked entirely to total GNP and population growth, and does notreflect variations in the investment level and mix or the proportion of GNPcontributed by the construction sector. It is obvious that these factorsare liable to considerable variation in Egypt over the next 5-10 years, largelydue to the impact of the reconstruction activity being planned.

C. IMPORT/EXPORT

40. Although for many years Egypt was an importer of cement, since 1967its own industry has produced sufficient quantities of the types of cementrequired for its market and imports have been negligible. Indeed, since 1962Egypt has exported considerable quantities of cement. Tables 7 and 8 showdetails of cement exports which, together with imports, are summarized below:

ANNEX 3Page 15

Egypt: Cement Imports and Exports (000 tons)

Year 1950 1960 1961 62/63 63/64 64/65 65/66 66/67 67/68 68/69 69/70 70/71 71/72

Imports 8 17 1 - 90 245 223 126 - - - - -

Exports - - - 258 132 211 353 271 600 868 629 900 971

Source: Tourah Feasibility Study

41. Traditionally cement exports were regarded as a means of disposing ofsurplus output, but from 1967 more emphasis was placed on earning foreign ex-change, and a greater export effort was made, to the extent that there was someconflict between satisfying the need for foreign exchange vs. the demand forcement in the domestic market. Since 1973, domestic demand has increasinglycome into conflict with the desire to increase exports, as the static capacityof the industry was becoming pressed to the limit. The result has been thatin 1974, exports have been embargoed, and export activity confined only tocompleting contractual commitments. This situation has resulted in part dueto the curtailment of production caused by the shortage of paper bags.

42. In the past, Egypt's participation in various export markets had beensporadic. In more recent years, emphasis has been mainly on the Arab Statesand West Africa, as shown in Tables 7 and 8. Exports to Libya, Saudi Arabia,Syria, West Africa, Yugoslavia and Poland constituted 79% and 83% of Egypt'stotal exports in 1970/71 and 1971/72 respectively. Export pricing is coveredin the later section dealing with cement prices.

3. Future Export Prospects

43. In a reversal from having been a substantial cement exporter, Egyptnow faces a period where importation will become necessary, with demand ex-pected to climb rapidly over the next few years and capacity being virtuallystatic until early 1977. This situation is examined in more detail in thesection on supply and demand.

44. Aside from Egypt's future ability to resume exports from a domesticdemand/capacity viewpoint, the prospects for exports must be considered in thewhole Middle East and Mediterranean region, which includes many current cementimporters that are becoming substantial investors in cement production ca-pacity within their own borders.

45. Although various studies 1/ have been made of the demand/supplysituation in the Mediterranean and Persian Gulf region, these are very super-ficial and wide-ranging in their estimates. While reasonable projections of

1/ IDCAS (Industrial Development Centre for the Arab States); ARE Instituteof National Planning; Polysius AG; Holderbank.

ANNEX 3Page 16

of demand might be made for preliminary estimates, there is a lack of reliableinformation on the supply prospects, with a considerable number of substantialplants planned, being considered, or proposed. Additional information wasobtained on this from cement equipment manufacturers and consulting firmsduring a recent Bank mission to Europe. There is no doubt that most of theArab States and France have both the raw materials and financial resourcesto provide not only self-sufficiency in cement but export capacity as well,but the rate at which plants are actually established will depend, among otherfactors, on technical capabilities, other investment and development priorities,and the availability of cement-making equipment. Nevertheless, cement equip-ment suppliers are receiving a substantial volume of orders from the Arabcountries and Iran.

46. A review of the preliminary information obtained for the Mediterraneanand Persian Gulf indicates that nearly all the current cement importing countriesin the region could be self-sufficient in cement by the early eighties, withonly Kuwait being significantly deficient in cement-making capacity. Thereappears to be little risk of chronic over-capacity in the region although someareas could have surplus capacity from time to time. It would appear thatsome of the traditional European exporters e.g. Spain, Greece, will continueto be active in regional trading. More detailed information and analysis wouldbe required to make more reliable projections.

47. It would therefore seem prudent that Egypt should plan to have nomore than one million tons capacity available for export in any one year upto 1984, and then only if it secures at least half that amount contractually,as per the agreement currently contemplated with Kuwait, i.e., linking Kuwaitiinvestment in cement producing capacity in Egypt directly to export commitmentsfor 500,000 tons annually. It is obvious that joint planning arrangements aredesirable, particularly with other Arab countries. Most of the countries inthe region appear to be aiming at self-sufficiency, and it is probable thatothers besides Egypt will have export capacity available.

D. THE SUPPLY/DEMAND SITUATION

48. As already indicated in the relevant sections, the planned cementsupply expansion and the projections of construction investment and cementconsumption in Egypt over the next decade are extremely ambitious targets.The completion of cement plant projects as currently envisaged still dependson Egypt's ability to secure the necessary financial and organizational agree-ments, on the results of raw material testing, on project management perform-ance, and on the availability of cement manufacturing equipment. Any or allof these factors could act to slow down the implementation of the supplyprogram.

49. On the other hand, projections of demand are at least as imponder-able. Here again, the availability of finance, materials, project managementand equipment are factors which could act to curtail Egypt's ambitious de-velopment program. As regards the cement supply/demand situation projected

ANNEX 3Page 17

from all this, it is felt that the projections done by the Egyptians havebeen modified consistently on both sides of the equation. The net resultsof these projections are shown below. The projections of supply and demandare shown in Chart 1 and summarized in Table 9.

Projected Supply and Demand Situation in Egypt: 1974-1984(000 tons)

Domestic Domestic Committed Import Uncommitted TotalYear Production Demand Exports /1 Requirements /2 Exports Exports

1974 3,500 3,030 - 470 4701975 3,850 3,110 - - 740 7401976 3,850 4,140 - 290 - -1977 4,540 5,780 - 1,240 - -1978 5,350 6,200 150 1,000 - 1501979 6,330 6,530 350 550 - 3501980 7,070 6,580 430 - 60 4901981 7,870 6,770 500 - 600 1,1001982 8,200 7,520 500 - 180 6801983 8,370 7,830 500 - 40 5401984 8,370 8,330 500 460 - 500

/1 50% Kuwaiti share of output of Cairo's new plant, if Kuwait participatesin the financing as proposed.

/2 Including allowance for committed exports.

50. During the second half of the 1970s, the projections for Egyptindicate substantial cement import requirements, with a cessation of exportsfor about two years until the Cairo new plant comes on stream in 1978. Ifthis plant goes ahead as presently envisaged with joint Kuwaiti-Egyptianfinancing, one-half of its output will be earmarked for export to Kuwait.By 1980, imports should cease, and there may be some export capacity inaddition to the Kuwait commitment for a year or two. However, at present,it is difficult to predict whether the country will in fact be able to ex-ecute its overall investment and construction program as well as the com-pletion of all the proposed cement plants with the speed now envisaged.Should cement demand not grow as predicted, new plants could be scaled down,implementation of sectoral plans could be delayed and, in addition, there isthe possibility of continued exports to the Arab world or even to West Africa.However, owing to the uncertainties surrounding the supply and demand situ-ation, terms of reference for a comprehensive market and distribution studywill be agreed upon with the Government and assurances have been obtained that,should such a study indicate the likelihood of chronic imbalance, the Govern-ment would revise its investment program accordingly. In addition, furtherassurance has been obtained that the Bank be consulted before the Governmentwould set in motion any new proposals which would result in increased pro-duction beyond that contemplated in the investment program.

ANNEX 3Page 18

E. DISTRIBUTION AND SALES

1. Channels of Distribution

51. The sales operations and distribution of Egyptian cement to boththe domestic and export markets are controlled by the Egyptian Cement Office(ECO), which is based in Cairo. This body is responsible to the GeneralOrganization for Building Materials and its activities are directed by theCommittee for Organizing the Marketing of Cement. The Committee consists ofthe General Manager of the ECO, the chairmen and finance managers of thefour cement companies, and one delegate from each of the Ministries ofHousing, Supply and Interior Trade, and Economics. One of the company chair-men acts as the committee chairman for a period of two years.

52. The organizational structure of the ECO is shown in Table 10. Theoffice has no capital and does not publish a balance sheet. Its operatingexpenses are covered by contributions from the four cement companies inproportion to their annual cement production as follows (for 1973):

Tourah Cement Go. 32.9%Helwan Cement Co. 31.8%Alexandria Cement Co. 15.5%National Cement Co. 19.8%

53. The ECO has about 800 employees, including transport, maintenance,planning, personnel, financial and commercial staff. There are no agents orregional distribution centers used, but some 7,000 dealers are registeredwith the Office. Customers place their orders with either dealers (foramounts less than 10 tons) or directly with the ECO. Cement is allocatedamong dealers and Egypt's 25 governates according to a budget. Customersmust have a permit from their Governate's Department of Housing for quan-tities exceeding 10 tons and must pay for their orders in advance. Cementis subsequently dispatched directly from the appropriate plant according tothe ECO's instructions. Vehicles operated by the ECO transport a substantialproportion of the cement, as described below.

2. Physical Distribution

54. Nearly all Egyptian cement is transported in bagged form by truck.Small and declining amounts of bagged cement are carried by the Egyptianrailways and by barge (primarily to points along the Nile), as shown in thetable below:

Proportion of Cement Transported by Mode

1970/71 1971/72 1973

Truck 91.2 94.3 94.9Railway 3.9 3.2 3.3Barge 4.9 2.5 1.8

100.0 100.0 100.0

ANNEX 3Page 19

55. The decline in barge transport, which involves only bagged cement,has been caused primarily by the paper bag shortage which has continuedsince 1972, resulting in some shift to bulk road transport. Shipping cementin bulk has not been significant in Egypt, as major continuing usage centerssuch as ready-mix concrete plants have not developed and the development ofbulk-handling technology has not been so necessary. The move to increasethe bulk-shipped proportion has been almost entirely instigated by the bagshortage. This recent trend is illustrated in the table below.

Bulk Shipping of Cement

Total Bulk % ofYear Domestic Sales Shipments Total Sales

(000 tons) (000 tons)

1972 3,170 15 0.51973 3,033 46 1.51974 3,000 (est.) 200 (est.) 6.7

56. The ECO currently operates fifteen 15-ton and two 12-ton bulktrucks. There are plans to acquire an additional 40 trucks during 1975and 1976. Steel silos of 30-50 ton capacity are being made for sale tosome Cairo customers, mostly cement product manufacturers. Twenty silosare expected to be distributed during 1974.

57. Including the bulk units, the ECO owns and operates some 180 trucksand 97 trailers. The bag trucks and trailers have a capacity ranging from8 to 12 tons each, with most units being of 8 tons. The total carryingcapacity of the fleet is 2,617 tons. About 43% of the fleet is 10 years oldor more, and considerable problems are encountered keeping many of the unitsroadworthy, due mainly to a shortage of both skilled maintenance staff andimported parts. The ECO fleet is augmented by about 300 to 400 trucks operatedby a number of private and government controlled transport companies. Theproportion of cement transported by these contractors has been about 55% to62% during the last few years.

58. Some larger customers and government departments can arrange theirown transport directly from the plants. Customer pick-up has been curtailedfrom former levels due to the congestion which resulted.

59. Transport tariffs are set by Government decree and were recentlyrevised in March 1974. Tariff levels to various points in Egypt from theplants south of Cairo (Tourah, National and Helwan) are set out in Table 11.Ton-kilomter costs range from LE 0.04 - 0.05 for the short haul to Cairodown to LE 0.01 for longer hauls, i.e., over 200 km. Transport costs addfrom LE 0.60 to LE 8.00 per ton to ex-factory cement prices and are passedon directly to the customer.

ANNEX 3Page 20

60. Although rail and barge transport costs per ton-kilometer aregenerally lower for longer hauls, various constraints have restricted greaterusage of these modes. There appears to be little control or influence onthe part of ECO, particularly for rail deliveries, resulting in lengtheneddelivery times. Customers frequently wait up to three months between orderingand receiving their shipments, and therefore favor the faster and more flexibleroad transport.

61. Shipment by barge, although the cheapest means, is obviously re-stricted to waterway points and, above Assuit, trans-shipment to shallowerdraft barges is required due to the inadequate river depth (1.35 meters for8 months of the year). Also, as previously mentioned, barge shipping hasbeen restricted by the paper bag shortage. Although barge shipping is notset up for bulk handling at present, the ECO plans to expand the movementof cement by water and pneumatic handling facilities are being establishedat Tourah and Helwan. The waterside plants south of Cairo are located ona waterway system which includes 910 km of the Nile from Cairo to Aswan andthree canals, two from Cairo to Alexandria (220 km and 250 km) and one fromCairo to Ismailia (133 km). The ECO arranges all water transport through aprivate contractor who owns three barges and sub-contracts others.

3. Scope for Improvement: Proposed Market and Distribution Study

62. As already indicated, the cement distribution system in Egypt hasa number of shortcomings. In view of the substantially increased demandwhich will be placed on it in the future, coupled with the major impact ofdistribution costs on delivered cement prices, it is imperative that themarket and distribution study requested by the Bank, be carried out. Thiswill allow more definite estimates to be made as to the likely balance betweenfuture demand and supply and will, further, permit a rational distributionsystem to be developed in line with these projections. Assurances have beenobtained that, upon completion of the study, the Government will prepare aninvestment program which will include developing the distribution system forcement in line with the updated demand and supply forecasts. It is notapparent that the Institute of National Planning and the ECO have the re-sources to carry out such a comprehensive study, which must take into consider-ation not only major growth, but a significant future shift in the pattern ofregional demand, the bottlenecks caused by poor rail delivery control andinadequate bulk handling facilities, the lack of regional distribution depots,inadequate and poorly maintained truck fleets, and so on. It has been agreedthat the best means of expediting planning to meet these problems and to imple-ment needed improvements would be to engage consultants to study Egypt's futurecement distribution needs and help prepare the necessary distribution plans.Training of ECO staff to continue these planning efforts and effect theirimplementation should also form part of this program.

ANNEX 3Page 21

F. PRICING

1. Historic Pricing Policy

63. Since 1946, cement prices in Egypt have been controlled by thegovernment. Between 1965 and March 1974, only one increase was allowed (in1969) in the ex-factory price to the companies. Prices to the customer

were increased in addition to this by the addition of an Equalization Taxof LE 1.00 per ton for the purpose of financing housing projects. Thedomestic price structures since 1965 to the present day are set out in Table12 and export prices are shown in Table 13. The development of the price ofOrdinary Portland Cement is shown below:

Ordinary Portland Cement: Domestic Price History

Price/Ton Ex-Factory Price/Ton Ex-Factory,Period Excl. Tax Incl. Tax

--------------------- LE ---------------------

1965-69 4.10 5.501969-72 5.10 6.50Feb. 1972 - March 1974 5.10 7.50After March 8, 1974 6.25 /1 9.50 11

/1 Bulk price; earlier prices include cost of bags; this is now an additionalcharge.

64. Bagged cement prices have included the cost of bags at a constantfigure of LE 0.50 per ton and dealers' margins were LE 0.4 per ton abovetheir purchase price until the 1974 round of increases described below. In1967, a price increase of LE 0.56 per ton was allowed for cement produced bythe Alexandria Cement Company and any other cement sold in the AlexandriaRegion due to the higher production costs of the local company. Deliveredcement prices have always included transport costs directly passed on to thecustomer.

65. Until 1973, Egyptian export prices were below domestic prices whileheavy emphasis was placed on foreign exchange earnings and internationalprices were significantly below their more recent levels (see Table 3 forEgyptian Export Prices to 1973). The companies received an export subsidyof LE 1.00 per ton.

66. The rigid pricing policies adopted in the past have of courseresulted in eroding profit margins for the Egyptian companies, especially inmore recent times, when inflationary pressures have increased substantially.A new pricing policy effected by government decree as from March 8 is describedbelow.

AiNEX 3Page 22

2. Present and Future Pricing Policies

67. The prices resulting from the new government policy are detailedin Table 12. The new prices are listed by product below:

EGYPT

Domestic Cement Prices from March 8, 1974(Bulk, Ex-Factory)

Product Before Taxes After Taxes--------------- LE -----------------

Ordinary Portland 6.25 9.50Supercrete 7.25 10.50Superfine 4100 8.25 11.50Seawater 8.25 11.50Low Heat 8.25 11.50Blast Furnace and Karnak 6.15 8.00White 17.25 20.50

68. The basis of the new policy is as follows:

- ex-factory bulk prices are based on total product costs,allowing a margin of 30% of the price; annual adjustmentsbased on cost increases will maintain the margin; theAlexandria increment of LE 0.56 per ton will be retained;

- the cost of bags will be passed on directly to the customer(plus LE 1.30 per ton in March, increasing to LE 1.70 byJune-July and likely to go much higher with the soaringcost of Kraft paper);

- transport costs have been fixed at higher levels and willcontinue to be passed on directly to the customer (seeTable 11 for transport costs to selected points);

- the retail dealers' margin has been increased to LE 1.00per ton;

- the Equalization Tax has been increased from LE 1.00 toLE 1.10 per ton; a Reinvestment Tax of LE 0.75 per tonwill be collected by the ECO to help finance futureindustry expansion;

- the export subsidy has been removed.

69. The new pricing policy has of course significantly improved companyprofit levels, but the delivered price to customers has increased greatlydue to the higher factory prices, additional charges for bags, additional

ANNEX 3Page 23

taxes, hieher transport charges and, for those buying from dealers, increasedretail margins. The resulting delivered prices for Ordinary Portland Cementat various points in the country are shown below:

Delivered Prices per Ton for Ordinary Portland Cement(LE)

Maximum Wholesale RetailTown/Area Transport Delivered Price Delivered Price

Cost /1 Bagged /3 Bulk Bagged /3 Bulk

Cairo 1.10 12.30 10.60 13.30 11.60Alexandria /2 2.40 14.16 12.46 15.16 13.46Suez 1.90 13.10 11.40 14.10 12.40Port Said 2.60 13.80 12.10 14.80 13.10Assillt 4.00 15.20 13.50 16.20 14.50Aswan 8.00 19.20 17.50 20.20 18.50

/1 Transport charges can vary according to the plant of origin and thelocation of the point of delivery even within Cairo.

/2 For cement from plants other than the Alexandria plant; includesLE 0.56 per ton premium.

/3 Extra charge of LE 1.70 per ton for bags at June-July Kraft prices.

70. The regional differentials are illustrated in the table. Theextremely high prices in the more remote areas are obviously potential in-hibitors to development. Establishing more decentralized plants (Assiut,Suez) will help to alleviate this imbalance but in the meantime the importanceof efficient and economical distribution is emphasized.

71. The ex-tax prices of Egyptian cement compare favorably with domesticprices in other cotntries as well as with the higher international trade pricelevels. Increasing world wide inflation and in particular the higher oilprice levels have resulted in cement price increases over 1972/73 levels ofthe order of 20%-40% in most countries. Egypt's reasonable price levels arepermitted mainly through a substantial oil price subsidy, resulting in an oilcost to the cement companies of about 35% of world prices. Also, theEgyptian plants have comparatively low depreciation charges, and although theplant labor forces are relatively large, low wage rates yield another costadvantage.

72. During 1974, international cement prices reached unprecedentedlevels, reflecting not only higher costs of manufacture and transport, butthe high levels of international demand in relation to export capacity. Baggedprices in September, 1974 ranged around US$30-35 per ton F.O.B. European portswith bulk prices $9-12 lower. It is generally expected that the regional

ANNEX 3Page 24

supply/demand imbalance will be substantially corrected over the next fewyears, with a number of new plants coming on-stream, particularly in theMediterranean and Persian Gulf area. Trading price levels for bulk cementcould then fall back to about $16-20 per ton F.O.B. For bagged cement themost likely price is between US$25-30 per ton. Export prices are unlikelyto fall substantially below the general level of domestic prices in the longterm, although they have generally been at somewhat lower levels and duringsome periods the combination of strong international competition and domesticsupply/demand imbalances has resulted in marginally costed export prices.Owing to the recent astronomical rise in shipping rates, the C.I.F. Alexandriaprice is hard to assess. However, assuming a future lowering of time charterrates and unloading costs to US$7 per ton for bagged cement, the C.I.F. long-term Alexandria price could be about US$32 (September, 1974 prices). Thiscompares with a bagged price at the Alexandria plant of LE 11.75 (US$29.99),including the Alexandria premium.

Industrial Projects DepartmentDecember, 1974

ANNEX 3Table 1

EGYPT

TOURAH CEENT EXPANSION PROJECT

CEMENT PRODUCTION CAPACITY IN EGYPTAND ACTUAL PRODUCTION (1900-19731

Installed Total Annual ActualCapacity Theoretical Arnnual

Year Incremental Capacity Production

1900 100,000 100,000 n. a.1929 160,000 160,000 70,4841930 180,000 340,000 196,0001932 110,000 450,000 252,0001936 175,000 625,000 330,0001947 140,000 765,000 641,0001948 120,000 885,000 780,0001949 130,000 1,015,000 876,0001950 120,000 1,135,000 1,,019,0001951 135,000 1,270,000 1,118,0001955 150,000 1,420,000 1,375,0001957 500,000 1,950,000 1,415,0001960/61 360,000 2,310,000 2,295,0001961/62 - 2,310,000 2,266,0001962/63 150,000 2,460,000 2,376,50001963/64 40,000 1,500,000 2,622,0001964/65 - 2,500,000 2,411,0001965/66 - 2,500,000 2,578,0001966/67 200,000 2,700,000 2,661,0001967/68 1,000,000 3,700,000 2,904,0001968 69 - 3,700,000 3,485,0001969/70 300,000 4,000,000 3,627,8001970/71 - 4,000,000 3,813,800July 1971)18Dec. 1972))months 6,000,000 5,772,600

1973 - 4,000,000/1 3,617,000

/1 Actual production capacity has been revised downward to 3,850,000tons per year due to the extreme age of some of the equipment atthe Tourah and Helwan plants.

