MerchantBridge and LaFarge to Perform Expansion at Iraq Cement Plant

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Dubai office of direct investment company MerchantBridge & Company Limited (London, England) and French building materials company LaFarge SA (EPA:LG) (Paris), has announced the completion of a $220 million investment in the Karbala cement plant in Iraq.

The two partners "now take on full operations and management of the plant from the government of Iraq under a 15-year lease agreement," according to a statement issued by MerchantBridge. LaFarge holds a 51% stake in the plant, while MerchantBridge holds the remaining 49%. The plant is about 130 kilometers southwest of Baghdad. The lease was arranged through Iraq's Ministry of Industry and Minerals.

The Karbala cement plant presently has an annual production of less than 300,000 tons of cement per year--well below full capacity--as a result of years of neglect and a lack of spare parts. However the two partners plan to increase production up to the design capacity of 2 million tons annually in the next 30 months through a complete rehabilitation program.

The plant, which consists of two production lines, commenced operations in 1985. After the completion of the refurbishment in March 2013, the facility is expected to contribute up to 10% of the total cement market in Iraq. Locally produced cement accounts for about half of the cement consumed in Iraq, and experts forecast that this will be the case for the next decade.

This agreement pushes the MerchantBridge investments in Iraq to more than $1.5 billion in debt and equity and is the largest privatization and debt arrangement deal in Iraq with the exception of oil and gas agreements. MerchantBridge is one of the largest private sector investors in Iraq. The company's key investments in Iraq include the joint venture with Dalmar Energy LLC (Muscat, Oman) to provide drilling and other oilfield services, as well as being a consultant to Iraq's Ministry of Industry and Minerals for the leasing of 35 factories in a number of sectors.

In addition to the refurbishment of the Karbala factory, MerchantBridge has also received a license to construct a greenfield 2 million-ton-per-year cement factory 15 kilometers from the refurbishment project.

The Iraq government estimates that $200 billion of investment will be over the next four years to complete the enormous reconstruction and infrastructure plans. Earlier this month at the Iraq Investment Conference in Bahrain, Ali al-Dabbagh, an official spokesperson of the Iraqi government, said, "Huge investment opportunities do exist in Iraq, and the government will ensure the security to all strategic investors."

According to al-Dabbagh, opportunities exist for foreign investors, particularly as Iraq plans to privatize the power industry to meet the forecast demand of 28,000 MW of power. "Iraq needs trillions of dollars for infrastructure development, rehabilitation and to modernize all the vital projects seen as a crucial part of the national economy," al-Dabbagh said.

MerchantBridge opened its first office in London in 1997 and its office in Baghdad in 2003. Since then, the company has expanded to a network of offices in Europe and the Middle East and is backed by well-known merchant families from the Gulf Cooperation Council region.

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