The European Investment Bank (EIB), the European Union's long-term financing institution, is providing a loan of USD 372 million, for the construction of the first train of a liquefied natural gas (LNG) plant at Idku, some 40 km east of Alexandria.

This loan, one of the largest ever financings provided by the Bank in the Mediterranean Partner Countries (MPCs) is provided under under the Bank's "Facility for Euro-Mediterranean Investment and Partnership (FEMIP). The borrower, El Behera Natural Gas Liquefaction Company, is a joint venture bringing together the major international gas groups: British Gas (35.5%), Petronas (35.5%) and Gaz de France (5%) with the public sector Egyptian General Petroleum Corporation - EGPC (12%), and Egyptian Natural Gas Holding Company - EGAS (12%).

This is a prime example of the EIB's catalyst role in investment in the MPCs. The Bank's experience in Egypt, its longstanding financial relationship with the principal project promoters, the mitigation of the political risks (under the EuroMed portion of the loan package) and the Bank's capacity to attract long-term commercial funding and guarantees on this transaction are viewed as decisive factors by the Government of Egypt and the project sponsors .

The project involves technology transfer to Egypt through the participation of three major international companies. The gas comes from the West Delta Deep Marine concession and will be dedicated to export, through a 20-year take-or-pay agreement with Gaz de France, a well-known and experienced LNG off-taker. Priced competitively, the LNG is likely to find markets also elsewhere in the Union. In exporting a part of the large Egyptian natural gas reserves, the project will benefit the country's economy by generating substantial foreign exchange revenues.

FEMIP is a major step forward in financial and economic cooperation between the Union and the Mediterranean Partner Countries (MPCs). It foresees EUR 8-10 billion funding of investment in the MPCs by 2006. It has at its disposal funds under the existing Euro-Mediterranean mandates, risk capital resources and technical assistance funds from the EU budget..FEMIP's top priority is to promote private sector development (especially SMEs and FDI) and support projects helping to establish a favourable climate for private investment (economic infrastructure, health and education schemes). FEMIP's ultimate goal is to help the MPCs meet the challenges of economic and social modernisation and enhance regional integration in the run-up to the creation of a Euro-Mediterranean free-trade area planned for 2010.

Set up following the Barcelona European Council in March 2002, it was inaugurated in October 2002. During FEMIP's first full year of activity, the Bank has extended over 1.8 billion of new loans and approved a pipeline of 17 new investment operations for another total amount of EUR 1.8 billion, benefiting almost all MPCs. This led the recent Brussels European Council to further reinforce FEMIP by closer cooperation of the 27 Euromed Partner countries (15 EU, 2 Acceeding and 10 MPCs), more regional offices in the MPCs, and innovative financing instruments.

The EIB has had operational links with Egypt since 1978 and has channelled financing of some EUR 3 billion to the country. This has been concentrated on support for infrastructure, environmental schemes and private sector businesses - encompassing both large corporates stemming from cooperation between local and European operators and SMEs financed in partnership with the Egyptian banking sector. In 2002, the EIB provided EUR 225 million in Egypt for extension of the Cairo metro and the first phase of the Nubariya power plant as well as in equity funding for Egyptian SMEs. In 2003, the Bank has lent EUR 450 million equivalent to finance the second phase of the Nubariya power plant and the Idku LNG plant.