Industrial Projects DepartmentAugust, 1974

EGYPT

TOURAH CEMENT EXPANSION PROJECT ANNEX 3

PL,NENSD EXTENSION AND NEW CI1ENT PLkqTS/2 Table 2

Ncirii nalCapacity Expected Production Per Year (000 to11s

Projects (000 tons) 1974 1975 1976 1977 1970 1979 1980 1981 1982 1983 198L-

Existing Plants 3,850 3,500/2 3,850 3,850 3,850 3,700o3 3,600 3,500 3,500 3,500 3,500 3,500

1. Natio nalTabiew 850 510 600 850 850 850 850 G,; 850

2. Alex.bxtension 300 180 240 300 300 300 300 3G0 300

3. TourahExtension 72U 430 580 720 720 720 7LŽO 720

4. Cairo/LNew Plant 1 ,000 300 700 850 1,000 1,000 1 ,00W 1 Oa

5. SuezNew Plant 1,000 300 700 850 1,000 1 ,000 1,0C0

6. Alex.New Plant 500 150 350 425 50] XC

7. AssiutNew Plant 500 300 400 500 J00

Total Capacity/-and Production- - 3,500 3,850 3,850 4,540 5,350 6,330 7,070 7,870 8,195 0,370 d,3?&

Notes:

/1 This is contingent upon the findings of the proposed Market and iCistributiori Study, to be carried GUt by or crbehalf of the Government.

/2 During 1970 production may be reduced to about 90% of capacity due to shortages of paper sacks anc spare parts.

/3 A gradual decrease of production from existing plants can be expected because of the decline in efficiency ofold machinery.Production is expected to level off as replacement parts becane available.

/ 50i of the production from the Cairo new plant will be exporteu to Kuwait by contract aereemer a.

/ Production figures for the new projects are based on

60;a output in 1 st year80 " 2nd

100,5 ' 3rd

Industrial Prcj,ects DepartmentOctober, 1974

EGYPT

TOURAH CEMENT EXPANSION PROJECT ANNEX 3Table 3

INVEST11ENT, CONSTRUCTION AND DIRECT CEMENT 500SUMPTION BYSECTOR (1971/72) WITH TECHNICAL COEFFICIENTS

Range of CoefficientsDirect (1967/68 to 1971/72)

Invest- Construc- Cement Cement Consumptionment tion hxen. Consumtion Constr. Expend. Constr. Expenditure

Sector (LE mill.) (LE mi.) (000 t.) Investment (tons/LE 000)

Agriculture,Irrigation& Drainage 44.0 20.5 297 11.3 47-60 10.9-15.1

Industry,Mining &Petroleum 145.4 49.2 850 32.2 25-40 15.6-17.3

Electricity 21.3 1.6 22 0.8 8-46 13.8-16.3

Transport &Communication 79.6 37.1 262 9.9 34-47 7.1- 7.9

Trade &Finance 11.0 2.1 24 0.9 15-71 10.0-11.4

Housing 29.8 28.7 302 11.4 88-98 10.5-10.9

Public Utilities 16.9 10.1 100 3.8 51-80 9.'i-10.0

Other Services(incl. Con-struction &,Defense 27.0 81.0 580 22.0 -/1 7.2-10.5/1

Installationof Machinery - 9.5 - - -

Maintenance &Other Uses - 20.0 200 7.6

375.0 259.8 2,639 100.0 63-69 10.2-11.4

L Construction expenditure exceeded investment from 1967/68 due to currentexpenditure on defense installations. Prior to this time the coefficientsfor "other services" were 46%-52% and abcut 10-11 respectively. The totalconstruction expenditure to investment ratio is therefore also distorted.

Source: Ministry of Planning

Industrial Projects DepartmentOctober, 1974

EGYPT

TOURAH CEMENT EXPANSION PROJECT

HISTORIC INVESTMENT, CONSTRUCTION EXPENDITURE AND CEMENT CONSUMPTION BY SECTOR

1967/68 1968/69 1969/70 1970/71 1971/72

Direct

Cement D.C. DnC. D.C. D.C.

Sector~Constr. Consump- Constr. Consump- Constr. Consump- Constr. Consump- Constr. Consump-

Sector Invest.l/ ExF 1/ tion Invest. E __ ion Invest. Exp. tion Invest. on Invest. Exp_ tion

- - - LE Mill. - - 000 t.) - -LE Mill.-- (000 t.) - - LE Mill.- - (000 t.) - - LE Mill. - - (000 t.) - - 1.E Mill. - - (000 t.)

Agriculture,

Irrigation& Drainage 62.5 35.0 383 67.6 39,1 449 61.3 36.5 454 53.3 24.3 368 44.0 20.5 297

7ndustry &

Mining 85.8 26.1 430 101.1 25.3 418 123.1 47.0 731 125.7 50.4 867 145.4 49.2 850

Electricity 52.9 17.8 270 31.9 14.8 219 27 .3 7.3 119 23.1 4.8 68 21.3 1.6 22

Transport &Communication 38.3 15.4 121 69.5 23.7 185 71.4 29.5 230 81.2 34.8 267 79.6 37.1 262

Trade &

Finance 0.7 0.5 5 2.7 1.2 12 3.6 2.4 24 9.5 1.4 16 11.0 2.1 24

Housing 41.7 36.9 401 46.9 42.5 462 36.5 35.7 379 26.5 24.0 252 29.8 28.7 302

Public

Utilities 4.) 2.3 23 5.8 3.6 35 10.9 5.6 51 16.8 13.4 126 16.9 10.1 100

Other Services

(incl. Con-

struction) 11.9 35.3 3/ 257 18.0 ;9.7 3/ 448 21.4 61.1 3/ 640 24.9 67.4 3/ 644 27.0 61.0 31 580

Installationof Machinery - 3.7 - - 3.8 - 4.4 - - 6.0 - - 9.5 -

Maintenance &

Other Uses - 13.3 134 - 34.0 led _ 15.0 148 - 19.0 196 - 20.0 200

Sub-total 2/ 298 186.3 2.014 343.5 227 .7 2.369 355.5 244.5 2,776 361.0 245.5 2,804 375.0 259.8 2,639

Cement Products 4L -b 268 284 299 305

Tota' 2,432 2.637 3,060 3,103 2,944

1/ Investment and construlctiOn figtures at current prices.

2/ InvestmenL totals exclude adjustment for land purcnases

3/ "Other Services" incluides defense: -onstrLction expenditure higher than investment (1967/68) due to current expenditures on construction for defense purposes.

c 3

Industrial Projects Department

August. 1974

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01 CDC C C C C C 4 oC . C CC C ' oC CC CCoCr CON C N C IC C - C C'C CC CO C CC CCO

EGYPT

TOURAH CEMENT EXPANSION PROJECT ANIMEX 3Table 6

CEMENT CONSUMPTION PER CAPITAL vs. GNP PER CAPITA FORSELECTED COU4TRIES/1I - 1971 & 1972

Apparenrt Germerit~Country Consumptiron/Cap./2(.kg) GNP/CaPita (us$) A

1971 1972 1971/L.2.72

Egypt 7L 84 220 240

iMorroco 104 102 260 270

Algeria 102 117 360 430

Turkey 178 197 340 370

Yugoslavia 295 305 780 810

-ormania 371 404 740 810

Portugal 275 300 730 780

Tunisia 110 122 320 380

Sudan 12 12 120 120

Ethiopia 6 7 80 80

Somalia 24 19 70 80

Kenya 35 44 160 170

Jordan 139 149 260 270

Syria 199 201 290 320

Lebanon 334 407 660 700

Yemen 20 21 90 100

Iraq 125 128 370 370

Iran 96 119 L50 490

India 27 28 110 110

Pakistan 47 5 130 130

/1 Countries with GAP/Capita less than U6TS1 ,000 per annmrn; emnhasis on E-urope,Middle East and N. Africa; excluding those countries where high oil revenuesand small population substantially distort figures.

1 Gerabureau Statistical Review, 1973./ World Bank Atlas, 1973._ IBRD: Economic Analysis and Projections Dept.; base data for 'world Bank

Atlas, 1974.

Industrial Projects DeoartaeortOctober, 197h

EGYPT

TOURAH CEMENTI EXPANSION PROJECT ANNEX 3Table 7

EGYPT' S EXPORT MARKET SHARE - SELECTED COUNTRIES

Country Year1969 1970 1971 1972 1973

(68-69) (69-70) (70-71) (71-72)

Libya

Lmports (total)/1 750,000 405,000 538,000 1,354,000 1,803,000From EgrptL 49,500 67,236 102,824 257,915 353,005% share 6.6 16.6 19.1 19.0 19.6

West Africa

Imports n.a. 2,180,000 2,930,000 2,550,000 2,654,000From Egypt 84,998 135,414 216,405 124,986 = 20,489% share - 6.2 7.4 4.9 0.8

Saudi Arabia

Ixmports 560,000 464,000 550,000 299,000 350,000From Egypt 2400,826 1 4,700 31,129 124,088 91,590, share 43.0 3.2 5.7 41.5 26.2

Lyria

Imports n.a. 75,000 374,000 400,000 600,000From Egypt 24,755 50,255 101,104 110,872 2,298% share - 67.0 27.0 27.7 O.li

Yugoslavia

Imports 1,075,000 1,643,000 1,395,000 892,000 869,oOoFrom Egypt 67,470 262,169 258,636 53,985 nil% share 6.3 16.0 18.5 6.1 nil

Poland

Imports 320,000 311,000 614,000 1,240,000 1,633,000from Egypt - - 129,482 19,400% share nil nil nil l0.4 1.2

/1 Total import figures fromn Gembureau Statistical Review, 1973.77 Egy-tian figures from Tourai feasibility study.

Industrial Projects DepartrmentOctober, 1974

EGYPTTOURAH CEMENT EXPANSION PROJECT

EGYPTIAN CEMENT EXPORTS AND EXPORT MARKETS

Year

Country 1962-63 1963-64 1964-65 1965-66 1966-67 1967-68 1968-69 1969-70 1970-71 1971-72

Sudan 16,498 11,865 72,900 11,200 15,885 500 13,559 2,000 1,280 500Palestine (Gazza) 30,046 38,651 43,153 63,965 63,866 - - - - -Saudi Arabia 79,239 20,131 39,880 82,330 48,220 107,213 240,826 14,700 31,129 124,088Libya 22,405 2,510 2,000 11,250 9,250 104,695 49,500 67,236 102,824 257,915Cyprus 7,315 2,000 - - - - 40 6,420 600 -Aden 46,310 4,855 3,465 16,980 15,100 41,024 27,012 5,450 2,750 5,600Yemen 9,100 9,838 4,933 25,193 45,200 31,740 17,150 9,490 35,489 15,725Kuwait 4,280 2,378 - 60,800 31,750 109,721 87,884 - - -Somalia 2,469 - - - 1,500 - 5,900 1,000 7,400 6,775Ceylon - - - - 5,630 51,057 - - 17,550West Africa 25,015 8,850 24,878 51,270 23,665 28,900 84,998 135,414 216,405 124,986Lebanon 500 - - - - - - - - -San Morinas - - - 10,305 3,360 - - - - -Djibouti - - - 1,500 3,500 8,761 7,700 _ _ 14,000Qatar - - - - 10,000 24,200 36,140 - - -Al Makla - - - - - 2,800 - -Al Bahrain - - - - - 20,700 - - - -Dubai and Abu Dhabi - - - - - 25,027 71,340 25,270 19,572 39,030Tanzania - - - - - 700 - - - -Cambodia - - - - - 4,500 - - - -Syria - - - - - - 24,755 50,255 101,104 110,872Turkey - - - - - - 70,890 41,200 - -Yugoslavia - - - - - - 67,470 262,169 258,636 53,985Iraq - - - - - - 4,000 - - -Albania - - - - - 4,000 12,470 4,420Hungary - - - - - - - 44,350Malta - - - - - - - - 2,400 690Brazil - - - - - - 4,500 9,300Bulgaria - - - - - - - - 49,960 49,650Spain -- - - - - - 3,650 -Poland - - - - - - - - 129,482Germany - - - _ 9,000Panama - - 5,500Jordan - - - - - - - 995 1,232Other Countries 15,000 31,000 20,000 18,100 17,000 4,000 - - - -

TOTAL 258,177 132,078 211,209 353,093 271,296 600,111 867,686 629,104 900,314 971,000

Industrial Projects DepartmentAugust, 1974

EGYPT

TOURAH CE1'NT EXPANSION PROJECT

PROJECTED CJ&ENT SUPPLY/DEMAND SITUATION: 1974-1984(000 tons)

Year 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

ProjectedProduction 3,500 3,850 3,850 4,540 5,350 6,330 7,070 7,870 8,195 8,370 8,370

ProjectedDomesticDemand 3,029 3,109 4,138 5,778 6,196 6,533 6,581 6,774 7,515 7,827 8,325

ImportRequirements - 0 288 1,238 996 553 - _ - - 460

Exports- 471 741 - - 150 350 489 1,096 680 543 500

/1 Including committed exports to Kuwait.

Industrial Projects Department CDO October, 1974

ANNEX 3Taib2e 10

EGYPTTOURAH CEMENT EXPANSION PROJECT

ORGANIZATION CHART OF EGYPTIAN CEMENT OFFICE

G. 0. B. M.

PATONRAH PESNHELWAN N L EXPGRTSALES A LEXA NDRIAMCEMIENTCO. CEIMENTCO. CEMENT CO. CEMENTCO.

|COMMITTEE FORt ORGANIZING|

GENERALMANAGER

MANAGER

COMMERCIAL |TRASPR

PLANNING 1 PERSNE FINANCIA;L71 LOCAL SALES EXPORT SALES AEXANDRIA MAINTENANCE| MANAGER MANAGER MANAGER MANAGER | RNH MANAGER || MANAGER

INDUSTRIAL PROJECTS DEPARTMENTAUGUST, 1974 World Bank-8936

EGYPT

TOURAH CE1ENT EXPANSION PROJECT ANNEX 3Table 11

CEMENT DISTRIBUTION COSTS BY REGION

Cement/ Approx. Official Approx.Sales /1 Distances-/ Transporl Cost Pq

Region (1971-72) Place _Km Tariff. 5-L Ton-Km--t000 tons LE/ton LE

Cairo 1,434 Cairo 12-30 0.60-1.10 0.04 - 0.05

Delta 875 Menofia 80 1.65 0.02Damietta 210 2.30 0.01

Alexandria- 346 Alexandria 210-230 1.85-1.40 0.01

Suez and Sinai 110 Port Said 230-250 2.00-2.60 0.01Ismailia 150 1.75 0.01Suez 160 1.90 0.01

Upper Egypt 404 Bani-Suef 80-100 1.30-2.00 0.02Assuit 320-340 3.30-4.00 0.01Aswan 900 8.00 0.01

/1 Shipped by all modes.7i Not necessarily typical or average distances to points in each region, but

indicative of range and order of magnitude. Distances are by road fromplants south of Cairo (Helwan, National, Tourah).

/3 By truck as from March, 1974.7T Data does not include shipments from Alexandria plant.

Industrial Projects DepartmentOctober, 1974

EGYPT

TOURAH CGEENT EXPANSION PROJECT AdNEX 3Table 12

CEMENT PRICES AND TAXES

Price/ton LE Price/tonBulk Treasury Tax Bulk

Ex-factory Production Equalization Total Reinvestment Ex-factoryType of Cement Before Tax Duty Tax Tax Tax After Tax

(LE) (_LE)

CEMENT PRICES AND TAXES 1965-1969

Ordinary Portland 4.10 1.40 - 1.40 - 5.50Supercrete 5.10 1.40 - 1.40 - 6.50Superfine 4100 5.60 1.40 - 1.40 - 7.00'Seawater 5.65 1.40 - 1.40 - 7.05Low Heat 5.60 1.40 - - - 7.00Blast Furnace & Karnak 5.0o - - _ _ 5.00'kiite 16.10 1.40 - 1.40 - 17.50

CEMENT PRICES AND TAXES 1969-1972

Ordinaty Portland 5.10 1.40 - 1.40 - 6.50Supercrete 6.10 1.40 - 1.40 - 7.50Superfine 4100 6.60 1.40 - 1.40 - 8.ooSeawater 6.65 1.40 - 1.40 - 8.05Low Heat 6.60 1.40 - 1.40 - 8.00Blast Furnace & Karnak 5.00 - - - - 5.00Wihite 17.10 1.40 - 1.40 - 18.50

CS4ENT PRICES AND TAXES, FEBRUARY 12, 1972 TO MARCH 8, 1974

Ordinary Portland 5.10 1.40 1.00 2.40 - 7.50Supercrete 6.10 1.40 1.00 2.40 - 8.50Suoerfine 4100 6.60 1.40 1.00 2.40 - 9.00Seawater 6.65 1.40 1.00 2.40 - 9.05Low Heat 6.60 1.40 1.00 2.40 - 9.00Blast Furnace & Karnak 5.50 - 1.00 1.00 - 6.50Itite 16.60 1.40 1.00 2.40 - 19.00

C7NEBNT PRICES AND TAXES AFTER MARCH, 1974

Ordinary Portland 6.25 1.40 1.10 2.50 0.75 9.50Supercrete 7.25 1.40 1.10 2.50 0.75 10.50Superfine 4100 6.25 1.40 1.10 2.50 0.75 11.50Seawater 8.25 1.40 1.10 2.50 0.75 11.50Low Heat 8.25 1.40 1.10 2.50 0.75 11.50Blast Furnace & Karnak 6.15 - 1.10 1.10 0.75 8.oo'White 17.25 1.40 1.10 2.50 0.75 20.50

Source: Egyptian Cement Office

Industrial Projects DegartmentOctober, 1974

EGYPT ANNEX 3Table 1Y3

TOURAH CEMENT EXPANSION PROJECT

EXPORT PRICEASL PER TONPORTLAND AND -WHITE CEMENT 1965766-1 971/72

Portland WhiteYear Cement Cement

- _ (E)- - - -

1965/66 5.189 11.9001966/67 5.322 10.9001967/68 4.617 11.6061968/69 4.810 13.4oo1969/70 4.076 10.8001970/71 4.094 11.50o1971/72 4.486 12.3001973 8.114 12.900

Source: Egyptian Cement Office

/1 F.O.B. prices; bagged cement.

Industrial Projects DepartmentOctober, 1 974

ANNEX 3Chart 1

EGYPTTOURAH CEMENT EXPANSION PROJECT

SUPPLY/DEMAND COMPARISON

9 9

8~~~~~~~~

ProJ ectedProduction(Capacity)

a 6 - ""/ ;0 - 60

Sectoral Project-, ion (incl. Suez) -' Macro-economic

00 \,' / ##lPojectionshigh

5 0 ~~~~~~me diu m50 l~~~~~~~~~~~~~~~ow

o iX * * #> J Sectoral Proiection(excl. Suez

~ 4 _4

o~~~~~~~~o

3 _ 3

2 2 1

I t_ | I . 1

1 974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

Year

Industria a7 rojects DepartmentAugust, 197h

ANNEX 4-1Page 1

EGYPT

TOURAH CEMENT EXPANSION PROJECT

RAW MATERIAL AVAILABILITY AND ANALYSIS

A. Introduction

1. TCC draws its limestone from the virtually unlimited reserves ofan immense deposit which stretches about 30 km along the east bank of theNile and extends eastward into the Eastern Desert. The deposit belongs to thewell-known 'Mokkatam Formation" (DJebel Moccatam), which shows outcroppingsstretching from the east bank of the Nile from Cairo down to Minia, south ofHelwan (see Map IBRD 11196). The deposit was already well known in ancienttimes; in fact, the Tourah limestone quarry ranks among the oldest in theworld: Papyrus notes from the VI Dynasty about 2000 B.C. in Egypt bearwitness to the daily life of quarry men at Tourah. At this early time,Tourah limestone was quarried as building stone and later on for small-scalelime production. Since 1928, the deposit has been exploited for the prod-uction of Portland cement by the Tourah Portland Cement Company (TCC).

2. In 1969, TCC hired the Polish Foreign Trade Enterprise, Polimex-Cekop, to carry out a study to establish the suitability of the limestoneas raw material for the production of lime in modern production facilities.This study included (i) a geological exploration of the Tourah limestonedeposit, (ii) an evaluation of accessible proven reserves both for theexisting cement factory and a lime plant, projected for a rated capacity ofupto 1,000 tpd, and (iii) a technical feasibility study for the lime project.Within the framework of this study, detailed geological and topographicalmaps were prepared, samples collected and analyzed, and the results of thestudy recorded in a substantial report. No problem is envisaged with regardto the limestone reserves.

3. Formerly, clay did not represent a problem for cement productionalong the Nile, as nearly each year, prior to the construction of the AswanHigh Dam large amounts were deposited by the river. Since then, however,TCC is limited to the clay deposit, presently exploited. GOBM asked Tourahto investigate this deposit in detail in order to establish its recoverablereserves. It is planned that a new cement plant under separate managementwith a rated capacity of 1.0 million TPY would exploit the same deposit asthat used by TCC. However, clay deposits may be limited. TCC is, therefore,presently carrying out a detailed study of the clay deposit which includesgeological exploration and chemical analyses of samples in the laboratoriesof TCC.

4. TCC's geologists and chemists routinely carry out deposit investiga-tions in both quarries within the process of quarry operations to establishchemical and mineralogical composition of each batch of materials for quality

ANNEX 4-1Page 2

control and determination of material variability and resulting short-termexploitation plans. The personnel are well qualified and ensure smoothquarry operation.

B. Limestone Deposit

5. The Mokkatam Series, an Eocene Carbonate Formation stretching formore than 30 km along the east bank of the Nile from Cairo, south to Helwan,Tabbien and Minia, extends eastward into the Eastern Desert to Suez and theRed Sea. At Tourah, the deposit is between 100 and 120 m. The highestelevation in the TCC quarry is 195 m above sea level, the exploitation levelat 99 m above sea level. The terrain of the region is rather even. Thecurrent quarry face is located 3 km from TCC's plant. The strata lievirtually horizontally, their inclination varying between 2° and 5°. Onecan clearly distinguish four different layers: the top layer (25 m) consistingof very homogeneous and hard "building limestone", followed by a layer (40 m)of soft, flour-like whitish limestone with loaf-like hard embeddings; thethird layer (20 m) from the top, consisting of chalky, snow-white, softlimestone of great homogeneity, and finally the bottom layer (2 m) of marlylight grey to white limestone of chalky consistency. Compressive strengthvaries between 150 and 900 kg/cm2 and density between 1.8 and 2.6 t/m3. Theaverage physical and chemical composition and other details are given intables 1 and 2. Although there is great lateral variation regarding lithologyand faunal contents, the chemical composition shows little variation in lateraldirection. The medium hard material is very brittle and shows a compact,fine, crystalline structure. It fractures irregularly with a tendency tosharp-edged splintering. Fracture surfaces are rough and irregular. Scratchhardness according to Mohs is about 3. A sub-water storage test showsrelatively low water absorption in spite of the chalky structure.

