ICBC contributes $80 million to syndicated loan for Indorama Eleme Fertilizer Line 2 Expansion Project

On June 12, 2018, Indorama Eleme Fertilizers & Chemicals Limited -- a special purpose vehicle that is legally incorporated in Nigeria and a subsidiary of Indorama Corporation (Singapore) -- signed a $1 billion syndicated loan agreement for Phase II of the Indorama Eleme Fertilizer Line 2 Expansion Project. The deal was put together in challenging conditions for the Nigerian market, but it was well structured and had the backing of revenues from the first fertilizer line financed in 2013 (which was also awarded The African Petrochemical Deal of 2013 by PFI). ICBC appears to have been a late add to the syndicate, as when it was originally announced, the loan was lead managed by IFC, which directly lent $100 million (as well as under its managed co-lending portfolio program) together with equally large participations by joint mandated lead arrangers and lenders -- European Investment Bank, Yes Bank, CDC Group, African Development Bank, Bank of Baroda and Standard Bank. In addition, Standard Chartered, Bangkok Bank, FMO, DEG, Emerging Africa Infrastructure Fund, Proparco, ICICI Bank and Citibank also participated in the deal. ICBC reportedly contributed $80 million to the syndicated loan for the Indorama Eleme Fertilizer Line 2 Expansion Project. No MIGA cover or partial risk guarantee were required. The tenor on the debt was 11 years door-to-door for DFIs and 8 years for commercial banks with a four-year principal grace period. The Indorama Eleme Fertilizer Plant which began operation in May 2016 is located on Indorama Eleme Petrochemicals Limited (IPL) site in Port Harcourt, River State and produces 1.4 million MTPA of urea fertilizer. The Indorama Eleme Fertilizer Line 2 Expansion Project consists of the expansion of IFL’s existing fertilizer complex in Port Harcourt, Nigeria from 1.4 to 2.8 million TPA by adding a new and identical train to the existing fertilizer plant. The new fertilizer plant (Line II) will consist of (i) Ammonia unit with a single train of 2,300 metric tons per day (MTPD); (ii) Urea unit with a single train of 4,000 MTPD granular urea; (iii) Urea granulation unit with a single train of 4,000 MTPD design capacity; (iv) Additional small urea granulation unit of 800 MTPD design capacity and (v) Inside boundary infrastructure, utilities and storage facilities. Construction of the second fertilizer line began in April 2018. The second line of ammonia-urea plant and its associated facilities was successfully completed and commissioned in April 2021. The project was categorized as 'category one' project by Nigeria's Federal Ministry of Environment (FMEnv), which confirmed the need to conduct a full blown ESIA. An ESIA for the project was subsequently carried out in line with national legislation. The ESIA process conformed to the AfDB’s ESAP. An ESMP was also adopted. In April 2018 a complaint was filed with the Office of the Compliance Advisor Ombudsman (CAO) by 134 IEFCL employees raising a series of concerns regarding the company’s labor and working conditions and use of security forces. Specifically, these concerns pertain to: (a) salaries/welfare; (b) discrimination; (c) unionization; (d) tax calculation and union dues withholdings; (e) discipline and treatment of employees who complained to CAO and/or who criticize management; (f) workplace safety, hazards, and hazard allowance; (g) healthcare coverage; and, (h) impacts associated with a July 2017 protest. CAO found the complaint eligible for further assessment in May 2018. The CAO team conducted an assessment trip in September 2018. During CAO’s assessment, there was a lack of consensus amongst the parties to engage in a CAO facilitated dispute resolution process. In accordance with CAO’s Operational Guidelines, the complaint has been referred to CAO’s compliance function. In December 2019, CAO completed a compliance appraisal of the case. While the range of issues raised by the complainants are potentially serious, enhanced supervision by IFC subsequent to the July 2017 protest has considered the company’s approach to labor issues and security. Where gaps against Performance Standard requirements were identified, IFC documented implementation of corrective actions. However, while IFC supervision provides general assurance of the company’s PS2 performance, questions remain as to IFC’s response to allegations that the company has taken a retaliatory approach to workers who have raised grievances with the company. CAO concludes that this issue raises substantial concern regarding the application of PS2 to IFC’s investments and requires further investigation by CAO. CAO’s investigation will be limited in scope to IFC’s review and supervision of the company’s disciplinary procedures and approach to grievance handling, including its response to the specific grievances raised in the complaint. In June 2021, CAO finalized the compliance investigation in relation to the case, making two non-compliance findings in relation to IFC’s supervision of the environmental and social (E&S) risks and impacts of the project. The investigation report was sent to IFC for formal response. CAO’s investigation concluded that, while IFC enhanced its supervision of the Company’s WGM since 2018 and documented improvements, IFC supervision activities do not provide sufficient evidence of the effectiveness of the Company’s WGM regarding PS2 requirements. Particularly, IFC lacks assurance that the Company is implementing a WGM which provides workers with a channel to address their concerns in a manner that is perceived as safe and fair. The investigation also concluded that IFC’s response to the complainant's allegations of Company retaliation against workers was insufficient and represents a non-compliance with the Performance Standard 2 requirement to ensure the right of workers to organize and raise grievances without fear of reprisal. An appropriate IFC response would have included actions aimed at further understanding and assessing the situation, such as: engaging with workers alleging instances of reprisals to review their claims and concerns, and/or a more in-depth review of whether the company’s WGM was effective and whether disciplinary procedures had been properly applied. CAO concluded that the lack of guidance at the IFC and client level on handling allegations of retaliation at the time was an underlying cause of this non-compliance finding. Finally, CAO also concluded that available evidence, in this case, is insufficient to make findings of adverse outcomes in relation to the complainants’ allegations of retaliation. CAO’s investigation report and IFC’s response, which included a Management Action Plan (MAP), were cleared for publication by the IFC Board of Directors on September 16, 2021. The first Management Progress Report on the Implementation of the Management Action Plan was published on October 26, 2022.

Additional details

1. The ESMP can be accessed in its entirety via https://www.afdb.org/sites/all/libraries/pdf.js/web/viewer.html?file=https%3A%2F%2Fwww.afdb.org%2Fsites%2Fdefault%2Ffiles%2Fdocuments%2Fenvironmental-and-social-assessments%2Fesmp_summary_nigeria_indorama.pdf#page=1&zoom=auto,-14,848. 2. The ESIA summary can be accessed in its entirety via https://www.afdb.org/sites/all/libraries/pdf.js/web/viewer.html?file=https%3A%2F%2Fwww.afdb.org%2Fsites%2Fdefault%2Ffiles%2Fdocuments%2Fenvironmental-and-social-assessments%2Fnigeria_-_indorama_fertiliser_plant_-_esia_summary.pdf#page=2&zoom=auto,-16,389 and https://www.afdb.org/fileadmin/uploads/afdb/Documents/Environmental-and-Social-Assessments/ESIA_Summary-Indorama_Eleme_Fertilizer_II-NIGERIA_.pdf 3. The Office of the Compliance Advisor Ombudsman is an independent complaints and accountability mechanism for people who may be affected by IFC and MIGA projects.

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