Swiss Participation in a Pioneering Project to refurbish Egypt’s Textile Industry
The Egyptian government is totally refurbishing its textile factories, a process in which the Swiss textile machinery industry is also playing a part. SERV is supporting the project with complex ECA cover, its expertise and its presence in negotiations with local partners.
05.04.2022
Egyptian cotton enjoys a reputation as a luxury product of the very highest quality. However, sales are declining due to high prices, and the state textile factories have become rather antiquated. The Egyptian government has therefore committed itself to refurbishing its entire cotton and textile sector. This includes the modernisation of the Ghazl al-Mahalla spinning mill, which will be the largest in the world. To achieve its objective, the government has selected prestigious Swiss cotton processing and textile machinery manufacturers to equip its mills with state-of-the-art technologies. The machines are designed to reduce energy consumption while also increasing production. Processing the cotton locally adds value and creates skilled jobs in the country.
Supporting and advising exporters from the start of negotiations
An insurance policy from SERV made the transaction in its current form possible and allowed the Swiss suppliers to offer the Egyptian buyer attractive financing conditions. As Hanspeter Weilenmann, CFO at one of the suppliers, Benninger AG (“Benninger”), explains, “Benninger and its customers are dependent on economically viable medium-term financing for the projects.” Karl Mayer Textilmaschinen AG, Luwa Air Engineering AG, Maschinenfabrik Rieter AG, Stäubli AG, Toyota Textile Machinery Europe AG and Uster Technologies AG are also participating in the project.
In addition to providing the insurance, SERV also supported the project in an advisory capacity. Its representatives, together with the financing bank, were present on site from the very outset of the contract negotiations to establish contact with the Egyptian partners. This personal exchange proved very useful, as Hanspeter Weilenmann explains: “SERV’s advisors have been extremely supportive. They visited several times, drove the discussions with the customer forward, explained processes and requirements, and supported us on environmental matters. This good communication was very helpful to us in the negotiations and in the project and financing activities.”
Flexibility for the insurance of a ground-breaking project
SERV faced the challenge of developing a creative and flexible solution for the insurance of this transaction as it involves 87 supply contracts in three different currencies with deliveries to seven locations, each of which must meet different environmental requirements. Close collaboration between all of the parties, the elaboration of a credit agreement and a single payment guarantee provided by the Egyptian Ministry of Finance made it possible.
With a total order value of CHF 402 million, it is a one-of-a-kind project for Swiss textile machinery manufacturers. While they have used SERV-covered financing for a long time, this is the first time that it has been used on this scale for a single project. Andreas Oel, Senior Vice President, Large Enterprises, SMEs & Acquisition at SERV, explains the significance of this project: “Participating in this mammoth project is hugely important for the Swiss textile machinery industry, and may lead to follow-up orders and long-term service mandates in an emerging market.”
The Egyptian state has a relationship with textile machinery manufacturers from Switzerland that spans many decades. The high quality of the machines that were delivered to the country over 40 years ago means that some of them are still in operation. The current deliveries will now breathe new life into these machines.