6. The boring campaign of the Polish investigation of the limestonequarry included 12 borings with a total length of 600 m. This campaignblocked out reserves of about 42 million m3 (750 x 800 x 70). Because ofthe homogeneity of the material, one can safely assume a reduction factorof 0.9 for this material to account for waste materials and fissurations.The cement plant after expansion (2.07 million TPY of cement, equivalent to1.96 million TPY of clinker) would require 2.65 million TPY of limestone(1.35 tons of limestone per ton of clinker). At an average density of 2.2t/m3, this amount is equivalent to 1.16 million m3 per year. The lime plant,with a rated capacity of about 90,000 TPY of lime, would require another0.15 million tons (0.07 million m3 ) of limestone per year. Using the abovedetermined reserves of 42 million m3, a reduction factor of 0.9, and an annuallimestone consumption of 1.23 million m3 per year, adequate supply for bothplants is assured for 30 years from confirmed limestone reserves. However,beyond these conformed reserves, there are millions of cubic meters of reservesto be investigated which would allow operations to continue for a much longertime. Detailed calculations on limestone reserves are shown in Table 3.

7. The limestone quarry face, currently worked upon, is about 500 mlong and has an average height of 70 m. With a reduction factor of 0.9 and

ANNEX 4-1Page 3

a yearly requirement of 1.23 million m3, the quarry face will advance about25 im per year after full utilization after the expansion project.

i~; Clay Deposit

6. The clay deposit exploited by TCC is located between the east bankof the Nile, bounded by a small limestone cliff in the west and the steepstep of the Mokkatam series (limestone) in the east. Within this peneplanation,.three different layers can be identified, which.result from different geolo-gical periods: the lower strata built up by oligocene swamps and interruptedhere and there by small sandlenses. This layer was covered by frequent al-luvial deposits of the Nile floods. Finally, another layer was built by looses3urface deposits of eocene limestone erosion. Accordingly, from bottom totop, a plastic clay layer, followed by a mixed clay layer and a sandy claylayer are clearly identifiable along the quarry face.

9. The sandy clay is reddish to yellowish-brown, with a porous andlumpy structure and irregular grain sizes. The mixed clay is yellowish-brown,with irreaular grain sizes, but of a dense structure. The fracture sarfaceis smooth and is scratchable by fingernail. The plastic clay varies fromgreenish grey to dark grey in color, has an irregular grain size and a porousstructure. Surfaces are strongly cleaved. All materials can be crushed byhand. Under water, the sandy clay disintegrates to a fine sand slurry,whereas mixed and plastic clay become sticky and somewhat greasy. The physicalandi chemical analyses of the three types of clay are shown in Tables 1 and 2.

10. The detailed investigation of the clay deposit, currently carriedout by TCC, is supervised by Dr. 14owad Ibrahim Yousif, Professor of Geologyat the Ain Shams University in Cairo. Currently, the deposit is investigatedvithin the boundaries of TCC's concession area (see Hap IBRD 11196) whichhas been split into several lots of varying sizes and shapes. In Area A,adjacent to the current quarry face, the study has been fully completed,including boring campaign, sample-taking and chemical analysis of the samples;thc distance between bore holes is a 50 m grid. WJithin the other plots, thedis-ance between bore holes varies between 100 and 400 m grids. Samples arebeing taken and properly stored for subsequent chemical analyses. Boringsare carried out by manual Auger borers, which are effective in clay. Drillingcannot continue when the machine hits a sand lens. In such a case, a newboring must be carried out at another spot. Working depth is up to 75 m.Borings and sample-taking are carried out with professional expertise.Table 4 shows details of boring in the various plots and estimated clayquantities. With the fully investigated plot A reserves, the expanded plant'iould be able to operate over 30 years whereas, with total quantitiescurrently researched (including reduction factors), the expanded plantcould operate for over 100 years, provided the chemical analyses show fea-sil)le composition.

D. Sand Deposit

11. Within the concessionary area of TCC there is a sand deposit ofan estimated reserve of more than 3.5 million tons. Sand is used as a thirdcomponenit in some special cement clinkers for the production of (a) high

ANNEX 4-1Page 4

sulphate resisting cement (specific consumption: 0.168 tons of sand per tonof clinker); and (b) low heat cement (specific consumption: 0.125 tons ofsand per ton of clinker). The total production of these types of cement islimited to a maximum of 50,000 tons per year; the total quantity of sandrequired per year for this purpose will, therefore, not exceed 7,500 tonsper year. Sand is also used as an additive to clinker and gypsum to be groundto mixed cement (Karnak). Per ton of cement produced, 0.25 ton of sand isrequired. Projected production of Karnak cement after the project is set at280,000 tons per year. Resulting requirements are projected at 70,000 tonsper year. Thus, total sand consumption after implementation of the expansionproject will be limited to 80,000 tons per year. Therefore, the above depositwould be sufficient for a period of more than 40 years.

L. Pyrite Ash

12. All types of cement produced by TCC regularly require pyrite ashto increase the iron content of the clinker to improve the characteristicsof the cement. The important chemical components Qf the pyrite ash usedby TCC are as follows:

Iron percent 58-65Sulphur percent 2-3Humidity, maximum percent 10

The iron component improves the silica and aluminia ratios and is particularlynecessary for low heat cement and sulphate resistent cement. Currently, TCCbuys about 11,000 tons of pyrite per year to produce the following clinkertypes: (i) Ordinary Portland cement, clinker (specific consumption: 0.003tpyrite/t clinker), (ii) Sulphate resistant cement, clinker (specific consump-tion: 0.021 t pyrite/t clinker), and (iii) Low heat cement, clinker (specificconsumption: 0.035 t pyrite/t clinker). After the expansion project, totalrequirements will increase to about 16,500 tons per year. This will notconstitute any problem.

F. Gypsum

13. Gypsum is ground together with clinker to act as a retarding agentin the hydration process of cement. TCC uses on an average about 5 parts ofgypsum with 95 parts of clinker to produce 100 parts of cement. TCC quarriesgypsum in the desert at a location about 20 km south-east of Tourah. Naturalgypsum is available there in abundance as an overburden layer of 40 to 50 cmthiickness. The material is transported by TCC-owned or hire(d dumping trucksto the gypstum storage yard within the plant. Currently, TCC consumes about70,000 tons per year. The consumption will increase to about 105,000 tonsper year after implementation of the expansion project. Meeting this needwill not create a problem.

C. Blast Furnace Slag

14. Blast furnace slag is sometimes purchased from the nearby steelplant at Helwan, if it has a surplus which cannot be sold to the Tabbien or

ANNEX 4-1Page 5

Helwan cement plants. This is ground in 35 parts with 60 parts of clinkerand 5 parts of gypsum to blast furnace cement.

H. Raw Material Composition

15. With the given raw materials as described above, TCC has successfullyproduced cement according to internationally-accepted standards for 45 years.Table 5 shows the types of cement presently produced by TCC and the specificquantities of raw materials required for these types. Existing facilitieshave operated on the wet process, whereas the expansion project will operateusing a dry process. Suitability of the existing raw materials used in thedry process facilities has been investigated by TCC and three differentequipment suppliers in Europe (F.L. Smidth, Polysius/Krupp, and Humboldt/Wedag).All these suppliers (who would have to give guarantees on their equipment)have concluded from various tests and analyses 1/ carried out on samples ofTCC's raw materials that these materials are well suited for the dry processtechnology. By means of chemical calculations of theoretical raw mixes, thesuppliers determined similar composition requirements and typical moduli asare achieved by TCC's wet slurry and the resulting clinker.

16. The Cl-content of binary clinker (between 0.07 and 0.12%) producedfrom the raw materials, combined with an average amount of alkalies (between0.6 and 0.9%) will, however, probably require a by-pass arrangement for anyshort kiln with preheater system to partially discharge gases. Otherwise,disturbing chloride circuits will form and clogging of the preheater systemthrough crystallization of alkalies and chlorides will almost certainly takeplace and lead to serious disruptions of operations. TCC has sent raw materialsamples to equipment suppliers interested in participating in the bidding formechanical cement machinery and equipment. This will enable bidders toanalyze and test the materials within their own laboratories and to designequipment according to the specific characteristics of TCC's raw materials.Technical bid evaluation will particularly focus on dry process choice andappropriate design to accomodate TCC's raw material properties.

17. The fuel oil used for firing the kiln contains about 2.4% ofsulphur. This means that about 0.26% S03 content can be expected in combi-nation with the raw mix. This rather low component will be balanced by theexisting alkalies so that no disturbing sulphate circuits should occur.

Industrial Projects DepartmentDecember, 1974

1/ Physical, chemical, mineralogical, volatility test.

EGYPT

TOURAH CEMENT EXPANSION PROJECT

PHYSICAL ANALYSIS OF RAW MATERIAL

LIMESTONE SANDY CLAY MIXED CLAY PLASTIC CLAY

AVERAGE LOT 1 LOT 2 AVERAGE LOT 1 LOT 2 AVERAGE LOT 1 LOT 2 AVERAGE LOT 1 LOT 2

PHYSICAL COMPOSITION

a. Moisture

Natural Moisture (%) 3.4 n.e.1l) .e. 24.0 n.e. n.e. 21.5 n.e. n.e. 26.7 n.e. n.e.

Moisture (%) after 24 hours n.e. n.e. 16.6 n.e. 35.1 n.e. n.e. n.e. 36.6 n.e. n.e. 44.0storage under water

Moisture (%) after 3 days n.e. 6.3 n.e. n.e. 48.3 n.e. 48.3 n.e. n.e. n.e. 45.1 n.e.storage

b. Exterior Characteristics

Color Snow white to yellowish Reddish to yellowish Yellowish brown Greenish to dark greywhite brown

Structure Fine - crystalline, com- Irregular grain, lami- Irregular grain, com- Irregular grain, porouspact, chalklike, dense nated, porous but compact pact, bumpy but compact

Surface Rough, irregular Smoth Smooth Cleaved

Hardness Brittle, medium hard Softish Softish Somewhat plastic, disintegratable(3 as per Mohs) Disintegratable by hand Disintegratable by hand by handSplintering with sharp

c. Grindability Test edges

Grinding fineness in n.e. n. e. 9.8 n.e. n.e. 15.2 n.e. n.e. 9.6 n.e. n.e. 10.6% residue on 0.09 screen

Resulting spec. power n.e. n.e. 9.6 n.e. n.e. 5.4 n.e. n.e. 9.6 n.e. n.e. 10.5requirement in KWh/t

1) n.e. = not executed.

Industrial Projects DepartmentJuly) 1974

EGYPT

TOURA8 CEMENT EXPANSION PROJECT Table 2

CHEMICAL ANALYSIS OF RAW MATERIALS

LIMESTONE SANDY CLAY MIXED CLAY PLASTIC CLAY

i/ V 3AVERAGE LOT 1 LOT 2 AVERAGE LOT 1 LOT 2 AVERAGE LOT 1 LOT 2 AVERAGE LOT 1 LOT 2

CHEMICAL COMPOSITION (l)

SiO 2 4.29 2.41 2.36 54.3 58.37 61.19 53.9 56.73 55.29 52.3 52.14 51.40

Al203 0.64 0.11 1.44 16.5 17.94 14.19 17.2 18.64 19.32 16.5 18.04 21.52

Fe 2 030.32 0.16 0.28 10.3 8.98 9.04 10.6 9.42 9.72 9.38 9.58 9.55

CaO 50,8 53.38 52.01 2.19 2.00 2.54 2.41 2.10 1.60 2.05 3.85 1.92

mgo 0.81 0.97 1.21 2.07 2.73 3.60 2.01 3.14 3.05 2.00 3.44 3.35

Loss on Ignition 42.0 42.63 42.54 8.08 5.53 5.15 9.05 6.00 7.43 10.20 8.92 9.37

Subtotal 98.86 99.66 99.84 93.44 95.55 95.71 95.17 96.03 96.41 92.43 95.97 97.11

TiO2 0.06 0.03 0.08 1.85 1.88 1.87 1.74 1.56 1.90 1.78 1.82 1.63

Mn203 _ _ _ _ _ _ _ _ _ _ _ _

K20 0.09 0.04 0.06 1.41 1.30 1.39 1.31 1.25 1.39 1.35 1.23 1.17

Na20 0.24 0.09 0.14 1.57 1.32 1.58 1.4 1.25 1.17 1.25 1.12 1.17

C1 0.18 0.07 0.11 0.078 0.09 0.16 0.074 0.08 0.09 0.04 0.04 0.08

So 0.08 0.10 0.33 0.04 0.03 0.22 0.08 0.03 0.19 0.17 0.22 0.60

2 °5 0.06 0.02 n.e.4) 0.04 0.15 n.e. 0.04 0.15 n.e. 0.03 0.18 n.e.

Total 99.57]M.01 100.56 98.43 100.32 100.93 99.81 100.35 101.15 97.05 100.58 101.76

Caco 3 Titrated 93.4 97.00 84.3 2.5 1.25 n.e 2.1 2.00 n.e. 3.3 4.50 n.e.

CaCO3 Calculated 90.7195.28 92.88 3.91 3.57 1.57 4.30 3.75 2.86 3.66 6.87 3.43

MgCO3 Calculated 1.69 2.03 2.53 4.32 5.71 7.52 4.20 6.57 6.37 4.18 7.20 7.00

Silica Ratio 4.5 8.93 1.4 2.0 2.03 2.63 1.9 1.92 1.90 2.0 1.77 1.65

Alumina Ratio 2.0 0.68 5.1 1.6 2.21 1.57 1.6 2.14 1.99 1.8 2.07 2.25

1/ Average: Sample test run 2 years ago by TCC.

2/ Lot 1: Sample test run by European Equipment suppliers in 1973

3/ Lot 2: Sample test run by European Equipment suppliers in 1974.br n.e. - not executed.

Industrial Projects DepartmentJuly,197L

EGYPT

TOURAH CEMENT EXPANSION PROJECT

LIMESTONE DEPOSIT -- RESERVES

I. RESERVES OF LIMESTONE

1.) Blocked-out, investigated reserve (m3): 750 x 800 x 70 = 42 million m32.) Blocked-out, investigated reserve (t) 42 x 2.2 t/m3 = 92.4 million tons3.) Reduction factor 90%4.) Reduced quantity confirmed (t) 83.2 million tons

5,) Further reserves within concessionarea (m3): 1200 xllOO x 70 = 92.5 million m3

6,.) Further reserves within concessionarea (t) =203.3 million m3

7.) Reduction Factor 60%8.) Reduced quantity indicated (t) : 122.2 million tons

II. DEMAND FOR LIMESTONE

1.) Specific Requirement: 1.35 tons of limestone per ton of clinker2.) Annual Output of plant: 2.07 million tons of cement

1.96 million tons of clinker3.) Annual Requirement: 1.96 x 1.35 = 2.65 million tons per year for cement plant

0.15 million tons per year for lime plant2.80 million tons per year in total

4.) Number of years from confirmedreserves: 83.2 : 2.80 = 29.7 years

5.) Number of years from indicatedreserves: (Within concession area only) 122: 2.80 = 43.6 years

(D N4

Industrial Projects DepartmentJuly,1974

EGYPT

TOURAH CEMENT EXPANSION PROJECT

CIAY DEPOSIT -- RESERVES

Sub-

I. RESERVES OF CLAY AREA DESIGNATION A B C D E F G Total Z Total

1. Square Area (104 m2

) 14 23.5 17.5 8.1 25.7 8 32 128.8 60 188.8

2. Minimum Depthl) 17 33.5 24 21 32 27 23 n.a.3. Maximum Depth 61 70.5 72 58 61 61 54 n.a.4. Average Depth

2) 42 66 51 40 43 37 35 30

5. Resulting Cubic Meters (106 m3

) 5.9 15.5 8.9 3.2 11.1 3.0 11.2 18

6. Quantity Wet ($pecific Weight 2.0 t/m3

) (million) 11.8 31.0 17.8 6.4 22.2 6.0 22.4 117.6 36 153.67. Quantity Dry (Reduce by 20%) (million) 9.5 24.8 14.2 5.1 17.8 4.8 17.9 94.1 28.8 122.9

8. Number of Borings 48 16 5 15 7 4 18 n.a.9. Borings per Area (No.|10

4i

2) 3.4 0.7 0.3 1.9 0.3 0.5 0.6 n.a.

10. Total Length of Borings (row 4 x row 8) 2000 1050 250 600 300 150 630 4980 n.a.

11. Reduction Factor for Dry Quantities (%) 95 70 70 85 70 70 50 30

12. Reduced Quantity, Dry (million t) . 9.0 17.4 10.0 4.4 12.5 3.3 8.9 65.5 8.5 74

II. DEMAND FOR CLAY

1. Specific Requirement: 0.3 tons of dry clay per ton of clinker2. Annual Output: 2.07 million tons of cement

Annual Output: 1.96 million tons of clinker

3. Annual Requirement: 0.59 million tons of dry clay4. Number of years from Reserve A. 9.0 0.59 = 15.3 years5. Nutber of years from Reserve A & C: 19.0: 0.59 = 32.2 years6. Number of years from Subtotal A to G: 65.5: 0.59 111.0 years7. Number of years from Total Reserves: 74 : O.59 = 125.l years

1) Minimum, maximum depth as achieved with "Auger" manual borer.2) Average depth has b.en prepared on the basis of all borings carried out in the particular area.

Current height of working face in existing quarry is 35 m on the average.

Indus trial Project-s Depa'tircnt

July 1974

EGYPT

TCRJRAH CEMENT EXPANSION PROJECT

COMPOSITION OF DIFFERENT TYPES OF CLINKER AND CE4ENT IN TOC s PRODUCTION

I. Cement Types Ordinary Rapid Mixed Blast Super- Sulphate LowPortland Hardening Cement Furnace Fine Reaisting HeatCement Cement (Karnak) Cement Cement Cement Cement

II. Clinker used andComposition of Raw Materials -- Ordinary Portland Cement Clinker --- Special Special

(tons per ton of clinker) Clinker Clinker

1.) Limestone 1.340 1.340 1.340 1.340 1.340 1.326 1.365

2.) Clay 0.310 0.310 0.310 0.310 0.310 0.126 0.198

3.) Pyrite Ash 0.003 0.003 0.003 0.003 0.003 0.021 0.035

4.) Sand - - _ - - 0.i68 0.12%

Total 1.653 1.653 1.653 1.653 1.653 1.641 1.723

III. Cement Composition(Tons per ton of cement)

1.) Clinker 0.95 0.95 0.70 o.60 0.95 0.95 0.95

2.) Gypsum 0.05 0.05 0.05 0.05 0.05 0.05 0.05

3.) Sand - - 0.25 - - - _

4.) Blast Furnace Slag _ _ 0.35

Total 1.00 1.00 1.00 1.00 1.00 1.00 1.00

Industrtal Projects DepartmentJuly 1974

VI

ANNEX 4-2Page 1

EGYPT

TOURAH CEMENT EXPANSION PROJECT

UTILITIES AND INFRASTRUCTURE

A. Utilities

I. Fuel (Mazout)

1. Heavy fuel oil (Bunker C -- called "mazout" in Egypt) is suppliedby a pipeline of a diameter of 8" from a Cairo refinery, owned by the GeneralOrganization for Petroleum and is stored in the plant in one of five storagetanks with a total capacity of 23,000 tons. Currently, TCC uses about 220,000tons per year. Existing installations are fully sufficient to provide forthe existing as well as expanded plants.

2. The project design takes into account possible use of gas from theAbu Gharadig gas fields which already serve industrial complexes aroundCairo. If gas is used in the future as heating fuel, the mazout installationswould be maintained as standby. Table 1 of this Annex gives chemical andphysical characteristics of both "mazout" and gas.

II. Electricity

3. TCC is supplied with power by the Cairo Electricity and GasAdministration (CEGA) and by the Company's own power station. Currently, theannual power consumption of the existing facilities amounts to about 120million kWh. Two-thirds of this amount are withdrawn from the Cairo gridwhich is owned and operated by CEGA. The sub-station is fed by undergroundfeeders carrying 11 kV and 300 Amps each. Cost per kWh purchased is LE 0.0062.The in-plant power station consists of a steam generating plant with acapacity of 11.8 MW (5 boilers), and a gas generating plant of 3.0 MW (with5 free piston gas generators). As the power plant is expensive to operaterequiring much maintenance and repair, its load shall be shifted to a newsub-station (to be supplied under the expansion project) which will alsoprovide power for the expansion plant itself. The total capacity of this newsub-station is estimated to be 30 MVA and it will be fed by 6 parallel under-ground feeders each carrying 300 Amps at 11 k. CEGA is aware of TCC's ex-pansion plans and related power requirements and will provide the feedercables up to the plant site.

ANNEX 4-2Page 2

III. Water

4. Water is currently drawn from the Nile at a rate of 1.28 m 3/sec bya Company-owned sub-station. This water is used for the following purposes:

(a) preparation of clay slurry;

(b) cooling of miscellaneous machines:

(c) boiler feed in the power plant; and

(d) tap water.

For feeding the power plant boilers, water is demineralized in a new watertreatment unit (1968) by ion exchange at the rate of 10 m3/h. For drinkingwater (item (d)), three Peterson filters with a total capacity of 100 m3/hare used to clean the water. Daily consumption is about 100-180 m3. Furthertreatment is provided by adding chlorine. Table 2 of this Annex shows theanalysis of a Nile water sample. The project will replace the old pumpingstation by a new one with four pumps of a total capacity of 1.6 m3/sec.This quantity will be more than sufficient to provide for the requirementsof the expanded plant, as the expansion will operate on the dry process.

B. Infrastructure

I. Transportation

5. TCC's plant is ideally located with regard to transport facilities.It has road, rail and inland water transport connections at the plant site.All three modes of transportation provide immediate access to trunk lines:

road: 4-lane highway Cairo-Helwan;

rail: fast line Cairo-Helwan; at the plant, a station forpassengers is available; and

waterway: the Nile is the main transportation artery through Egypt.

6. Transportation of cement is the responsibility of Egyptian CementOffice (ECO - see Annex 3) which owns some road transport equipment andleases or otherwise contracts for required transport equipment (see distri-bution chapter of the Annex 3). Tourah has its own fleet of trucks tocarry some raw materials, parts and other items to the plant.

II. Housing and Recreation Facilities

7. TCC owns two housing complexes, one situated near the plant sitefor management and another near the clay quarry for workers. The majorityof workers live in Tourah and surrounding areas. The plant includes a

ANNEX 4-2Page 3

building, containing canteen, staff meeting rooms and hospital facilitiesfor emergencies. A large public hospital is located about 2 km from theplant. These facilities are adequate.

Industrial Projects DepartmentDecember, 1974

ANNEX 4-2Table 1

EGYPT

TOURAH CEMENT EXPANSIW FROJECT

FUEL OIL AND GAS ANALYSIS

1) Fuel Oil Specifications:

Specific gravity at 60°F: 0.952

Viscosity Redwood at 50OC: 721 min.

Viscosity Redwood at 80OC: 180 min.

Flash point (closed): 95.6 0C

Water: 0.1%

Higher calorific value: 10310 K. cal/Kg

Net calorific value: 9650 K. cal/Kg

Sulphur: 2.4%

2) Gas Specifications:

Gas from Abu Gharadig almost free of dust, and available at the

factory at a pressure of 7 atmospheres, has the following compositlol;:

volume:

Methane 90.93%

Ethane 6.68%

Ethylene 0.63%

Propene o.60%

Nitrogen 1.11%

Total 99.95%

CalorificValue 9000 K. cal/Nm3

Industrial Projects DepartmentAugust,1974

ANNEX 4-2Table 2

EGYPT

TOURAH CBMENT EXPANSION PROJECT

NILE WATER ANALYSIS

Total alkalinity as CaCO3 118 ppm

Total hardness as CaO 114"

Calcium hardness as CaO 70

Magnesium hardness as MgO 44

Iron as Fe+ 0.10

Sodium as Na+ 30

Potassium as 5.5

Chlorides as Cl 30

Silica as SiO2 14-5

Conductivity 345 micro x 1ohm

Total dissolved solids 236 ppm

Suspension matter maximum 250-300 "

Industrial Projects DepartmentAugust 1974

ANNEX 4-3Page 1

EGYPT

TOURAH CEMENT EXPANSION PROJECT

DETAILED PROJECT DESCRIPTION

A. Process Choice

1. For the plant expansion facilities, dry process technology has beenselected. The Company's existing facilities, including 6 kilns with a totalcapacity of 3,800 TPD of clinker, operate on the wet process technology. Inthis process, water is added to the raw materials to form a slurry, but thewater must subsequently be removed by increased heat input. Thus estimatedfuel consumption for the dry process, given TCC's particular raw materialcharacteristics, will be only 55% of the currently reported consumption ofthe existing facilities. At the current world market price of US$57.4 perton (US$8.2 per barrel) for heating fuel, this represents a saving of US$3.80per ton of cement. On the other hand, investment costs are somewhat higherfor a dry process plant (between 5% and 10%) than for a wet process plant ofcomparable capacity. Regarding other operating costs, electricity consump-tion is about 15% higher; and maintenance costs could be slightly higher(10%) for the dry process operation. All other operating costs are aboutthe same. See Annex 6-2 for a detailed description of operating costs.During the first two years, one might also count on a lower output of thedry process plant due to the fact that the personnel are less familiar withthe new process than with the wet process. Finally, the comparison shouldtake into account the possibility that if the dry process technology is used,the particular characteristics of TCC's raw materials might require a by-passto prevent build-up of alkali-chloride circuits. This would result in aloss of production of an estimated 3% to 5% from the same amount of rawmaterials used for the two alternatives. In other words, in the dry processalternative, about 3% to 5% more raw materials must be used to get the sameoutput and this has been taken into account in the production cost calculations.

2. An economic analysis has been carried out to compare the merits ofeach process in quantitative terms. This includes above considerations andcompares the wet and dry process alternatives in the following fashion:Capital cost requirements are expressed in constant 1974 prices. Duties andtaxes have been omitted. Operating costs are also expressed in constant1974 prices. Revenues, at constant 1974 prices, have been calculated basedon an "economic price" of US$32 per ton of bagged cement (see Annex 7-1). Theanalysis compares NPV's for the two alternatives and gives the IRR for thedifferential cost/benefit streams. The following results have been obtained:

ANNEX 4-3Page 2

Dry Process Wet ProcessDiscount Rate Net Present Value Net Present Value

-------------- LE '000 ---------------

10 14,209 10,70612 9,320 6,77315 4,087 2,56217 1,585 549

3. The incremental economic rate of return of the differential is about24.4% in favor of dry process even after taking into account losses from apossibly required bypass. Detailed calculations are shown in Table 1.

4. The advantages of the dry process expansion become even more pro-nounced if one considers the possibility of subsequent conversion of existingwet kilns. Such conversions have been carried out on more than a hundredkilns throughout the world in recent years. A relatively modest investmentis required to convert the kiln, thereby reducing its specific fuel consump-tion while, at the same time, increasing its nominal output between 30% and50%. Based on very tentative quotes from suppliers as well as TCC's ownestimates, capital cost for a conversion would amount to about LE 6 millionat constant 1974 prices (excluding duty and taxes). The economic advantageof dry process over wet process can be clearly seen from the above table andthis tends to indicate that a conversion of existing facilities should beconsidered seriously after the implementation of the expansion project.

B. Description of New Facilities

5. The project basically consists of two distinct parts:

Part 1: The expansion project, designed to increase the capacityof TCC by 700,000 TPY (from 1.35 million TPY to 2.05million TPY) including a complete line of cement producingequipment and related modifications in the plant; and

Part 2: Independent modifications and modernization of some ofthe existing facilities. Naturally, some overlappingoccurs between the two parts of the project, whereoveraged equipment is replaced by new equipment whichwill accommodate the requirements of the existing aswell as new facilities. The following description willdistinguish the two basic parts of the project whereverpossible and explain any overlapping parts.

I. Storage Capacity and Flow Rates for Expansion Project by Department

6. These items are shown in Table 1 of Annex 2-3 and are contrastedwith existing equipment.

ANNEX 4-3Page 3

II. Summary Description of Project by Procurement Packages

Equipment

7. (1) IBRD Package (Package D): Complete cement machinery and equipmentexcluding electrical motors, cabling, and control, but includingsupervision of erection, start-up and performance tests; tech-nical assistance during two years after start-up and trainingof key personnel abroad.

(2) Arab Fund Packages:

(a) Drilling rigs and compressors (Package A)(b) Shovels, bulldozers and loaders (Package B)(c) Diesel tractors and semi-trailers (Package C)(d) Electrical equipment and substation (Package E)(e) Laboratory equipment (Package F)(f) Lathes and tools (Package G)(g) Milling, shaping and drilling machines (Package H)(h) Hydraulic presses and pipe bending machines (Package I)(i) Heat treatment furnaces (Package J)(j) Electrical repair workshop (Package K)(k) Replacement of electrostatic filter of

Kiln 6 (Package L)

8. Packages A, B and C comprise equipment for the quarries as describedin section III. Package E includes the substation equipment, electronic controlequipment and all electrical equipment for Package D above, such as motors,switches, controls and cabling. Packages G, H, I, J and K are required formechanical and electrical workshops.

CivilJiee

9. Buildings and civil works such as foundations for stationaryequipment, cableducts, etc., are to be executed by one of the three civilengineering contractors, with whom TCC has had previous experience in theexecution of other projects within the plant.

Services

10. Training of personnel, detailed engineering of equipment, super-vision of erection, start-up and taking over tests, and technical assistanceduring two years after start-up are included in the IBRD package.

11. Erection, installation and start-up tests are to be carried out byTCC under the supervision of the equipment supplier.

ANNEX 4-3Page 4

Ill. Description of the Expansion Project by Department

Department No. 1: Limestone Quarry

12. The limestone quarry is operated in the conventional way, with anaverage working face of 70 m, slightly battered. Drilling rigs drill holesfor dynamite charges; after blasting, oversize blocks are reduced to a certainmaximum size by plaster shooting. Face shovels load the blasted rock ontosemitrailers pulled by diesel tractors, which are discharged by means of asemi-automatic overhead dumping mechanism, installed at the crusher hopper.Two drilling rigs, two face shovels and seven diesel tractors with semi-trailers are needed to replace existing obsolete equipment and also to caterfor the expansion project.

Department No. 2: Clay Quarry

13. The clay quarry also operates in the conventional fashion, withbulldozers and front loaders removing overburden, with face shovels diggingintco slightly battered working faces of up to 10 m height which are set interraces, and with dump trucks loaded by the shovels and discharging theirloads into the central clay crusher. Currently, trucks have to transportthe clay to the plant, but by the end of the year a new belt conveyor systemwill move the clay from a new clay crusher within the clay quarry to theintermediate stockpile and from there to the clay storage yard (or directlyto the respective hoppers) within the plant. The expansion project willrequiire a heavy duty bulldozer, a face shovel and two tractor loaders.

-Department No. 3: Crushing

14. One of the existing two limestone crushers, a 1956 F. L. Smidth,200 t!h limestone crusher will be replaced by a 500 t/h crusher of thesingle-stage, double swing-hammer type. It will reduce the medium hardlimestone with a humidity of 3.4% from a maximum size of 1200 mm on any sideto a maximum size of 25 mm. The complete crushing equipment, including aconcrete hopper of at least 70 t capacity, will be installed below quarrylevel, thereby reducing noise and dust pollution. Noise pollution will befurther reduced by an appropriate, wear-resisting lining material on the hopperwalls. Dust pollution will be reduced by cyclone and dry filter of suitabletype.

Department No. 4: _Raw Material Handling

15. The crushed limestone is fed by the crushers' discharge belts ontoan existing system of flexible belt conveyors with a capacity of 500 t/h ofcrushed limestone. This system needs modification to accomodate the increasedquantity of limestone required for the expansion project. For this purpose,the system's capacity would have to be increased to about 750 to 800 t/h.However, a future possible conversion of existing kilns from wet to dry pro-cess would increase their output capacity by an estimated 30% to 50%. A

ANNEX 4-3Page 5

respectively higher production of the existing facilities would require anappropriate increase in raw materials. Therefore, it has been decided toincrease the conveyor belt system's capacity from 500 t/h to a maximum of1000 t/h. This is to be achieved by increasing the width of the belt systemfrom 800 mm to 1000 mm and the speed to a maximum of 2.5 m/sec.

16. About halfway between limestone quarry and the plant an existinglimestone stockpile of 30,000 t capacity is located. The extraction arrange-ment, using vibrating feeders which are installed under the center of thestockpile can only extract 10,000 tons of material, as the crushed limestonereposes at an angle of about 70° rather than the angle of 45° which had beenassumed to design and calculate the extraction equipment. The expansionproject will modify this design and layout, so that the existing stockpilecapacity can be fully utilized.

17. Clay will be crushed and then transported on a new belt system of300 t/h originating at the new clay crusher and meeting the limestone beltsystem prior to entering the plant. An intermediate clay stockpile of 10,000ton capacity is provided in this system which is to be finished by early 1975and will replace the truck operation currently used.

18. The belt conveyor systems for limestone and clay will deposit theraw materials in the existing stockpiles within the plant close to the rawmill building or directly into the feeding hoppers of the raw mills and washmills.

Department No. 5: Raw Material Grinding

19. The expansion project, using the dry process technology requiresdry raw mills rather than wet slurry mills. Based on preliminary grindingtests carried out by TCC in different, well-known laboratories, TCC hasdecided on two tube mills of 110 t/h capacity each, with at least twocompartments, air separators and adequate heating arrangements. These willfit into the existing raw mill building. Each will be equipped with elec-trostatic precipitator for dedusting exhaust gases. The limestone feedingarrangement for all mills will be modified, as the existing travellingswivel crane has insufficient capacity. TCC has suggested a belt conveyorsystem with vibrating feeders but tender documents invite alternative designs.

20. The new dry mills will be fed with clay by a special clay feedingarrangement with a clay feed hopper and weighing facilities. For the wetprocess, clay is fed into the mills in the form of slurry which is producedin wash mills and slurry basins. A necessary modification, independent ofthe proposed dry process plant but included in the expansion project, concernsfour slurry elevators to replace overaged equipment in the existing grindingplant.

ANNEX 4-3Page 6

Department No. 6: Raw Meal Homogenization and Storage

21. The ground raw materials (raw mix) will be discharged from the rawmills by means of pneumatic conveyors and thus be transported to the Homogeni-zing and Storage Plant. This plant wil consist of several pairs of doubledecker concrete silos, one of each pair serving as homogenizing silo, theother one as a storage silo for the homogenized raw meal. Homogenization willbe achieved by forced air stirring and mixing. The total capacity will beabout 14,000 tons of raw meal, the appropriate number and dimensions of silopairs will be suggested by tenders based on factors such as the timing ofhomogenization, chemical control (sample taking) and discharge.

Department No. 7: Kiln Plant

(a) New Facilities

22. The blended proportioned raw meal will be conveyed by an appropriatehandling system (pneumatic system, screw conveyor, elevator) to a buffer binwith level indicators. A dosing valve coupled with a weigh feeder willcontinuously discharge controlled amounts of raw meal onto a pneumatic conveyorfrom where the raw meal is introduced into the preheater system. A dustcollection system, consisting of bag type filters shall be provided for thefeed arrangement. The preheater type has not been decided upon as yet. Itshall be designed to suit the available raw materials regarding alkalies andchlorides. A by-pass with evaporation cooling tower may have to be providedto withdraw controlled amounts of dust to avoid build-up of alkali/chloridecirculLs. Tenderers have to state the amount of dust to be withdrawn andhave to make suggestions for adequate disposal of the waste dusts. TCC willtake into account internationally accepted environmental standards for dustand waste gas disposal. Waste gases are to be cleaned by electrostaticprecipitator down to a level of 200 mg of particles per Nm3 of gas. Thekiln shall be a rotary short kiln, of all welded design, with a nominalcapacity of 2,000 tons of clinker per 24 hours and to operate 330 workingdays per year. The kiln shall have a planetary cooler with cooler tubesincorporated into the kiln shell. The firing system shall provide foralternative gas and mazout (Bunker C - fuel oil) firing. The size of theclinker which leaves the clinker cooler will be reduced by a clinker crusher.The crushed clinker will be conveyed by chain conveyor to the existing clinkerstorage yard or directly to the mill feed hoppers. The existing chain con-veyor system will be modified.

(b) Replacement of Electrostatic Precipitator for Kiln 6

23. The existing electrostatic filter of Kiln 6 (wet process) operatesat rather poor efficiency due to defects in the inside equipment, deformationof electrodes and cracks in the concrete casing which have developed over time.However, the high tension aggregates and the automatic regulators are inproper conldition. The project will provide for a modification of the existingfilter so that it can attain its optimum efficiency and provide dust controlin line with internationally accepted environmental standards.

ALNEX 4-3Page 7

Department No. 8: Gypsum Crushing and Handling

24. tUnder the existing system, a hopper is fed either directly by truckscoming from the nearby gypsum quarry, or by a crane from the gypsum stockpile.The uncrushed gypsum is withdrawn from the hopper outlet by an elevator andconveyed to an existing gypsum crusher of 25 t/h capacity. The crushed gypsumis discharged into the clinker mill hoppers by a drag chain. The crusherwhich is designed to cater to expansion as well as existing facilities(capacity 75 t/h). The Dragchain Conveyor will also be replaced by a newone with a capacity of 100 t/h.

Department No. 9: Clinker Grinding

25. Clinker and gypsum will be fed by chain conveyor into the cementmill hoppers. Clinker, gypsum and possibly additives will enter the mill viaelectronically controlled, separate weigh feeders installed under the appro-priate mill feed hoppers. Two closed circuit ball mills of a capacity of65 t/h (Blaine value of 3,000) will be installed in the existing cement millbuilding. The capacity of the mills is about 40% higher than the nominalcapacity of other equipment to allow for special cements (higher Blainenumber, or addition of slag or sand for mixed cement). The mills will beequipped with air separators and cooling system (water). One electrostaticfilter for each mill shall clean exhaust gases down to a level of 50 mg/Nm3

of gas.

26. Within the old plant, two ball mills from 1932 and 1936, withcapacities of 12 t/h and 15 t/h respecitvely, will be replaced by one ballmill of 40 t/h with open circuit, complete with two weigh feeders, coolingsystem and electrostatic precipitator. The increase in capacity is tocompensate for production of special cements.

27. From the two new mill outlets cement will be transportedpneumatically to three cylindrical concrete silos of 4,000 t capacity each,and equipped with bulk loading devices. Cement produced in the old plantwill be conveyed pneumatically, either to the existing cement silos withinthe old plant, or to two new cement silos, to be installed at the Nile Bankfor Nile dispatch (distance 600 m).

Department No. 11: Packing and Loading

2S. Cement produced in the expansion facilities will be withdrawn fromone of the three silos by conveyors and from these it will be taken up bybucket elevators to the feed hoppers of two rotary packers of 100 t/hcapacity each. The two packers shall feed a new horizontal belt conveyor(about 2,000 bags/h) with deflectors and end skids or, alternatively, threeexisting portable loading belt conveyors, to load trucks.

29. Until recently Nile barges were loaded along one quay by portableconveyor belt from trucks which had carried the bags out of the plant (about800 m road). Currently two new berths are being built for Nlile barges.

ANNEX 4-3Page 8

Cement will be transported via pneumatic pipeline with a total capacity of85 t/h from the old plant to two new silos of 1,500 t capacity each, to beinstalled at the quay. An extraction system will be provided which shall becapable of feeding two rotary packers of 100 t/h capacity each. This willallow simultaneous loading of two barges with bagged cement via an adjustablebelt conveyor system.

Department No. 12: Nile Pumping Station

30. This comprises necessary replacement of the existing pumpingstation (old pumps of a total capacity of 1.28 m3/sec) by 4 new pumps of0.4 m3/sec each. The increase in water supply will be sufficient to providecooling water for mills and driers of the expansion plant and modifiedmachinery. The replacement of the old equipment would have been requiredsoon even without the project.

Department No. 13: Substation

31. Details of the new substation are given in Annex 4-2.

Department No. 14: Control Station

32. The existing control room shall house equipment and apparatusneeded to centrally control and supervise the new installations (except forthe crushing department which will have an independent control station). Adiagram shall be provided to show, by means of indicator lamps, the statusof all equipment and electric motors involved in the production process ofthe expansion.

Department No. 15: Workshops (Mechanical and Electrical)

(a) Mechanical Workshops

33. Equipment will be procured to replace obsolete equipment in theexisting workshop. Furthermore, a new workshop building, which will caterto the existing plant as well as to the expansion, will be equipped. Requiredequipment will include lathes, milling, drilling and shaping machines, mis-cellaneous other machines and tools.

(b) Electrical Workshop

34. An electrical workshop will be established to repair about 300 motorsper year. It will include both the required electrical and mechanical equip-ment, such as lathes, milling, drilling, cutting machines, welding equipment,furnaces, etc.

Department No. 16: Laboratory

35. The existing laboratory is to be modernized and expanded forquality-control and improvement of both existing and expanded production.

MANEX 4-3Page 9

For lack of foreign exchange, TCC has to carry out an extensive raw materialinvestigation and the regular production control with overaged and obsoleteequipment. The project is to improve this situation by providing mis-cellaneous laboratory equipment from a long list.

Services

36. Training is discussed in Annex 4-7.

37. Technical assistance for a maximum of two years after start-up ofthe expansion will be included in the project. This may appear somewhat"generous' but should be taken into account in the case of initial problemsof operations and maintenance with a process, new to most of TCC's operatingand maintenance staff.

38. Detailed engineering of equipment is to be provided by the respec-tive equipment suppliers.

39. Supervision of erection, installation, start-up and performancetests will be provided by the equipment supplier. The personnel to carryout erection, installation, start-up and tests will be provided by TCC.

40. Detailed civil engineering will be done by one of the Egyptianengineering firms which will also be responsible for the supervision of civilworks and buildings.

Industrial Projects DepartmentDecember, 1974

EGYPT ANNEX 4-3

TOU RA CEINT EXPANSION PROJECT

PROCESS CHOICE: COST BENEFIT ANALYSIS OF ALTERNATIVES (WET AND DRY PROCESS)

Alternative I: Wet Process Expansion Alternative II: Dry Process Expansion Alternative II - I

Pro- Require%) Costs Additional Additional OperatingCapital Operatng duction

1) ImportsZ) Capital of Operatis* Capital Import Cost

Pro- Costs2) Costs3) Revenue4) (hillion (Million Costs

3) imports2) Coats Revenue

5) Costs Costs Savings

Year duction1i) (E 000) (LE 000) (LE 000) Tons) Tons) (ILE 000) (IE 000) (LE 000) (LE 000 ((E 000) (LE 000) (LE 000)

1974 50 - - - - 55 - - - 5 - -

1975 - 5522 - - - - 6136 - - - 614 - -

1 976 - . 7739 - - - - 8599 - - - 860 - -

1977 - 3230 - - - - 3589 - - - 359 - -

1978 500 2053 3213 6275 430 70 2204 1100 2352 6275 151 1100 861

1979 650 39 4229 8158 580 70 39 1100 3132 8158 - 1100 1097

1980 720 37 4669 9036 720 37 3655 9036 - 1014

1981 720 4741 9036 720 3722 9036 1019

1982 720 4840 9036 720 3789 9036 1051

1983 720 484o 9036 720 3789 9036 1051

1984 720 484o 9036 720 3789 9036 1051

1985 720 4840 9036 720 3789 9036 1051

1986 720 484o 9036 720 3789 9036 1051

1 987 720 4840 9036 720 3789 9036 1051

1988 720 4840 9036 720 3789 9036 1051

1989 720 4840 9036 720 3789 9036 1051

1990 720 4840 9036 720 3789 9036 1051

1991 720 4840 9036 720 3789 9036 1051

1992 720 k84o 9036 720 3789 9036 1051

1993 720 4840 9036 720 3789 9036 1051

1994 720 4840 9036 720 3789 9036 1051

1995 720 48kg 9036 720 3789 9036 1051

1996 720 4840 9036 720 3789 9036 1051

1997 720 -772 4840 9036 720 -772 3789 9036 1051

1) Startup assumed in January 1978. Utilization 1) Production as explained in Annex 6-2.of capacity:

First year 70% 2) Required imports: to make alternatives comparable,Second year 90% appropriate quantities are assumed imported at aThird year and thereafter 100%. price of LE 12.55/Ton of cement.

2) Capital costs as used in dry process case but 3) Capital costs as used in the Economic Evaluation,reduced by 10% Annex 7-1.

3) Operating costs based on fuel costs of XE 3.66 per ton 4) Operating costs as per Annex 7-1.of cement,electrioity costs of LE 0.55 per ton of cement,spare parts costs of LE 0.26 per ton of cement. All other 5) Revenue as per Annex 7-1.items as in dry process case.

4) Revenue based on LE 12.55/ton of cement as perEconomic Evaluation in Annex 7-1.

Industrial Projects DepartmentAugust, 1974

TOUATA- EXPANSION PROJECT

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_ I~ ~ ~~~~1L

S-CMPD .- MMEH CA- IE CLYI- - 11 LA I APPED 1 TSOE INASIYTSAAESLS 2PESAE3 DAMPED S LIMENWONS -YOEP ISIT NAY CANCVM D

S IMPLANYSTOOXPILE / 3 / INDING MILL INS LAY -YOPL SCNOSI-ALALAI--PAD-AM2 PLAEAYCOE

-PLANT STCP- I CAS

-MAR OUC NING AAnDL INGE PRP-IINA RAN AINA ANDR GIPDINA

PI1 DORIN ACHINE AD CLI2EEM H OMMRFSHErS tLMSOE GIIETAN SALPER LISIN MAILEIZTDNSORG DNAO YSLCERGTTI

2 LY E I5A TNMPER 7YM HAMMER &CAPPER CI -ANAIN ANI LA -TD A- SAI ATRACE

D CE PLAR OTHE A-TG TPILA 52 G AINDNN AN2T AND NAG L0ADINS AARAD

9D CNIAAALL AI SEPARATOR27 CEMENT SILAILSAD D-25 CE-N-RUA l- RSPAAO

ANNEX 4-6Page 1

EGYPT

TOURAH CEMENT EXPANSION PROJECT

ECOLOGY

A. Introduction

1. Potential ecological problems posed by cement plants are normallywater pollution (if wet scrubbers are employed), air pollution from bothdust as well as toxic gases, and noise pollution. The Egyptian Ministry ofPublic Health has established standards regarding pollution control, whichare specific as concerns effluents into the Nile but which are vague and stillunder study as far as gaseous effluents, dust and noise are concerned.

B. Tourah Cement Companv

Existig Facilities and oing Prpects

2. TCC does not currently use water to cool polluted kiln gases (wetscrubber system) and, therefore, has no chemical effluents which would beharmful to discharge. TCC does operate a sewage plant to treat the sewageof sanitary facilities in the factory and staff quarters before dischargeinto the Nile.

3. Dust pollution is the major problem in TCC's factory. The managementis aware of this fact and has taken steps to improve the situation: Kilns I &2, the only kilns which did not have electrostatic precipitators to date, arecurrently equipped with modern machines, which will reduce the dust output to200 mg/Nm3 of kiln gas released (maximum permitted value when running abovenominal capacity). Electrostatic Drecipitators of Kilns 3, 4 and 5 are beingmodernized under the same contract. 1/ Finally, this contract also includeselectrostatic preciDitators for three existing cement mills which have previ-ously caused dust pollution problems, and a complete multicyclone system(meclhanized filter) for the "fuller cooler.'

Exyansio 2 Project

4. The expansion project will include the modification and replacementof the electrostatic precipitator of existing Kiln 6. It will replace twoold cement mills, wqhich do not have electrostatic filters by one large newmill fully equipped with air separator and electrostatic filter. It willfurther replace an old limestone crushLer which operates in two stages and isill-suited for TCC's limestone as it produces nearly 70% dust and only 30%aggregate. Transportation of the dusty material over 2 kan via open conveyor

1/ Contract between TCC and the Polish Foreign Trade Company for ElectricalEquipment in cooperation with Walter & Cie, A.G. Cologne, Federal Republicof Germany. Total cost of project including civil works is estimated atL.E. 450,000.

AINEX 4-6Page 2

belt tends to create a very dusty atmosphere on windy days and causes much lossof raw material. The new crusher will be of a single stage type and will havevery little dust output--which will mostly be retained in a mechanical filtersystem.

5. Regarding the expansion project, TCC will ensure that the newequipment will adhere to internationally accepted standards. For this purpose,tenderers are requested to give detailed particulars regarding performanceguarantees of pollution abatement equipment. Tender documents set upper limitsfor solid effluents acceptable under standards prevailing in Switzerland. Allcrushers, silos and packing plants will be equipped with appropriate mechanicalfilters such as cyclones and/or bag filters. All raw mills, cement mills andthe kiln will be equipped with electrostatic filters.

6. The use of the dry process technology may require use of a bypasswithin the preheater system to discharge harmful quantities of chloride andalkalies which might otherwise clog the preheater system when crystallizing.Disposal of the dust collected in the bypass system may be difficult; there-fore, tender documents require tenderers to propose suitable and acceptablemeans for disposal. One reasonable suggestion at this time is to mix thisdust with the slurry for the existing wet process plant, and as dust quantitiesare expected to be small this would not significantly affect the quality ofthe existing plant's clinker. Noise pollution within the existing plant iswithin acceptable limits. For the expansion project no problems are expected,as crushers will be installed below surface, with feed bins lined by shock andnoise absorbent material, and raw cement mills will have partly closed build-ings.

Industrial Projects DepartmentAugust, 1974

ANNEX 4-7Page 1

EGYPT

TOURAH CEMENT EXPANSION PROJECT

LABOR FORCrE PROJECTIONS AND TRAINING REQUIREMENTS

A. Labor Force

General

1. The factory and service facilities of TCC are run and operated bya staff of about 2,050 persons. The payroll shows a total number of employeesaround 2,500, which includes, according to Egyptian law, 450 persons secondedto the military, attending university or serving in public functions. Theactive staff of 2,050 persons may appear high by international comparison withsimilar factories, particularly privately-run operations. However, consider-ing the many special activities performed by the staff which in similar com-panies abroad are uncommon (such as foundry, training center, fire department,security department, etc.), and taking into account the Egyptian employmentsystem, these figures are acceptable.

Projections

2. For the expansion project, the Company plans to hire about 200additional persons. In 1980, when the project reaches capacity production,the labor productivity of the operational staff within the plant will increaseby over 40%. The following additional personnel for the various departmentswill be recruited, of whom some will be trained; this program is consideredreasonable.

Total

A. Quarries 40B. Raw material handling 10C. Raw mills 25D. Kiln plant 45E. Cement mill 25F. Bagging-Dispatch 35G. Maintenance and control 20

Total 200

B. Training

General

3. TCC operates a training program with a long standing tradition.Since the beginning of the plant's operation, in-plant training has beenpracticed, particularly in the workshops. Since 1973, a special buildinghas been provided which gives room for the following training activities:

Ai\NEX 4-7Page 2

(1) Testing of recruits, testing of staff for new positions,promotions, transfers.

(2) Training of new staff.

(3) In-plant training courses (upgrading courses);

- Upgrading courses for workers, unskilled workers;- Maintenance course;- Foreman training;- Kiln operator training;- Mill operator training;- Training of mobile equipment operations; and- Pre-vocational training for semi-skilled welders, fitters,

drivers;- Miscellaneous (Induction course, Safety course, Labor

Culture, "Fight against Illiteracy').

(4) Training of personnel from other companies in Egypt and otherArab Countries; and industrial training of students.

4. Programs can be full or part-time, or after w,orking hours and havevarying durations from a week to three years (apprenticeship for boys).Average duration of upgrading courses is 6 to 8 weeks. The training centeris well prepared to train thle majority of the new staff required for theexpansion project.

Training for the Expansion Project

5. Of the 200 new persons required for the expansion project, about20 will be trained by the supplier of the new equinment, as most operatingpersonnel of TCC are not vet familiar with dry process operations. Particu-larly the required raw mill and kiln operators should have sufficient trainingon similar equipment. The project provides for training of 20 persons out-side Egypt for about one year. This part of the training will be the res-ponsibility of the equipment supplier and is included in the IBRD financedpackage of cement machinerv and equipment.

6. The remaining 130 new employees will be trained by TCC, eitherthrough on-the-job training in the plant, combined with theoretical coursesin the training center or in ELyptian institutions outside TCC, such as theDeDartment of Mlining (for training drilling machine operator), the Mlobil OilCo. (for training oilers), Department of Roads and Bridges (for trainingtractor loader drivers). The proDosed training schemes are considered satis-factory.

Industrial Projects DepartmentAugust, 1974

EGYPTTOURAH CEMENT EXPANSION PROJECT

IMPLEMENTATION SCHEDULE

1974 1975 1976 1977

RELEASE OF TENDER DOCUMENTS, 1 ff

SUBMISSION OF TENDERS.

ANALYSIS OF TECHNICAL BIDS.

TECHNICAL DISCUSSIONS AND TWO STAGEBIDDING.

ANALYSIS OF FINANCIAL BIDS.

NEGOTIATIONS & AWARD OF CONTRACT. A

ENGINEERING DRAWINGS SUBMISSION.

DELIVERY OF EQUIPMENT. _ _ _ _ _

CIVIL CONSTRUCTION _ _

ERECTION OF EQUIPMENT. _ m m

START-UP AND COMMISSIONING

wom--m FOR CEMENT MACHINERY AND EQUIPMENT AND ELECTRICAL EQUIPMENT.

- _ _ FOR ALL OTHER EQUIPMENT.

Induatrial Frojects Department AORDER PLACEMENT PROJECTCOMPLETIONDecemberS, 1974 0 RELEASE OF DOCUMENTS World Bank-8934

EGYPT ANNEX 5-1Page 1

TOURAH CENENT EXPANSION PROJECT

CAPITAL COST ESTIMATE

A. SUMMARY

1. The capital cost estimates are based on the technical studies undertakenby the Company and are summarized below:

CAPITAL COST ESTIMATE

(000 LE) (000 US$)Local Foreign Total Local Foreign Total %

1. Building & Civil'Works 4750 - 4750 12113 - 12113 13.02. Equipment - 13759 13759 - 35085 35085 37.83. Freight & Insurance 1000 - 1000 2550 - 2550 2.84. Duties & Taxes 1470 - 1470 3749 - 3749 4.05. Erection & Installation 430 130 560 1096 332 1428 1.56. Testing & Startup 125 75 200 319 191 510 o.67. Training & Technical

Assistance 15 155 170 38 395 433 0.58. Preoperating Expenses 80 - 80 204 - 204 0.2

Total Base Cost Estimate 7870 14119 21989 20069 36003 56072 60.4

9. Contingency (10%) 787 1412 2199 2007 3600 5607 6.010. Price Escalation (32.9%) 3087 4862 7949 7872 12398 20270 21.8

Total Fixed Assets 11744 20393 32137 29948 52001 81949 88.2

11. Working Capital 772 _ 772 1969 - 1969 2.1

Project Cost 12516 20393 32909 31917 52001 83918 90.3

12. Interest during Cons-truction 1410 3137 3547 1045 8000 9045 9.7

TOTAL FINANCING REQUIRED 12926 23530 36456 32962 60001 92963 100%

Above figures reflect direct local and direct foreign costs.

B. DETAILED ESTIMATES

The following table shows detailed capital cost estimates and their directlocal and foreign components, as well as their total local and foreign components.Background information is contained in the footnotes as appropriate.

EGYPT

TOURAH CEMENT EXPANSION PROGRAM

*DETAILED CAPITAL COST ESTIMATE

(IN LE 000)

2/ 3/ 4/ ~~~~~~~~~~~~~~~~~~~6/ 7/1/ PHYSICAL PRICE TOTAL DIRECT DIRECT- TO1AL- TOTAL-

DESCRIPTION BASE COST CONTINGENCY ESCALATION C(ST LOCAL COST FOREIGN COST TOTAL COST LOCAL COST FOREIGN COST TOTAL COST

1. CIVIL CONSTRUCTION & BUILDING -

Crusher Plant 250 25 108 383Raw Grinding Plant & Storage 1050 105 454 1609Kiln Plant 1150 115 497 1762Clinker Grinding Plant 880 88 380 1348Loading Packing, Nile Dispatch 360 36 156 552Substation, Cableducts, Waterworks 260 26 112 398Miscellaneous Buildings 290 29 125 444Modification Existing Facilities 510 51 220 781 1/

Total Civil Constr. & Buildings 4750 475 2052 7277 7277 0 7277 6186 1091- 72779/

2. EQUIPMENT & SPARES-

a) Cement Plant Mechanical EquipmentCrusher 390 39 135 564Raw Material Handling 275 28 95 398Raw Material Grinding 960 96 332 1388Raw Meal Transport & Storage 281 28 97 406Kiln Plant 2770 277 939 3986Clinker Transport 275 28 95 398Clinker Grinding 1680 168 581 2429Cement Transport & Storage 505 50 175 730Packing, Loading, Nile Dispatch 445 45 154 644Various Modifications 405 40 140 585Spares for two years 450 43 149 622Miscellaneous (pipes, mill plates, etc) 690 69 239 998

Subtotal A 9106 911 3131 13148 - 13148 13148 1315 11833 13148

b) Other EquipmentQuarry Equipment 1127 113 390 1630Electrical Equipment 1386 139 480 2005Substation 871 87 302 1260Lab Equipment 200 20 69 289Workshop Equipment 783 78 271 1132Electrostatic Precipitator (Kiln 6) 286 28 99 413

Subtotal b 4653 465 1611 6729 6729 6729 135 6594 6729

Total Equipment & Spares 13759 1376 4742 19877 _ 19877 19877 1450 18427 19877

3. FREIGHT & INSURANCE 1000 100 310 1410 1410 - 1410 200 1210 1410

4. DUTIES & TAXES- 1470 147 508 2125 2125 - 2125 2125 - 2125

5. ERECTION & INSTALLATION- 12/ 560 56 194 810 620 190 810 620 190 810

6. TESTING & STARTUP EXPENSES-13/ 200 20 70 290 180 110 290 180 110 290

7. TRAINING & TECHNICAL ASSISTANCE1

'4/ 170 17 49 236 20 216 236 20 216 236

8. PREOPERATING EXPENSES-1

5/ 80 8 24 112 112 - 112 77 35 112

GRAND TOTAL 21989 2199 7949 32137 11744 20393 32137 10858 21279 32137

o e

Pootnotes explained on following page

ANNEx 5-1Page 3

/1 Base cost estimates in End 1974 prices.

/2 Physical contingency: 10% for civil construction, 10% for equipment,10% for all other items.

13 Price escalation: Escalation iates for foreign equipment:First year: 15%Second year: 12%Third year andthereafter: 10%

Escalation rates for civil works:First year: 25%Second year: 20%Third year: 15%Fourth year and

thereafter: 10%

Escalation rates for remaining items as appropriate.

/A Direct Local Costs excluding indirect local components3 if any.

15 Direct Foreign Costs excluding indirect foreign components, if any.

/6 Total Local Costs, including direct and indirect local components, if any.For the cement machinery and equipment package, clearly identifiable itemsamount to 10 percent of total cost could be provided locally. Forthe other equipment packages, this percentage has been estimated toarount to 2 percent.

/7 Total Foreign Costs, including direct and indirect local components, if any.

For the civil construction costs about 15 percent are eastimated to repre-sent imported material and equipment. Of the direct local cost offreight and insurance, about 75%, are estimated to consist of indirectforeign exchange. Of the preoperating expenses about 30 percent areestimated to be expanded in indirect foreign exchange.

/8 Civil Construction & Building Costs:Cost estimates based on the Company's8 experience with recent similar

projects. These cost estimates in terns of 1973 prices were increasedby 30 percent to arrive at end 74 base prices, reflecting the recentstrong price increases in the Building Material Sector of Egypt.

ANNE 5-1Page 4

/9 Equipment & Spares Cost:Cost estimates based on two firm offers received by the company during

1973 and on comparisons with similar projects in North Africa. Pricequotes of the offers were adjusted upward by about 30 to 35 percentto derive base prices in end 74 terms, reflecting the inflationaryimpact of price hikes of fuel and other raw materials.

/10 Freight & Insurance Costs:Estimates based on the Company's experience as well as quotes for prevailing

tariff rates.

/11 Daties & Taxes:Calculated based on prevailing tariff rates currently in effect in Egypt.

/12 Erection & Installation:Cost estimate based on (i) 60 man months of foreign supervision personnel

including travel and allowances, (ii) about 900 man years of localpersonnel and renting of equipment.

/13 Testing & Startup Expenses:Cost estimates based on (i) 35 man months of foreign superrision personael

including travel and allowances, (ii) one and a half month of directoperating cost plus equipment rental for teating.

/14 Training and Technical Assistance:Cost estimates are based on

(i) 20 persons to be trained abroad(ii) 140 persons to be trained locally for an average period of two

months(iii) one expert to be provided for two years after startup of plant

(iv) consultants to assist during technical bid evaluation

/15 Preoperating Expenses:Estimates include costs for Company's project engineering staff, related

travel expenses, issuance of tender documents, as well as costs for araw material survey.

Industrial Projects DepartmentDecemberj 1974

ANNEX 5_1Table 1

TOURAH CEMENT EXPANSION PROJECT

COST BREAKDOWN OF ALTERNATIVE PROJECT L

Capital Cost Estimate

(LE 000)

LOCAL FOREIGN TOTAL

1.) Building & Civil Construction 660 - 660

2.) Equipment - 3917 3917

3.) Freight & Insurance 400 - 400

4.) Erection & Installation 65 41 106

5.) Duties & Taxes 617 - 617

Subtotal 1742 3958 5700

6.) Contingency 66 392 458

7.) Price Escalation 283 1347 1630

TOTAL FIXED ASSETS 2091 5697 7788

8.) Working Capital _ - _

PROJECT COSTS 2091 5697 7788

/1 This program would be necessary to keep the production at current ratedcapacity, if the expansion project did not go ahead.

Industrial Projects DepartmentDecembers, 1974

ANNEX 5- 2

EGYPT

TOURAH CEMENT EXPANSION PROJECT

WORKING CAPITAL REQUIREMENTS

Basic Assumptions:

A. Base Case (Without Expansion)1. Cash LE 40,0O0 - minimum cash required2. Accounts Receivables - 30 days of sales3. Inventories:

(a) Raw materialsBags - 30 days of requirementFuel - 23,000 tons (present capacity of storage tanks)

(b) Work in Progress - 15 days of clinker cost(c) Finished Goods - 20,000 tons of bagged cement and 4 2,000 tons

of cement in bulk.(d) Spare parts - LE 2.67 million worth of spare parts and stores.

4. Accounts Payable - 60 days of sales in 19744 5 days of sales in 1975, and30 days of sales in 1976 and thereafter.

B. Expanded Case (With Expansion)1. Cash LE 600,000 minimum cash required after expansion2. Accounts Receivable - 30 days of sales.3. Inventories

(a) Raw materialsBags - 30 days of requirementsFuel - 23,000 tons (present capacity, no increase in storage

capacity for fuel is envisaged in the project becausethere will be a direct pipeline connection to the mainfuel supply line)

(b) Work in Progress - 15 days of clinker cost.(c) Finished Goods - 30,000 tons of bagged cement and 88,000 tons

of cement in bulk.(d) Spare parts - LE 2.67 million worth of spare parts for the

existing facilities.. Spare parts required for the project areincluded in capital cost.

4. Accounts Payable - 60 days of sales in 1974,45 days of sales in 1975, and30 days of sales in 1976 and thereafter.

EGYPT

TOURAH CEMENT EXPANSION PFOJECT

WORKING CAPITAL REQUIRNT(In 000 L E )

1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

A. BASE CASE (Without Excpansion)

1. Cash 40 400.0 1400.0 1400.0 1 400.0 400.0 400.0 400.0 1 400.04

2. Receivables 935.5 996.4 1015.2 1022.7 1028.5 1028.5 1028.5 1028.5 1028.5 1028.5 1028.5

3. Inventorya) Paper for bags (L.E.1.14/ton of cement) 151.7 157.5 157.5 157.5 157.5 157.5 157.5 157.5 157.5 157.5 157.5

b) Fuel (L.E.7.5/ton) 172.5 172.5 172.5 172.5 172.5 172.5 172.5 172.5 172.5 172.5 172.5

c) Work in Progress (L.E.3.52/ton of clinker) 190.7 198.0 198.0 198.0 198.0 198.0 198.0 198.0 198.0 198.0 198.0

d) Finished Goods (20,000 tons at L.E.8.22/ton) 164.4 164.4 164.4 164.4 164.4 164.4 164.4 164.4 164.4 164.4 164.14

e) Finished Goods (42,000 tons at L.E.6.52/ton) 273.8 273.8 273.8 273.8 273.8 273.8 273.8 273.8 273.8 273.8 273.8

f) Spare Parts 2670.0 2670.0 2670.0 2670.0 2670.0 2670.0 2670.0 2670.0 2670.0 2670.0 2670.0

Total InventorY 3623.1 3636.2 33636.2 636.2 3636.2 3636.2 3636.2 3636.2 3636.2 3636.2 3636.2

Total Current Assets 4958.6 5032.6 5051.4 5058.9 5064.7 5064.7 5064.7 5064.7 5064.7 5064.7 5064.7

4. Accounts Payable 1871.0 1494.6 1015.2 1022.7 1028.5 1028.5 1028.5 1028.5 1028.5 1028.5 1028.5

Working Capital Requirements 3087.6 3538.0 4035.2 4036.2 4036.2 4036.2 4036.2 4036.2 4036.2 4036.2 4036.2

Change in Working Capital +1159.6 +450.4 +498.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

B. EANDED CASE (With Exansion)

1. Cash 400.0 400.0 400.0 400.0 600.0 600.0 600.0 600.0 600.0 600.0 600.02. Receivables 935.5 966.4 1015.2 1022.7 1323.1 1425.8 1521.7 1521.7 1421.7 1521.7 1521.7

3. Inventorya) Paper for bags (L.E.1.14/ton of cement) 151.7 157.5 157.5 157.5 207.7 225.2 241.5 241.5 241.5 241.5 241.5

b) Fuel (L.E.7.5/ton) 172.5 172.5 172.5 172.5 172.5 172.5 172.5 172.5 172.5 172.5 172.5

c) Work in Progress (L.E.3.52/ton of clinker) 190.7 198.0 198.0 198.0 261.1 283.1 303.6 303.6 303.6 303.6 303.6

d) Finished Goods (30,000 tons at L.E.8.22/ton) 164.4 164.4 164.4 164.4 246.6 246.6 246.6 246.6 246.6 246.6 246.6

e) Finished Goods (88,000 tons at L.E.6.52/ton) 273.8 273.8 273.8 273.8 573.8 573.8 573.8 573.8 573.8 573.8 573.8

f) Spare parts 2670.0 2670.0 2670.0 2670.0 2670.0 2670.0 2670.0 2670.0 2670.0 2670.0 2670.0

g) Spare parts fbr project!- 0.0 0.0 0.0 0.0 1285.0 1285.0 1285.0 1285.o 1285.0 1285.0 1285.0

Total Inventory 3623.1 3636.2 3636.2 3636.2 5416.7 51456.2 5493.0 5493.0 5493.0 5493.0 5493.0

Total Current Assets 4958.6 5032.6 5051.4 5058.9 7339.8 7482.0 7614.7 7614.7 7614.7 7614.7 7614.7

4. Accounts Payable 1871.0 1494.6 1015.2 1022.7 1323.1 1425.8 1521.7 1521.7 1521.7 1521.7 1521.7

Working Capital Requirements 3087.6 3538.0 4036.2 4036.2 6016.7 6056.2 6093.0 6093.0 6093.0 6093.0 6093.0

Change in Working Capital +1159.6 +450.4 +498.2 0.0 +1980.5 +39.5 +36.8 0.0 0.0 0.0 0.0

Working Capitta Increase due tothe Project2/ 0.0 0.0 0.0 0.0 +695.5 +39.5 +36.8 0.0 0.0 0.0 0.0 s

1/ These are irrluded with the Capital Cost estisates.

2/ Excludes spare parts included in the Project Capital cost.

Industrial Pm jects DepsrtmentJuly 1 974

ANNE3X 5-3

BEYPT

TOURAH CEMENT EXPANSION PROJECT

*~~ ~ ion, 1 v X i_

CATEflORY Amount of Loan Allocated

(Excpressed in US$ Equivalent)(000 US$)

A Mechanical equipment and machinery for:

I. Crushig Plant consisting of complete 1,339mechnical equipment for limestonecrusher plant and clinker crusherplant.

II. Raw Material Handli,g, including modification 944o te lestone stockpile and conveyor belt

III. Raw Material Grinding Plant and Raw Meal 4,259Storage comprising of mechanical transportequipment, two grinding mills with air separatorsraw meal transport and mechanical equipmentfor raw meal storage in homogenization silos

IV. Kiln Plant including preheater equipment, kiln 10,401and drive, cooler electrostatic precipitatorand Qlinker transport

V. Clinker Grinding Plant & Cement Storage including 7,5 00necessary transport equipment, tw Ball millselectrostatic precipitator and storage equipmentfor expansion and transport equipment, one ballmill, electrostatic precipitator and transportequipment for the modification of the existingplant

VI. Packing, Loading, Nile Despatch and 1,527ping Station comprising 4 packing machines

and related equipment and a pumping station

VII. Various Modifications in existing plant, such 1,390as modified slurry elevators, weigh feeders andconveyors

VIII. Spares for Two Years for above equipment 1,476

Ix. ,Iiscell-iq.ous 1t.e-ns (Chutes, Pines, 2,369Mill plates, grinding media, refractories)

Subtotal A 31,205

B Services

Supervision of Erection Installation, 1,265Testing and Startup; Training ofPersonnel abroad; Technical Assistanceduring bid evaluation and for two yearsafter startup

C Technica' Consultant 100

D Interest during Construction 5,000

E Unallocated 2,430

Total (B+B+C+D) 40,O0

Industrial Projects Depart-mentDecember, 1 9741

ANNEX 5-4

EGYPT

TOURAH CEMENT EXPANSION PROJECT

DISBURSEKENT SCHEDULEA/

Disbursemrent Amount Outstanding Undisbursed Am1nmt

1_ -97- -5$ O )-----

I Quarter - - 35,000II Quarter 100 100 34),900

III Quarter 8,350 8,t450 26,550IV Quarter 6,o421 14,8 71 20,129

1976

I Quarter 477 15,348 19,652II Quarter 2,522 17,870 17,130

III Quarter 2,088 19,958 15j042IV Quarter 3,119 23,077 11,923

1977

I Quarter 885 23,962 11,o38IT Quarter 4,985 28,9147 6,o53

III Quarter 160 29,107 5.893IV Quarter 1,460 30,567 4s433

1978

I Quarter 80 30,647 4,353II Quarter 50 30,697 4303

III Quarter 50 30,747 4,253IV Quarter 4,253 35,000

1/ This is based on the following assumptions: 20% down payment;S progress payments; 30% on delivery; 1% on start-up; and

10% after the oempletionof performance guarantee.

The amounts shown include the cost of the technical assistance for prowurementand exclude the interest capitalized to principal during construction perioid

Industrial Projects DepartmentDecember, 1974

EGYPT

TOURAH CEMENT EXPANSION PROJECT

REVENUE PROJECTIONS(000 LE)

YEAR 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

ITEMS

BASE CASE

Production Program

Ordinary Portland Cement (000 tons) 900 900 900 900 900 900 900 900 900 900 900 900

Rapid Hardening Cement (000 tons) 250 250 250 250 250 250 250 250 250 250 250 250

Mixed Cement (000 tons) 150 200 200 200 200 200 200 200 200 200 200 200Total Cement (000 tons) 1,300 1,250 1,350 1,350 50 1,350 1,350 1,3 50 50 1,350 1,350

Weighed Rfleen.e per ton of cement sold(LE/Ton)- 8.02 8.22 8.22 8.22 8.22 8.22 8.22 8,22 8.22 8.22 8.22 8.22

(1) Total Revenue from Cement Sales (OOOLE) 10,426 11,097 11,097 11,097 11,097 11,097 11,097 11,097 11,097 11,097 11,097 11,097

Production of Lime (000 Tons-) 0 12 57 75 89 89 89 89 89 89 89 89Revenue per ton (LE/Ton) 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00

(2) Total Revenue from Lime Sales 0 60 285 375 445 445 445 445 445 445 445 445

(3) Other Revenue]/ (L E 000-) 800 800 800 800 800 800 800 800 800 800 800 800(4) Total Income (1) + (2) + (3) 11,226 11,957 12,182 12,272 12,342 12,342 12,342 1Y,4 122,342 12,42 1,342 12,342 12,342

EXPANDED CASE

Production Program

Ordinary Portland Cement (000 Tone) 900 900 900 900 1,210 1,310 1,400 1,400 1,400 1,400 1,400 1,400Rapid Herdening Cement (000 Tons) 250 250 250 250 330 360 390 390 390 390 390 390Mixed Cement (000 Tone) 150 200 200 200 240 260 280 280 280 280 280 280

Total Cement (000 Tone) 1,300 1,350 1,350 1,350 1,780 1,930 2,070 2,070 2,070 2,070 2,070 2,070

Weighed Revenue per ton of Cement Sold(L E /Ton)l/ 8.02 8.22 8.22 8.22 8.22 8.22 8.22 8.22 8.22 8.22 8,22 8.22

(5) Total Revenue from Cement Sales (000 LE) 10,426 11,097 11,097 11,097 14,632.6 15,864.6 17,015.4 17,015.4 17,015.4 17,015.4 17,015.4 17,015.4Production of lime (000 Tons) 0 12 57 75 89 89 89 89 89 89 89 89

Revenue per ton (LE/Ton) 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00

(6) Total Revenue from Lime Sales (000 LE) 0 60 285 375 445 445 445 445 445 445 445 445

(7) Other Revenue2/ (000 LE) 800 800 800 800 800 800 800 800 800 800 800 800(8) Total Revenue (5) + (6) + (7) 11,226 11,957 12,182 12,272 15,876 6 17,109.6 18,260.4 18,260.4 18,260,4 18,260.4 18,260.4 18,260.4

(9) Incremental Revenue (8) - (4) 0 0°0 0°0 0.0 3,534.6 4,767.6 5,918.4 5,918.4 5,918.4 5,918.4 5,918,4 5,918.4

1/ Ordinary Cement (9.50/T)Rapid Hardening Cement (10.5/T)Mixed Cement (8.0/T)Weighted Average Price (9.52/Ton)

Less: Weighed Average Tax (3.00/Ton)Plus: Cost of Bags (1.70/Ton)Total Revenue to Company per ton (8.22) 8.02w 8.22

Until mid-1974 total revenue to the company per ton of .ement sold was 7.82 and would be L E 8.22 per ton thereafter because bag price wes

increased from 1.3 to 1.7 in mid-1974

2/ Revence from foundry and workshop operations as well as technical services.

Industrial Projects Depa.LmentJuly 1974

VNNL,S 6 - 2Page 1

ECYPT

T'OURIW CEHIENT EXPAINS IOi PROJECT

PRODUCTION AND OPERATING COST PROJECTIONS

A. Production Plan

1. As a result of the project, cement production in TCC's plant isexpected to increase as follows:

Projected Cement Production (iLillion Tons)1974 1975-77 1978 1979 1980-85

Ordinary Portland Cement 900 900 1,210 1,310 1,400Rapid Hardening Cement 250 250 330 360 390M4ixed Cement 150 200 240 260 280

Total 1,300 1,350 1,780 1,930 2,070

Thus by 1980, when fully operational, the expansion project will help increaseTCC production by 53.3 percent over tne current rated capacity of 1.35 mil-lion tons. Furthermore, the implementation of the project is not expected toaffect the production of existing facilities and the project will help theexisting plan to maintain production levels at rated capacity, since the proj-ect includes some modernization of some existing facilities.

2. Output figures have been calculated on the assumption, that theexpansion will start production in January 1978 and reach full productioncapacity by 1980. Utilization of the capacity to be installed under theproject (0.72 million TPY) 1/ has been assumed as follows:

Capacity Utilization of Expansion (Percent)1978 1979 1980-85

Utilization of capacity (%) 60 80 100

However, to account for any loss in production during early stages of theoperation of the plant, operating cost projections are based on a conservativeutilization rate of 75 and 90 percent for 1978 and 1979 respectively. Thecapacity of the existing plant (1.35 million TPY) is assumed to remain con-stant during the entire forecast period. This is reasonable, as the plant iskept in good condition, the maintenance crews are well experienced, and theproject includes some modifications.

3. The lime plant project currently being implemented by the Company,is to be carried out in two phases. Phase I, with a capacity of 20,000 TPY,is scheduled for start-up in January 1975, whereas Phase II, with a capacityof 69,000 TPY is expected to start operations in January 1976. The sameutilization of capacity has been assumed for these two phases as was used

21 Under given product mix.

ANNEX 6-2Page 2

for the cement expansion project (para 2). This yields a production build-upas follows:

Projected Production of Lime (000 tons)1975 1976 1977 1978-85

Total Lime Production 12 57 75 89

B. Production Costs

4. Detailed production costs by type of cement produced are difficultto establish for TCC because of the lack of detailed information required forsuch calculations due to the peculiarities of the accounting system. As thecomposition of cement types within the annual production shows very littlechange over time and is also forecast to remain virtually constant, operatingcosts are based on total production.

5. Cost projections, with the exception of labor costs and costs ofimported spare parts, have been expressed in constant 1974 prices. However,an increase of 5% per annum for wages and 10% per annum for imported spareparts have been taken into account for projections until 1978. Any increasethereafter is assumed to be compensated for by increases in product prices.Considering the present pricing system in ARE, these assumptions are reason-able as the cement prices will be adjusted upward periodically depending onthe increase in operating costs as a result of increase in input prices.Thus effects of production cost increases beyond the control of the Companyare expected to be offset by selling prices.

6. Based on the proposed product mix, the total production cost bymaterial and other inputs as well as per ton cost of these items for existingplant and the expansion project are detailed in Table 1 and summarized below.They are in 1974 price at full production capacity.

OPERATING COST ESTIMATES

Existing Plan Expansion (Incremental Costs)Total Cost Total CostCost Per Ton Cost Per Ton

(000 LE) (LE) (000 LE) (LE)

A. Material, Utilitiesand Supplies /1 4,369 3.24 2,035 2.83

B. Labor /2 465 0.34 85 0.12C. Maintenance /3 1,689 1.25 738 1.03

Cost of goods sold 6,523 4.83 2,858 3.98

/1 Includes fuel, electricity, pyrite, slag and paper./2 Includes direct labor only./3 Includes maintenance labor, refractories, grinding media, supplies and

spare parts.

ANNEX 6-2Page 3

I. SupliesJ Materials and Utilities

7. Fuel (for Kiln only): This is the most important cost element inthe operating costs and is a major measure for the efficiency of the plant.Fuel consumption of the existing plant amounts to about 0.162 tons of Mazout 1/per ton of cement produced, given the current product mix. This figure isconsistent with the consumption of comparable wet process-operated plantsand is equivalent to a caloric consumption of 1,565 keal per ton of cementproduced. For the dry process expansion project, a caloric consumption ofabout 870 kcal per ton of cement has been used conservatively. (Such a figurewould result, if the more heat consuming semidry process were used, whereasthe installation of a dry process kiln would result in a caloric consumptionof 750 to 800 kcal per ton of cement produced.) This caloric consumptionwould require 0.090 tons of Mazout per ton of cement produced. The Companybuys Mazout at a subsidized price which is LE 7.5 per ton (equivalent to aboutUS$2.75 per barrel). Although world market prices run about three times ashigh for this type of fuel, the Government is hesistant to remove the subsidybecause of the down stream effect this would have on consuming industries.For this reason and the reason described in para. 5 of this Annex, the fuelprice has been kept constant throughout the projection period. On the otherhand, if subsidies were eliminated for the fuel, cement selling prices wouldbe adjusted accordingly.

8. Electricity: Another major measure of plant efficiency, which isalso an important cost element, is the consumption of electricity. In theexisting plant, this is at present between 94 and 95 kwh/ton of cement pro-duced. This consumption compares favorably with similar wet process plants.For the dry process expansion, a consumption of about 110 kwh/ton of cementis estimated, which is consistent with other producers using this process,and is used for cost projections.

9. Currently the Company is purchasing two-thirds of total powerrequirements from the Cairo Grid at an average cost of LE 0.0062 per kWh.The remaining one-third of TCC's power requirements are generated in its ownpower plant at a variable cost of LE 0.0050 per kWh (equivalent fuel costexcluding costs of labor, parts, depreciation and overhead). The projectwill provide for a new substation, so that all required power can be purchasedfrom the grid. The existing power station will then be maintained as a stand-by unit. Savings will be realized by the Company in two ways: (i) the in-creased amount of electricity purchased will reduce cost per kWh; and (ii)maintenance and operation of the power plant will greatly be reduced. Forthis reason, the weighted average electricity cost of the existing plant, ascurrently incurred (LE 0.0058 per kWh) has been kept constant throughout theprojection period for the existing plant. Nevertheless projections for thenew expansion are based on a kWh price of LE 0.0062.

1/ Mazout = heavy fuel oil (Bunker C), average net caloric value: 9,650kcal/ton of Mazout.

ANNEX 6-2Page 4

10. Pyrite and Slag: TCC buys pyrite at a price of LE 1.25 per ton.With a total current requirement of 11,000 tons per year, this yields a costof LE 53,000 per year or LE 0.047 for pyrite per ton of cement produced.For the expansion project the same figure is used. Slag is purchased fromHelwan Steel plant for the production of mixed cement (blast furnace cement).The cost of this material amounts to LE 0.022 per ton of cement.

11. Refractories: For the existing plant, the cost of refractories isabout LE 0.015 per ton of cement. For the expansion project the same figureis used. As one year's supply of refractories is included in the project'scapital cost estimates; necessary adjustments in calculating operating costswith respect to such materials are made for 1978 and 1979.

12. Grinding Media: For the existing plant the cost for grinding mediaamounts to about LE 0.195 per ton of cement produced. The same cost is usedfor the expansion project, since consumption of grinding media is generallydirectly proportional to the production of cement. Since one year's supplyof this material is included in the project, appropriate adjustments havebeen made in calculating the cost of production due to this material during1978 and 1979.

13. Spares: Cost of spares for the existing plant in 1974 is estimatedat LE 0.29 per ton of cement. These costs have been increased until 1978 by10% per annum to reflect the market situation for such items in industrializedcountries. Spare part costs for the expansion project have been estimated ona different basis: At full production, the total annual requirement for spareparts in the expansion is estimated to amount to 2% of the gross fixed invest-ment, equivalent to LE 0.31 million.

14. Other Materials and Supplies: This item includes fuel for trucks,grease and lubrication materials, explosives and miscellaneous items forworkshops, laboratory, foundry, etc. It currently amounts to LE 0.250 perton of cement produced. This figure has been used for the existing as wellas the expansion project.

15. Paper: Paper has experienced tremendous price hikes within thelast year. Therefore, GOBM has excluded paper from the regular cost calcula-tions for setting selling prices for cement. Cost of paper bags, instead,has been added as a separate item on top of the ex-factory cement price andcan thus be passed along directly to the consumer. The current paper bagprice of LE 1.30 per ton of cement will be increased to LE 1.70 per ton byJuly 1974. These prices do, however, include operating costs, depreciationand interest of the paper bag factory. The actual cost of paper to theCompany, used within the cost projections, is derived as follows: 1 ton ofkraft paper is sufficient to bag 250 tons of cement. 1/ Average CIF price ofkraft paper at the plant in early 1974 was close to LE 265 per ton of paper,

1/ 1 bag, weighing about 180 to 190 g. contains 50 kg. of cement. To in-clude unavoidable wastes of paper, the weight of the bag has been cal-culated at 200 g.

ANNEX 6-2Page 5

or LE 1.06 per ton of cement. Recently this price has increased to aboutLE 350 per ton of paper, or LE 1.40 per ton of cement. In the projectionsit is, therefore, assumed that the average paper bag price for 1974 is LE1.23 1/ per ton of cement, whereas from 1975 onward a price of LE 1.40 perton of cement is used. As mentioned earlier, any future increase in kraftpaper prices will not be a factor in the profitability of the Company becauseaccording to the new pricing system, this entire cost of paper bags will bepassed on to the consumer. Production costs are calculated under the assump-tion that the entire cement production will be sold in bags. However, anyshift from bagged to bulk cement sales, which is quite likely, would notaffect the profitability of TCC for the same reasons mentioned above.

16. Miscellaneous Overhead: This item is mostly related to maintenanceand includes "servicing necessaries" such as outside contractors' services,renting of equipment, hiring of short-term labor, etc. This item has beenleft at current levels for the existing plant. For the new expansion it hasbeen estimated at 10% of the existing plant's requirements, which is reason-able.

17. Others: They include estate taxes, rents, donations and the like.They have been kept constant throughout the projection period for the existingplant. As no additional rents and taxes are to be paid for the expansionproject, no costs are shown in the forecasts for the project.

II. Labor

18. According to TCC's records the annual total labor bill can be splitinto the following categories:

Percent 1974 Labor Bill(million LE)

Direct Labor 40 465Maintenance 35 411Administration 25 _294

Total 100 1,170

To reflect recent increases of wages, particularly of minimum wages, thelabor bill of 1973 has been increased by 7 percent to arrive at 1974 figures.Thus the average annual wage per man, including social benefits, has in-creased from LE 438 in 1973 to LE 470 in 1974 at TCC. From 1974 to 1978,wages have been assumed to rise at 5 percent per year to reflect a trendconfirmed by Government sources. The labor force of the existing plant isassumed to remain at the current level.

1/ 1.23 = (1.06 + 1.40) . 2.

ANNEX 6-2Page 6

19. For the expansion project, an additional labor force of about 200persons will be required (180 direct labor and 20 for maintenance). Theaverage wage, applicable to the existing plant, has been used to project therelated labor costs.

20. Comparison: The comparison of operating costs between the existingplant and expansion project is not readily possible, as the costs shown forthe expansion are incremental (infrastructure costs, maintenance labor,administration and overhead are much lower for the extension than for theexisting plant). However, fundamental differences can be identified formajor direct cost elements, such as for fuel and electricity. As fuel issubsidized (LF 7.5 per ton of Mazout against a world market price of morethan LE 22.5 per ton) the big advantage to TCC of the dry process expansionshows only feebly. But even so, savings in operating costs from fuel alone,also taking into account slightly higher electricity cost for dry process,even at the subsidized price for fuel, work out to LE 0.41 or US$1.05 equiv-alent per ton of cement produced. Using a world market price of LE 22.5 perton, these savings jump to LE 1.49 or US$3.80 equivalent per ton of cementproduced.

21. Detailed operating cost projections by year from 1974 to 1985 areshown in tables 2 and 3 of this Annex.

III. Lime Plant

22. Operating costs for the lime plant are based on estimates of TCCand suppliers and updated for 1974. Table 4 of this Annex shows the projec-tions of production and operating costs from 1975 to 1985 based on the assump-tion that Phase I of the plant (rated at 20,000 TPY) would commence operationin 1975 and Phase II (rated at 69,000 TPY) in 1976. The following table givesthe operating costs, expressed in 1974 prices, at 100% capacity (89,000 TPY).

ANNEX 6-2Page 7

EGYPT

TOURAH CEMENT EXPANSION PROJECT

OPERATING COSTS FOR LIME PLANT

Total Costs Cost Per Ton(000 LE) (LE)

1. Raw Materials (A) 50.7 0.572. Fuel (A) 92.6 1.043. Electricity (A) 32.0 0.364. Spares & Maintenance(C) 58.1 0.66S. Labor (120 persons) (B) 57 0.646. Administration (D) 6.4 0.077. Others (E) 6.4 0.07

Total 1 to 7 303.2 3.41

SUMMARY OF OPERATING COSTS

1. Materials & Supplies(A) 175.3 1.972. Labor (B) 57 0.643. Maintenance (C) 58.1 0.66

Cost of Goods Sold 290.4 3.27

4. Administration (D) 6.4 0.075. Others (E) 6.4 0.07

Total 1 to 5 303.2 3.41

Industrial Projects DepartmentDecember, 1974

EGYPT AiNEX 6-2Table 1

TOURAH CEMENT EXPANSION PROJECT

OPERATING COSTS FOR CEMENT PLA14T1v

Existing Plant Expansion (Incremental CostsYCode for Cost CostSummary Total Cost Per Ton Total Cost Per Ton

(000L E7) (L E ) (000 L E ) (L u%)

I. DETAILED OPERATING COSTS

1. Labor

Direct (B) 465 0.34 84.6 0.12Maintenance (C) 411 0.31 9.4 0.01Administration (D) 294 0.22 -

Subtotal 1 1,170 0.13

2. Materials, Supplies, Spares

Pyrite, Slag (A) 94 0.07 50.0 0.07Refractories (C) 156 0.12 83.0 0.12Grinding Media (C) 264 0.19 140.0 0.19Other Mat. & Supplies (C) 338 0.25 180.0 0.25Spares (C) 396 0.29 215.00.30

Subtotal 2 1,2L8 0.92 668.0 0.93

3. Fuel (A) 1,641 1.22 486.o 0.684. Electricity (A) 744 0.55 491.0 o.685. Paper (A) 1,890 1.40 1,008.0 1.406. Miscellaneous (C) 124 0.09 12.0 0.027. Other (E) 163 0.12 -

Total 1 to 7 6,90 5.1T 2,85. 3.98

II. SUEDNARY OF OPERATING COSTS

1. Materials, Utilities (A) 4,369 3.24 2,035.0 2.83& Supplies

2. Labor (B) 465 0.34 84.6 0.123. Maintenance (C) 1 689 1.25 738.4 1.03

Cost of goods 64.83 2,8.W 3.98sold

4. Administration (D) 294 0.22 -

5. Other (E) 163 0.12 - _

Total 1 to 5 6,980 5.16 2,858.0 3.98

1/ These costs relate only to the Expansion, excluding existing facilit½es.

Industrial Projects DepartmentAugust, 1974

ANNEX 6-2Table 2

EGYPT

TOURAH CEMENT EXPANSION PROJECT

PRODUCTION AND OPERATING COST PROJECTIONS i A. EXISTING PLANT ONLY

rITFS CODE 2/ 1974 1975 1976 1977 1978-85

I. PRODUCTION (in Million TPY)

1. Ordinary Cement 0.90 0.90 0.90 0.90 0.902. Rapid Hardening Ceeent 0.25 0.25 0.25 0.25 0.253. Mixed Cement 0.15 0.20 0.20 0.20 0.20

Total 1 - 3 1.30 1.35 1.35 1.351-

II. OPERATING COSTS (LE 000)

1. Labor

a) Direct Labor (B X 465 488 513 538 565b) Maintenance & Support (C) 411 432 453 476 500c) Administration (D) 294 309 324 340 57

Subtotal 1 1170 1229 1290 1T354 +12

2. Materials & Supplies

a) Pyrite, Slag (A) 91 94 94 94 94b) Refractories (C) 150 156 156 156 156c) Grinding Media (C) 254 264 264 264 264d) Other Materials & (C) 325 338 338 338 338

Suppliese) Spare parts (C) 382 436 480 528 581

Subtotal 2 1202 .0128 12

3. Fuel (A) 1580 1641 1641 1641 16414. Electricity (A) 716 744 744 744 7445. Paper (A) 1599 1890 1890 1890 18906. Miscellaneous Overhead (C) 124 124 124 124 1247. Other (E) 163 163 163 163 163

Total 1 - 7 gT7079 7184 72 72417

III. SUMMARY OF OPERATING COSTS (LE 000)

1. Mat. Utilities & Supply (A) 3986 4369 4369 4369 43692. Labor (B) 465 488 513 538 5653. Maintenance (C) 1646 1750 1815 1886 1963

Costs of Goods (Subtotal 1 to 3 60 B9 6697 My ZB774. Administration (D) 294 309 324 340 3575. Other (E) 163 163 163 163 163

Totsa 1 to 5 76 70791 7T8 729 7417

IV. COST PER TON (LE/Ton) 5.04 5.24 5.32 5.40 5.49

1/ For detailed explanations refer to text of this Annex.

2/ Code letters indicate where detailed cost items belong in the "Summary of Operating Costs"(Item III).

Industrial Projects DepartmentJuly '74

ANNEX 6-2Table 3

Et;YPT

TOURAH CIMENT EXPANSION PROJECT

PRODUCTION OPERATING COST PROJECTIONS : B. PLANT EXPANSION ONLY

ITEKS CODE 2/ 1978 1979 1980 1981 1982-85

I. PIODtUCTION (in Million TPY)

1. Ordinary Cement 310 41o 500 500 5002. Rapid Hardening Cement 80 110 140 140 1403. Mixed Cement 40 60 80 80 80

Total 1-3 O.1o o0ro b72 0.720 0.720.

II. OPERATING COSTS(LE 000)

1. Labor

a) Direct (B) 104 104 1014 104 1014b) Maintenance & (C) 12 12 12 12 12

Supportc) Administration (D) - - - - -

Subtotal 1 116 116 1-16 TTs ig

2. Materials, Supplies, Spares

a) Pyrite, Slag (A) 37 45 50 50 50b) Refractories (C) - 75 83 83 83c) Grinding Media (C) - 91 140 140 140d) Other Materials & (C) 135 162 180 180 180

Suppliese) Spare Parts (C) - 104 157 235 31h

Subtotal 2 172 177 To 767

3. Fuel (A) 365 437 486 486 4864. Electricity (A) 368 442 491 491 4915. Paper (A) 605 806 1008 1008 10086. Miscellaneous Overhead (C) 12 12 12 12 127. Other (E) - - - - _

Totsa 1 to 7 i 2290 723

III. SUMMARY OF OPERATING COSTS (LE 000)

1. Mat., Utilities, Supply (A) 1375 1730 2035 2035 20352. Labor (B) 104 104 104 104 1043. Maintenance (C) 159 456 584 662 741

Costs of Goods Sold 2290 2723 2-9 TWO(Subtotal 1 to 3)

4. Administration (D) - - - -5. Other (E) 12 2723

Total (1 to 5) 1638 2290 2723 21R-1 2350

IV. COST/TON (LE/Ton) 3.81 3.95 3.78 3.89 4.0

.1 For detailed explanations refer to text of this Annex.El Code letters indicate, where detailed cost items belong in the "Summary of Operating Costs"

(Item TII).

Industrial Projects DepartmentJuly '74

EGYPT

TOURAH CE21ENT EXPANSION PROJECT

PRODUCTION AND OPERATING COST PROJCTIONS1 C. LM PLANT ONLY

ITEMS YEAR 1975 1976 1977 1978 1279-1985

I. PRODUCTION

1. Phase I (Tons 000) 12 16 20 20 20

2. Phase II (Tons 000) - 41 55 69 - 69

Total Production 12 57 75 89 89

II. COST OF PRODTJCTION (000 L E )

1. Material & Supply 29 138 161 175 175

2. Labor 11 52 64 69 69

3. Maintenance 9 46 54 59 59

Cost of Goods Sold (Subtotal 1 to 3) 49 236 279 303 303

4. Administration 1 5 6 6 6

5. Other 1 5 6 6 6

subtotal 4 to 5 2 10 12 12 12

TOTAL 1 to 5 51 246 291 315 5

III. TOTAL PRODUCTION COST PER TON (LE/T) 4.25 4.32 3.88 3.54 3.54 &

For detailed explanations please refer to the text of this rnnex.

Industrial Projects DepartmentJuly 1974

ANNEX 6-3Page 1

EGYPT

TOURAH CEMENT EXPANSION PROJECT

NOTES TO FINANCIAL PROJECTIONS

1. The financial projections are based on the production plan outlinedin Annex 6-2. The expansion project is expected to start operating in early1978 and to reach full production capacity by 1980. Since the cement pricesare expected to be periodically revised to reflect the increase in inputcosts in order to maintain the financial viability of the cement companies,any increase in input costs will be compensated for by a corresponding in-crease in selling prices. Therefore, 1974 prices are used for the financialprojections with the exception of capital costs. However, financial rates ofreturn calculations are based on 1974 prices for capital costs as well.

2. Net Sales. Cement is sold on an ex-factory price basis and thecustomer pays for the transportation costs. Details of revenue projectionsare contained in Annex 6-1. Taxes, which are directly remitted to the Govern-ment by ECO, are netted out from the sales price to show the actual revenueto the Company. Net sales are also calculated on the basis of the productmix given in Annex 6-2. Revenue from other sources, such as sales of foundryproducts and revenue from services, which are based on the Company's previousexperience, is also included in the net sales.

3. Operating Costs. These costs are calculated on the basis of theCompany's past performance as well as the improvements that can be reasonablyexpected due to the project. Assumptions used in calculating these costprojections are elaborated on in Annex 6-2.

4. Depreciation. This follows the legally required rates and accord-ing to the Standarized Accounting System in force in Egypt, assets must bedepreciated at the following rates:

5 years - for rolling stock, light moving equipment,office equipment, pre-operating, startupexpenses and training expenses, interestduring construction;

8-10 years - for heavy moving equipment, drilling rigs,etc;

20 years - for plant and equipment; and

33 years - for buildings and civil works.

5. Financial Charges. Financial charges are based on the followingassumptions. Financial charges due to the project during the constructionperiod are charged to the balance sheet:

ANNEX 6-3Page 2

IBRD - The Bank Loan of LE 15.686 million (US$40 million)will be onlent to the Company for 15 years includ-ing 5 years of grace, at an effective interestrate of 10 percent per annum. Interest on theonlent funds during construction will be financedby the Government. Repayment of the loan is assum-ed to be on equal principal plus interest.

Arab Fund - LE 6.667 million (US$17 million) for 20 yearsincluding 5 years grace, at 6% interest. ArabFund will finance interest on its loan duringconstruction. Repayment of this loan is basedon annuity payments.

GovernmentParticipation - Assumed to be in the form of equity.

It is also assumed that the company will gradually reduce its Bank overdraftsand by the time the project comes into operation, the Company will have noshort-term debt outstanding. Interest on short-term borrowings is assumedto be 6% per annum.

6. Taxes. Tax payable by the Company is calculated at 8.89% of netprofit before taxes. This is calculated on the following basis:

(i) At present income tax is 39.7% of the retained earnings; and

(ii) 85% of the net profit after taxes is distributed.

Let NP - Net profit before taxesD - Distribution of profits = .85(NP-T)T - Taxes - .397(NP-D)

T = .397 NP - .397 x .85 NP + .397 x .85 T

= .05953NP NP x .0898

- NP x 8.98%

7. Retained Earnings. It is assumed that 85% of the net profit aftertaxes is paid out, as detailed in page 2 of Annex 2-4, to the Government andto the Company's employees. Of the remainder, 5% is used for compulsorypurchase of government bonds in the following year. Payments of taxes aswell as distribution of profits are also assumed to be made in the followingyear.

Industrial Projects DepartmentJanuary, 1975

EGYPT

TOURAH CEMENT EXPANSION PROJECT

INCOME STATEMENT PROJECTIONS (With Expansion)

(LE 000)

1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

Cement Production ('000 tons) 1,300/1 1,350 1,350 1,350 1,780 1,930 2,070 2,070 2,070 2,070 2,070

Net Sales(1) Cement 10,426 11,097 11,097 11,097 14,632 15,865 17,015 17,015 17,015 17,015 17,015(2) Lime 0 60 285 375 445 445 445 445 445 445 445

(3) Others 800 800 800 800 800 800 800 800 800 800 800

Total Net Sales 11,226 11,957 12,182 12,272 15,877 17,110 18,260 18,260 18,260 18,260 18,260

Cost of Goods SoldMaterials, Supplies and Utilities 3,986 4,458 4,507 4,530 5,919 6,284 6,579 6,579 6,579 6,579 6,579

Labor 465 499 565 602 738 738 738 738 738 738 738

Maintenance 1,646 1,759 1,861 1,940 2,181 2,478 2,606 2,684 2,763 2,763 2,763

Gross Profit 5,129 5,241 5,249 5,200 7,039 7,610 8,337 8,259 8,180 81,80 8,180

Operating ExpensesAdministrative and Sales Expenses 294 310 329 346 363 363 363 363 363 363 363

Depreciation 875 925 1,025 1,025 3,513 3,513 3,513 3,513 3,513 2,744 2,744

Other 163 164 168 169 169 169 169 169 169 169 169

Operating Profit 3,797 3,842 3,727 3,660 2,994 3,565 4,292 4,214 4,135 4,904 4,904

Other Income 200 200 200 200 200 200 200 200 200 200 200

Financial Charges 150 117 103 75 1,454 1,820 1,956 1,830 1,702 1,533 1,337

Net Profit Before Taxes 3,847 3,925 3,824 3,785 1,740 1,945 2,536 2,584 2,633 3,571 3,767

Taxes 345 352 343 340 156 175 228 232 236 321 338

Net Profit After Taxes 3,502 3,573 3,481 3445 1,584 1,770 2,308 2,352 2,397 3,250 3,429

Distribution:To Employees & GOBM 2,977 3,037 2,959 2,928 1,347 1,505 1,962 1,999 2,037 2,762 2,914

To Reserves 350 357 348 345 158 177 231 235 240 325 343

To Reserves for Bonds 175 179 174 172 79 88 115 118 120 163 172

Note: For assumptions, See Annex 6-3.

/1 Recent information from the Company indicated production closer to 1,200,000 tons in 1974; effect on income statement has not been calculated, but impacton cash flow is not expected to be substantial nor should results from 1975 be affected significantly.

Industrial Projects DepartmentDecember, 1974

EGYPT

TOURAH CEMENT EXPANSION PROJECTSOURCE AND APPLICATION OF FUNDS PROJECTIONS

(LE 000)

1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984SOURCES:

A. From OperationsProfit Before Taxes 3,847 3,925 3,824 3,785 1,740 1,945 2,536 2,584 2,633 3,571 3,767Depreciation 875 925 1,025 1Q025 3,513 3,513 3,513 3,513 3.513 2,744

Cash Generation 4,722 4,850 4,849 4,810 5,253 5,458 6,049 6,097 6,146 6,315 6,511

B. Government Participation(i) for the Project - 2,889 6,246 2,698 266 - - - - - -

(ii) for Others 200 - - - - - - - - - -

200 2,889 6,246 2,698 266 - - - - - -

C. Loans:

(i) for the Project Loan - 5,832 3,218 2,937 1,739(a) IBRD : Interest Capitalized - 251 684 1,026 - - - - - - -

(b) Arab Fund: Loan - 1,910 3,402 1,088 267 - - - - - -

:Interest Capitalized - 63 276 399 438 - - - - - -

(ii) for other investments 182 919 - - - - - - - - -

182 8,975 7,580 5,450 2,444 - _ _ _ _ _D. Decrease in Assets 217 - - - - - - - - - -

TOTAL SOURCES 5,321 16,714 18,675 12,958 7,963 5,458 6,049 6,097 6,146 6,315 6,511

APPLICATIONS:

E. Fixed Investment(i) for the Project:

(a) Fixed Investment 55 10,587 12,721 6,502 2,272 - - - - - -

(b) Interest Capitalized - 358 1,105 1,646 438 - - - _ _ _

(ii) for other investments 668 1,516 - - - - - - - - -

723 12,461 13,826 8,148 2,710 - - - - - -F. Loan Repayments:

(i) IBRD - - - - - - 1,569 1,569 1,569 1,569 1,569

(ii) Arab Fund - - - - - 157 329 349 369 392 416

(iii) Other 156 196 181 180 115 101 87 87 87 87 87

156 196 181 180 115 258 1,985 2,005 2,025 2,048 2,072G. Distribution of Profits 1,336 2,977 3,037 2,959 2,928 1,347 1,505 1,962 1,999 2,037 2,762H. Payment of Taxes 210 345 352 343 340 156 175 228 232 236 321I. Decrease in Overdraft 500 500 500 500 522J. Purchase of Government Bonds 52 175 179 174 172 79 88 115 118 120 163K. Change in Working Capital 1,160 450 498 - 696 39 37 - - - -

L. Surplus (Deficit) Cash 1,184 390) 102 654 480 3,579 2,259 1,787 1,772 1,874 1,193

TOTAL APPLICATIONS 5,321 16,714 18,675 12,958 7,963 5,458 6,049 6,097 6,146 6,315 6,511

Surplus Cash B.O.Y. 0 1,184 794 896 1,550 2,030 5,609 7,868 9,655 11,427 13,301Surplus Cash E.O.Y. 1,184 794 896 1,550 2,030 5,609 7,868 9,655 11,427 13,301 14,494

Note: For assumptions, See Annex 6-3.

Industrial Projects DepartmentDecember, 1974

EGYPT

TOURAHi CEMENT EXPANSION PROJECT

BALANCE SHEET PROJECTIONS (with Expansion)(LE 000)

1974 1975 1976 1977 1978 1979 1980 1981 1982 198J 1984

ASSETS

Current Assets:Cash & Bank 400 400 400 400 600 600 600 600 600 600 600Receivables 936 997 1,015 1,023 1,323 1,426 1,522 1,522 1,522 1,522 1,522Inventory 3,623 3,636 3,636 3,636 5,417 5,456 5,493 5,493 5,493 5,493 5,493

SUD-total 4,959 5,033 5,051 5,059 7,340 7,482 7,615 7,615 7,615 7,615 7,615Surplus Cash 1,184 794 896 1,550 2,030 5,609 7,868 9,655 131427 i13301 14,494

6,143 5,827 5,947 6,609 9,370 13,091 15,483 17,270 19,042 20,916 22,109Fixed Assets:

Gross Assets 13,808 14,808 15,808 19,045 53,444 53,444 53,444 53,444 53,444 53,444 53,444Less: Accumulated Depreciation 7,650 8,575 9,600 10,625 14,138 17,651 21,164 24,677 28,190 30,934 33,678Net Fixed Assets 6,158 6,233 6,208 8,420 39,306 35,793 32,280 28,767 25,254 22,510 19,766

Projects Under Construction 3,776 15,237 28,063 32,974 - - - - - - -Other Assets:

Other Investments 1,077 1,077 1,077 1,077 1,077 1,077 1,077 1,077 1,077 1,077 1,077Investments in Bonds 520 695 874 1,048 1,220 1,299 1,387 1,502 1,620 1,740 1,903

1,597 1,772 1,951 2,125 2,297 2,376 2,464 2,579 2,697 2,817 2,980

TOTAL ASSETS 17,674

29,06 42,169 50,128 50,973 51,260 50,227 48,616 46,99 46,243 44,855

LIABILITIES

Current Liabilities:Accounts Payable 1,871 1,495 1,015 1,023 1,323 1,426 1,522 1,522 1,522 1,522 1,522Bank Over Draft 2,022 1,522 1,022 522 - - - - - - -Dividends Payable 2,977 3,037 2,959 2,928 1,347 1,505 1,962 1,999 2,037 2,762 2,914Tax Payable 345 352 343 340 156 175 228 232 236 321 338Current Portion of Long Term Debt 196 181 180 115 258 1,985 2,005 2,025 2048 2,072 2,09

7,411 6,587 5,519 4,928 3,084 5,091 5,717 5,778 5,843 6,677 6,865Long Term Debt 173 8,967 16,367 21,702 23,888 21,903 19,898 17,873 15,825 13,753 11,662

Other Liabilities 252 252 252 252 252 252 252 252 252 252 252Equity:

Share Capital 2,231 2,231 2,231 2,231 2,231 2,231 2,231 2,231 2,231 2,231 2,231Government Participation 2,664 5,553 11,799 14,497 14,763 14,763 14,763 14,763 14,763 14,763 14,763Reserves 4,267 4,624 4,972 5,317 5,475 5,652 5,883 6,118 6,358 6,683 7,026Reserves for Government Bonds 676 855 1,029 1,201 _,280 1,368 1,483 1,601 l,7 21 1,88 2,05

9,838 13,263 20,031 23,246 23,749 24,014 24,360 24,713 25,073 25,561 26,076

TOTAL. LIABILITIES 17,674 29,069 42,169 50,128 50,973 51,260 50,227 48,616 46,993 46,243 44,855

Current Ratio 0.83 0.88 1.08 1.34 3.04 2.57 2.71 2.99 3.25 3.13 3.22Debt/Equity Ratio 2:98 40:60 45:55 45:55 50:50 48:52 45:55 42:58 39:61 35:65 31:69Debt Service Coverage 14.8 14.7 16.2 17.8 4.8 3.8 2,0 2.1 2.1 2.2 2.3

Note: For assumptions, See Annex 6-3.

Industrial Projects DepartmentDecember, 1974

EGYPT

TNCO2E STATEMENT PROJECTIONS (Without Expansion)(LE 000)

1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

Cement Production 1,300 1,350 1,350 1,350 1,350 1,350 1,350 1,350 1,350 1,350 1,350

Net Sales(1) cement 10,426 11,097 11,097 11,097 11,097 11,097 11,097 11,097 11,097 11,097 11,097(2) Lime 0 60 285 375 445 445 445 445 445 445 445(3) Other 800 800 800 800 800 800 800 800 800 800 _80Q

Total Net Sales 11,226 11,957 12,182 12,272 12,342 12,342 12,342 12,342 12,342 12,342 12,342

Cost of Goods SoldMaterials, Suipplies and Utilities 3,986 4,458 4,507 4,530 4,544 4,544 4,544 4,544 4,544 4,544 4,544Labor 465 499 565 602 634 634 634 634 634 634 634Maintenance f1,646 1,759 1,861 1,940 22,022 2,022 2,022 2,022 2,022 2,022 2,022

Gross Profit 5,129 5,241 5,249 5,200 5,1'2 5,142 5,142 5,142 5,142 5,142 5,142

Operating ExpensesAdministrative and Sales Expenses 294 310 329 346 363 363 363 363 363 363 363nepreciatino. 875 925 1,025 1,025 1,025 1,025 1,025 1,025 1,025 1,025 1,025other 163 164 168 169 169 169 169 169 169 169 169

Operating Profit 3,797 3,842 3,727 3,660 3,585 3,585 3,585 3,585 3,585 3,585 3,585

Other Income 200 200 200 200 200 200 200 200 200 200 200Financial Charges 150 117 103 75 18 16 11 9 6 4 2

Net Profit Before Taxes 3,847 3,925 3,824 3,785 3,767 3,769 3,774 3,776 3,779 3,781 3,783

Taxes 345 352 343 340 338 338 339 339 339 340 340

Net Profit After Taxes 3,502 3,573 3,481 3,445 3,429 3,431 3,435 3 437 3,440 ____ 3,443

Distribution:To Employees & COBM 2,977 3,037 2,959 2,928 2,915 2,917 2,919 2,921 2,924 2,925 2,927To Reserves 350 357 348 345 343 343 344 344 344 344 344To Reserves for Bonds 175 179 174 172 171 171 172 172 172 172 172

Note: For assumptions, See Annex 6-3.

Industrial Projects DepertmertAugust, 1974

EGYPT

TOURAH CEMENT EXPANSION PROJECT

BALANCE SIIEET PROJECTICNS (Without Expansion)(LE 000)

1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

ASSETS

Current Assets:Cash and Rank 400 400 400 400 400 400 400 400 400 400 400Receivables 936 997 1,015 1,023 1,029 1,029 1,029 1,029 1,029 1,029 1,029Inventory 3,623 3636 3.636 3.63 3.636 3.,66 3,636 3.636 3,636 3.636

Sub-total 4,959 5,033 5,051 5,059 5,065 5,065 5,065 5,065 5,065 5,065 5,065Surplus Cash 1,239 849 951 1,605 2.319 3,589 4,875 6,159 7,443 8,727 10,011

6,198 5,882 6,002 6,664 7,384 8,654 9,040 11,224 12,508 13,792 15,076Fixed Assets:

Gross Assets 13,808 14,808 15,808 19,045 19,045 19,045 19,045 19,045 19,045 19,045 19,045Less: Accumulated Depreciation 7,650 8.575 9,600 10,625 11.650 12,675 13,700 14 725 L5,750 16,775 17.800

6,158 6,233 6,208 8,420 7,395 6,370 5,345 4,320 3,295 2.270 1,245Project Under Construction 3,721 4,237 3,237 - - - - - - -Other Assets:

Other Investments 1,077 1,077 1,077 1,077 1,077 1,077 1,077 1,077 1,077 1,077 1,077Investments in Bonds 520 695 874 1.048 1.220 1 3 1,562 1,734 ,906 2.078 2.250

1,597 1,772 1.951 2,125 2,297 2,468 2,639 2,811 2.983 3,155 3,327TOTAL ASSITS 17,674 8 1.7,439 17,209 9 187.33 187,96 19.217 19.648

LIABILITIESCurrent Liabilities:

Accouats Payable 1,871 1,495 1,015 1,023 1,029 1,029 1,029 1,029 1,029 1,029 1,029Bank Overdraft 2,022 1,522 1,022 522 - - - - - -Dividends Payable 2,977 3,037 2,959 2,928 2,915 2,917 2,919 2,921 2,924 2,925 2,927Tax Payable 345 352 343 340 338 339 339 339 339 340 340Current Position of Long-Term Debt 196 181 180 115 101 87 87 87 87 87 80

7,411 6,587 3,519 4,928 4,383 4,372 4,374 4,376 4,379 4,381 4,376Long-Term Debt 173 911 731 616 515 428 341 254 167 80 0

Other Liabilities 252 252 252 252 252 252 252 252 252 252 252Equity:

Share Capital 2,231 2,231 2,231 2,231 2,231 2,231 2,231 2,231 2,231 2,231 2,231Government Participation 2,664 2,664 2,664 2,664 2,664 2,664 2,664 2,664 2,664 2,664 2,664Reserves 4,267 4,624 4,972 5,317 5,659 6,002 6,347 6,691 7,034 7,378 7,722Reserves for Government Bonds 676 855 1 029 1,201 1,372 1,543 1,715 1,887 2,059 2,231 2X403

9,838 10,374 10,896 11,413 11.926 1, 12,957 13,473 13.988 14,504 15.020TOTAI LIABILITIES 17,674 18.124 17,398 17,209 17.076 17,492 17,924 18,355 18.786 19,217 19,648

Current Retio .84 .89 1.09 1.35 1.69 1.98 2.27 2.56 2.86 3.15 3.44Debt/Equity Ratio 2:98 8-92 6:94 5:95 4:96 3:97 3:97 2:98 1:99 1:99 0:100

Note: rmr assumptions, See Annex 6-3

Industrial Projects DepartmentAugust, 1974

ANNEX 6-9Page 1

EGYPT

TOURAH CEMENT EXPANSION PROJECT

BREAK-EVE:N-POINT ANALYSIS

Existing Plant and Expansion

1. The break-even point of the fully expanded plant has been calculatedbased on total costs in the year 1980 when the plant is assumed to operate at100% of rated capacity. Costs for the lime plant have been excluded.

2. The following basic data were used to determine the break-even pointfor the expanded cement plant.

1. TOTAL COSTS Fixed Variable TotalCosts Costs Costs

O __ _______00 --

Labor 1307 231 1,538Fuel 213 1 ,914 2,127Electricity 124 1,111 1,235Paper 0 2,898 2,898Spare Parts 221 517 738Grinding Media 121 283 404Refractories 191 48 239Pyrite and Slag 14 130 144Other Materials 104 Oi14 518Miscellaneous Overhead 299 0 299Depreciation 3,513 0 3,513Financial Charges 1,95 0 1,956

Total 8,063 7,546 15,609

Percentage 51.7% 48.3% 100%

2. REVEN1UE 17,815

3. DEBT REPAYMENT 1, 985

The resulting break-even points are:

PROFIT BREAK-EVEN POINT (percentage Capacity) 78.5%

CASH BREAK-EVEN POINT (percentage Capacity) 6 3.7

ANN:EX 6-9Page 2

EGYPT

TOURAH CEMENT EXPANSION PROJECT

PROFIT BREAK EVEN POINT FOR THE TOTAL EXPANDED PLANT

YEAR 1980

(LE Millions) (LE Millions)18.00 17.80

Profit156

15.00 Break Even A5.61

(13.98)

12.00

9.00

Fixed Costs 8 06

7.60

6.oo _'I

3.00

0 20 40 60 / 80 1OOg(78. 5%)

% of Capaicity

Industrial Projects DepartmentDecember, 1971.

ANNEX 6-10

EGYPT

TOURAH CEMENT EXPANSION PROJECT

FINANCIAL RATE OF RETURN AND SENSITIVITY ANALYSIS

Assumptions

1. FinancialJ rate of return calculations are based on an incrementalbasis; cost and benefit streams are given in page 2 of this Annex. Thesecost and benefit streams are derived from the financial projections andreflect costs and benefits in 1974 real value terms. The capital cost estimateof the project is in current prices--i.e., it includes price escalations.Fixed investments, in current terms, required to maintain the present productionlevel, if the project is not implemented, have been deducted from the fixedasset cost estimate of the project to arrive at the incremental fixed assetcost. For the purpose of financial rate of return calculations, this costhas been deflated by 7% per annum to arrive at the fixed cost in 1974 realtenms, under the assumption that the average world inflation would be about7% per annum. Revenue calculations as well as operating cost estimates arebased on 1974 prices.

2. Other basic assumptions used in the financial rate of return calcu-lations are as follows:

Construction period 4 yearsLife of the project 20 yearsScrap value LE 772,000 (Assuming that incremental working

capital will be available afterthe expected project life)

Revenue to the company LE 8.22/ton of bagged cementFuel (at subsidized rate) LE 7.5/tonIncrease in direct labor 200 personsforce

EGYPT

TOURAH CEMENT EXPANSION PROJECT

INCREMENTAL FINANCIAL RATE OF RETURNCOST AND BENEFIT STREAMS

(LE 000)

CAPITAL COST OPERATING COST- REVENUE-EXPANDED CASED/ BASE CASE INCREENTAL Incremental Incremental EXPANDED CASE BASE CASE INCREMENTAL EXPANDED CASE BASE CASE INCRE-

(With Expansion) (Without Expansion) In current In 1974 3 Working Capital Cost (With Expansion) (Without Expansion) (With Expansion) (Without Expansion) MENTALterms Net Prices- Capital~6/ in 1974

Real Prices

1974 55 0 55 55 0 55 6,554 6,554 0 11,226 11,226 01975 10,587 3,963 6,624 6,191 0 6,191 7,130 7,130 0 11,957 11,957 01976 12,721 2,335 10,386 9,071 0 9,071 7,430 7,430 0 12,182 12,182 01977 6,502 1,195 5,307 4,332 0 4,332 7,587 7,587 0 12,272 12,272 01978 2,968 295 1,977 1,508 696 2,204 9,370 7,732 1,638 15,877 12,342 3,5351979 39 0 0 0 39 39 10,032 7,732 2,300 17,110 12,342 4,7681980 37 0 0 0 37 37 10,455 7,732 2,723 18,260 12,342 5,9181981 0 0 0 0 0 0 10,533 7,732 2,801 18,260 12,342 5,9181982 0 0 0 0 0 0 10,612 7,732 2,880 18,260 12,342 5,9181983 0 0 0 0 0 0 10,612 7,732 2,880 18,260 12,342 5,9181984 0 0 0 0 0 0 10,612 7,732 2,880 18,260 12,342 5,9181985 0 0 0 0 0 0 10,612 7,732 2,880 18,260 12,342 5,9181986 0 0 0 0 0 0 10,612 7,732 2,880 18,260 12,342 5,9181987 0 0 0 0 0 0 10,612 7,732 2,880 18,260 12,342 5,9181988 0 0 0 0 0 0 10,612 7,732 2,880 18,260 12,342 5,9181989 0 0 0 0 0 0 10,612 7,732 2,880 18,260 12,342 5,9181990 0 0 0 0 0 0 10,612 7,732 2,880 18,260 12,342 5,9181991 0 0 0 0 0 0 10,612 7,732 2,880 18,260 12,342 5,9181992 0 0 0 0 0 0 10,612 7,732 2,880 18,260 12,342 5,9181993 0 0 0 0 0 0 10,612 7,732 2,880 18,260 12,342 5,9181994 0 0 0 0 0 0 10,612 7,732 2,880 18,260 12,342 5,9181995 0 0 0 0 0 0 10,612 7,732 2,880 18,260 12,342 5,9181996 0 0 0 0 0 0 10,612 7,732 2,880 18,260 12,342 5,9181997 0 0 0 0 -772 -772 10,612 7,732 2,880 18,260 12,342 5,918

Incremental Financial Rate of Return = 10.4%

1/ Excluding incremental working capital and interest during construction.2! Excludes depreciation, financial charges, and taxes. These costs are in 1974 prices. For details refer to Annex 6-2.3/ 1974 real prices are calculated by deflating current prices using a 77. per annum deflator.4/ Incremental working capital attributable to the project and is assumed to be recouped after the economic life of the project.5/ Revenue calculations are based on 1974 prices. For details refer to Annex 6-1.

1>

EGYPT

Ai\l\7IEX 6-1oTOURAH CEMENT EXPANSION PROJECT Page 3

SEESITIVITY TESTS ON FI1ANCIAL RATE OF RETURN

20%~

o~~~~~c.

4~10%

0-30 -20 -10 0 10 20 30

A< Decrease Base Increase ->Case

% Variation in Input

Case Capital Cost Operating Cost Revenue Rate of Return

1. (Base Case) 100 100 100 10.42. 110 110 100 8.13. 110 110 90 5-54. 90 90 100 15.35. 110 100 110 11.46. One year Project delay 9.17. One year Project delay and 15),c- cost overrun 7.4

Industrial Projects DepartmentAugust 1974

ANNEX 7-1Page 1

EGYPT

TOURAH CE24ENT EXPANSION PROJECT

ECONOMIC RATE OF RETURN AND SENSITIVITY ANALYSIS

Assumptions

1. All costs and revenues are expressed in real 1974 prices and arederived on the following basis: (a) benefit stream is based on the opportunitycost of importing cement; (b) production cost is calculated using world marketprices for main inputs; and (c) all taxes and duties are excluded. However,no shadow pricing of the foreign exchange has been employed.

Revenue

2. TCC's net sales are valued at adjusted 1974 world market prices(c.i.f. Egyptian port), which are derived from conservatively estimated long-term European f.o.b. cement prices. Historically, European domestic cementprices have been somewhat higher than export prices. In the late 1960s somecountries exported cement at marginal cost due to domestic oversupply. A.number of cement plants came on stream in the late 196 0s and early 1970s whendomestic demand was somewhat depressed in most European countries. This resultedin an oversupply situation and spare capacity for export markets. However, duringthe 1972-1974 period, the increase in demand was not matched with increased supplyand for the past year or two there was a significant shortage of cement throughoutthe world. This shortage, along with the recent price increase of petroleum pluschanges in currency values have pushed up cement prices, particularly for exportcement. In September, 1974, f.o.b. European port prices on the average variedbetween US$30 - 35 per ton of bagged cement. The domestic selling prices ofcement are controlled or influenced bm most governments and prices of beggedcement in most European countries in September were about US$25 - 35.

3. The recent cement shortage situation is not expected to continue andalready domestic demand in many countries has slackened substantially. Further-more, a large number of expansion programs are at present being carried out, orunder study, in the Mediterranean and Persian Gulf region; by the end of thedecade, it is expected that demand and supply would be in a better balance.Under a stable demand/supply situation, the export prices would be more n linewith domestic selling prices. However, on the conservative assumption thatlong-term international competition might be greater than in the recent "sellers';market, the long-term f.o.b. European bagged cement price is assumed at US$25 per ton,a level somewhat lower than at present. Assuming that if Egypt were to import cement,it would import from nearby countries, such as Greece or Turkey, the transportationcost, including insurance, is conservatively estimated to be about US$7 per ton ofcement; this would give an economic accounting price for bagged cement of aboutUS$32 per ton at the port of Alexandria; this is used for sales revenue calcula-tions. However, if the world prices were to drop to the level of the marginalcost of production, which is highly unlikely, the economic accounting price ofcement at the port of Alexandria could be about US$28 per ton of bagged cement,including US$7 per ton transportation cost.

ANNEX 7-1Page 2

Operating Cost

4. Fuel oil: This is the most important cost element in the operatingcosts. In calculating the fuel cost, the subsidy element has been removed byusing an international price of about US$57.4 (or LE 22.5) per ton of fuel(Bunker C); this is equivalent to about US$8.1 (or LE 3.2) per barrel. Iffuel oil prices in world trade continue to increase, then the economic account-ing price of cement would also increase. At higher prices for fuel oil,alternative fuels, such as coal and lignite on a world-wide basis, are likelyto become economic heating materials for the kiln.

Labor cost: No shadow price for labor has been assumed because TCCrequires mainly skilled labor, which is in short supply. However, total laborcosts exclude taxes and contributions amounting to 13% of the total wage bill.

Other costs: No adjustments have been made with respect to otheroperating cost elements with the exception of imported spare parts; the costof spare parts excludes duties amounting to about 15%.

Project Cost

5. Project cost, which is in current terms, has been deflated by 7% perannum from the year of disbursement to arrive at the capital cost in 1974 realterms, under the assumption that the average world inflation would be about 7%per annum. Moreover, duties and taxes totaling LE 2.1 million have been exluded.

Life of the Project

6. The life of the project is assumed to be 20 years from the year ofcommissioning.

EGYPT

TOURAH CEMENT EXPANSION PROJECT

STREAMS FOR ECONOMIC RATE OF RETURN CALCULATION

19841974 1975 1976 1977 1978 1979 1980 1981 1982 1983 onward

A. Capital Cost Estimates: (LE 000)Project 55 10,587 12,721 6,502 2,272 - - - - -Less: Duties & Taxes - 215 850 1,060 - - - - - -

Sub Total (I) 55 10,372 11,871 5,442 2,272 - _ _ _ _ _Investments Required Without Project - - 3,963 2,335 1,195 295 - - - - - -Less: Duties & Taxes - 157 310 150 - - - - - - -

Sub Total (II) - 3,806 2,025 1,045 295 - - - _ _ _Incremental Fixed Cost (I-II) 55 6,566 9,846 4,397 1,977 - _ - _ _ _Incremental Fixed Cost (deflated at 7% per annum) 55 6,136 8,599 3,589 1,508 - - - - - -Incremental Working Capital - - - - 696 39 37 - - - -Total Incremental Capital Cost 55 6,136 8.599 3,589 2.204 39 37 - - - -

B. Operating Costs:Total Operating Cost (with Expansion) 9,506 10,197 10,509 10,658 13,143 13,923 14,446 14,513 14,580 14,580 14,580.Total Operating Cost (without Expansion) 9,506 10,197 10.509 10 ,791 10 ,791 10,791 10 ,791 10.791 10. 791 10,791Incremental Operating Cost - 0 - 0 -0 O - 2,352 3,132 3,655 3,722 3.789 3

C. Revenue:Total Cement Production (with Project) ( 000 TPY) 1,300 1,350 1,350 1,350 1,780 1,930 2,070 2,070 2,070 2,070 2,070Total Revenue (LE 000) 16,315 16,943 16,943 16,943 22,339 24,222 25,979 25,979 25,979 25,979 25,979

Total Cement Production (withoutProject) ( 000 TPY) 1,300 1,350 1,350 1,350 1,350 1,350 1,350 1,350 1,350 1,350 1,350

Total Revenue (LE 000) 16,315 16.943 16,943 16. 943 16 ,943 16. 943 16.943 16,943 16,943 16,943Incremental Revenue (LE 000) - 0 - O - O - C 5,396 7,279 9,036 9.036 9,036 9,036 9.036

Incremental Economic Rate of Return = 18.9%

1/ If project is not implemented, this investment will be required to maintain the present levelof production (see Annex 5-1, page 5).

rD

A,I\LEX 7-1EGYPT Pg

TOURAH CEMENT EXPANSION PROJECTSENSITIVITY TESTS ON ECOh4OMIC RATE 0=§ RETURN

25%

20%6

(1_.9% _ _

0

4-:

00

1. (Base Case) 1003 100 100 18.9'9. 113 110 100 15.23. 110 110 90 13.2a. 90 90 1 00 21. 9

50 lG10 130 10 20.06. One year Project delayr 16.3iS. One year Project delaly and 1 Op cost overrun 12 .9

EGYPT AIIIJEX 7-1

TOUAHI CE:tVIENT EXPANSION PROJECTEFFECT OF PRICES ONI ECONOIMIC RATE OF RETURN

I I . t #

24

23

22 _

21

20

18.9 , i &f - I_ _ _ h

17

1 7 $a84/13~~~~0

12

.1

117 1, 1,9 20 2,1 222 2, 3 6 2 2 8 2' 20 3~12 33

Cement Price -MFB European Fort (U$per ton)100 90 80 70 6o 0 40 30 20

Fuel Price (US$ per ton)Industrial Projects DepartmnentDecember, 1974,

ANNEX 7-2Page 1

EGYPT

TOURAH CEMENT EXPANSION PROJECT

RISK ANALYSIS

1. Details of economic rate of return calculations together with theassumptions used are given in Annex 7-1. These calculations are based on thebest estimates possible at present. However, since there are a number ofuncertainties prevailing in the world, there could be some variations in thecost and benefit streams. For example, depending on the order books of theequipment supply industries and the general price behavior of steel andother metals, the equipment cost could vary from the present estimates.Moreover, with respect to local construction cost estimates, it is hard topredict how these costs will behave in the future in light of the tremendousinvestment programs planned in ARE for the future. Regarding world marketprices for cement and fuel, although both are somewhat related, it is hardto quantify all factors, such as commercial factors, technological break-throughs, supply and demand distortions, and rising transport costs, whichcould have a major effect on future prices. Therefore, in order to takeaccount of these uncertainties in the economic rate of return of the project,a risk analysis has been carried out.

2. The percentage variations of cost and benefit streams and theirprobabilities are assumed as follows:

Caqital Cost peratin, 'Costs bene'Lits

'479- ,*4ts t o , 1 .7

> l1.0** -4 44 *> 13

r 3i .. 23_

M~~~~~~~~~~~~~~~~~~~~

, .2 - .2 V 2. 2- 0 2 .2 i 0 4

4 4~~~~~~~~ r H -

hqria+tio-i~~~~~~~~~~~~~~~~~~

ANNEX 7-2Page 2

Capital Cost Operating Cost RevenueCumulative Cumulative Cumulative

% Variation Probability % Variation Probability % Variation Probability

-20 to -1)4 .1 -20 to -12 .1 -25 to -18 .1-14 to -10 .2 -12 to - 8 .2 -18 to -12 .2-10 to - 6 .3 - 8 to - 5 .3 -12 to - 8 .3-6 to - 3 .4 - 5 to - 2 .4 - 8 to - 4 .4-3 to 0 .5 - 2 to 0 .5 - 4 to -0 .50 to 5 .6 0 to 3 .6 0 to 3 .65 to 11 .7 3 to 7 .7 3 to 6 .711 to 20 .8 7 to 12 .8 6 to 9 .820 to 34 .9 12 to 19 .9 9 to 13 .934 to 60 1.0 14 to 30 1.0 13 to 20 1.0

3. Based on the above probability distribution, the expected economicrate of return would be 17.9% with a standard deviation of 4.6%. Economicrate of return and the cumulative probability distribution are given in thefollowing chart and the major observations are summarized below.

Expected Economic Rate of Return 17.90%Standard Deviation 4.58%

Cumulative Probability Rate of Return (%)

0.05 110.25 140.50 180.75 220.95 25

4. There is a 90% chance that the economic rate of return of the projectwould be within 11% and 25%. The chances of the return being above 27% orbelow 10% are negligible and the probability of its being above 1h% is 75%.Therefore, the project is expected to provide a satisfactory return even underadverse conditions.

Annex 7-2Page 3

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TOURAH CEMENT EXPANSION PROJECTCUMULATIVE PROBABILITY OF RATE OF RE,TURN

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Rate of' Return

industrial Projects DepartmentAugust, 1974

EGYPT

TOURAH CEMENT EXPANSION PROJECT

FOREIGN EXCHANGE SAVINGS(LE 000)

1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984A. Expanded Case (with Expansion)

1. Gross Savings in Foreign Currency- 16,315 16,943 16,943 16,943 22,339 24,222 25,979 25,979 25,979 25,979 25,9792. Exchange Expenses Incu red in Operations:

Imported Spare Parts- 325 371 408 449 494 582 627 694 761 761 761Interest Payments 14 11 27 21 1,239 1,584 1,733 1,622 1,510 1,3 62 1,192Loan Repayments 156 196 181 180 115 258 1.426 1.482 1.502 1.52 1.5

495 578 616 650 1,848 2,424 3,786 3,798 3,773 3,648 3,5023. Fuel Exports Foregone2 4,740 4,923 4,923 4,923 6.018 6,234 6,381 6,381 6,381 6.381 6,381

4. Net Savings in Foreign Currency (1-(2+3)) 11.080 11.442 11,404 11,370 14.473 15.564 15,812 15.800 15,825 15.950 16.096B. Base Case (without Expansion)

5. Gross Savings in Foreign Currency1/ 16,315 16,943 16,943 16,943 16,943 16,943 16,943 16,943 16,943 16,943 16,943

6. Exchange Expenses Inc red in Operations:Imported Spare Parts- 325 371 408 449 494 494 494 494 494 494 494Interest Payments 14 11 27 21 18 16 11 9 6 4 2Loan Repayments 156 196 181 180 115 101 87 87 87 87 87

495 578 616 650 627 611 592 590 587 585 5837. Fuel Exports Foregon 4.740 4,923 4.923 4,923 4,923 4.923 4,923 4,923 4.923 4.923 4.923

8. Net Savings in Foreign Currency (5-(6+7)) 11.080 11,442 11.404 11,370 11,393 11.409 11,428 11.430 11.433 11.435 11,437

9. Incremental Net Savings in ForeignCurrency (4-8) 0 0 0 0 3,080 4,155 4,384 4.370 4,392 4515 4 659

10. Incremental Net Savings (in US$ 000) 0 0 0 7 7 10 , 19 11,400 11,880

I/Foreign exchange attributable to cement production. Price assumptions are same as those used for economic rate of return calculations.2/ Excludes duties and taxes.3/ This is based on the assumption that if the plant is not operating the fuel could be exported at US$57.4/ton

Industrial Projects DepartmentDecember. 1974

IBRD 11196

ARAB REPUBLIC OF EGYPT $j- E,,E, 1974-

TOURAH CEMENT EXPANSION PROJECT f ) UDRIAN

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