K. A F A 4t .7X Report No. 351 -MOR FILE COPY Morocco: Appraisal of the Maroc-Phosphore Phosphoric Acid and Mono-Ammonium Phosphate Project April 19, 1974 Industrial Projects Department Not for Public Use Document of the International Bank for Reconstruction and Development International Development Association This report was prepaed for offical use only by the Barik Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. CURRENCY EQUIVALENTS WEIGHTS AND MEASURES All figures in DH and US$ All weights and measures are in of Jan./Feb. 1974 except metric units as otherwise indicated 1 US$ h 4.42 DH (Dirhams) 1 Ton (T) - 1,000 kilograms (Kg) 1 DH = 0.23 US$ 1 Ton (T) - 2,204 Pounds 1 clearing $ = 4.195 DH 1 Kilometer (Km) = 0.62 miles 1 BE = 0.63 DM (Deutsch Mark) 1 Cubic Meter (m.3) = 264 US Gallons 1 iD = 1.58 DH 1 US$ = 2.80 DM ABBREVIATIONS AND ACRONYMS N Nitrogen - Nutrient Element in Nitrogenous Fertilizer P205 Phosphorus Pentoxide - Nutrient Element in Phosphatic Fertilizer PA Phosphoric Acid Solution containing 54% P205 MAP Mono-Ammonium Phosphate (11-55-0) containing 11% of N and 55% of P205 DAP Diammonium Phosphate (18-46-0) C&F Cost and Freight CIF Cost, Insurance and Freight FOB Free on Board FAS Free Alongside Ship TPD Metric Tons per Day TPY Metric Tons per Year Comanav Compagnie Marocaine de Navigation FFM Fertilizantes Fosfatados Mexicanos Gazocean French Partner in the Shipping Company ICM Industries Chimiques Maghrebines KfW Kreditanstalt fUr Wiederaufbau Marphocean The Shipping Company MC Maroc-Chimie Company MP Maroc-Phosphore (Project Company) OCP Office Ch6rifien des Phosphates (Sponsor) FISCAL YEARS January 1 - December 31 HOROCCO APPRAISAL OF TIIE MAROC-PIIOSPTHORE PHOSPHORIC ACID AND MONO-AMMONIUM PHOSPIHATE PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS ................... .......... i-iv I. INTRODUCTION ............................. . so ...., 1 II. ITHE SPONSOR, THE COMPANY AND THE SECTOR ............, 1 A. Office Cherifien des Phosphates (OCP) ......... 1 EN. Maroc-Phosphore Company (MP) ...... ............ 2 C. Sector Development.... . .... ........ . 3 III. T'HE PROJECT AND THE INFRASTRUCTURE ................. 4 A. Facilities, Products and Raw Materials ........ 4 B. General Infrastructure ........................ 5 C.Ecology .................................... 5 IV. WORLD MARKETS AND PRICES ......................... . 5 A. Main Trends ndd Rationale ... 5 B. Finished Phosphate Fertilizers . . 6 C. Phosphate Rock . ....................... ..s. 6 D . Sulfur ..................................... 7 E. Phosphoric Acid ............................... 8 F. Mono-Ammonium Phosphate ....................... 9 V. MARKETING, TRANSPORT AND TERMINAL' .............. ...... 10 A. Marketing and Sales Arrangements . . 10 B. Acid Transport .............. ......... 12 C. Receiving Terminal Facilities ......... 13 VI. PROJECT FXECUTION ........ ... ...... 13 A. Background ............. . ... 13 B. Selection of Contractors ...14 This report has been prepared by Messrs. R. Carmignani, S. Cottrell, M. Ferber and A. Gros of the Industrial Projects Department, on the basiLs of missions to Morocco in February and October 1973 and March 1974. TABLE 01' CONTENTS (Continued) Page No. C. The Consortium and the Project Contract....... 14 D. Procurementocut.. .. .. ... 16 F. Project Organization and Company Management... 16 F. Staffing and Training ...... .............. 17 VII. CAPITAL COST AND FINANCING PLAN .................... 17 A. Capital Costs .... .......... ... .... .......... 17 B. Working Capital .. 19 C. Financing Plann........... 19 D. Allocation of Loans and Disbursement Schedule. 20 VIII. FINANCIAL ANALYSIS ....... 22 A. Revenues and Operating Costs . . 22 B. Financial Forecasts ....23 C. Financial Return and Sensitivity Analysis 24 D. Risks and Financial Covenants . . ............... 25 IX. ECONOMIC JUSTIFICATION ........................ .. . 26 A. World Trade Pattern and Sales Strategy 26 B. Additional Rock Sales from Youssoufia 26 C. Other Social Benefits. 26 D. Economic Rate of Retur .26 X. RECOIMNDATIONS AND AGREEMENTS REACHED...... 27 A. Sector Recommendations . ....................... 27 B. Agreements Reached... . ..... .,...... 27 ANNEXES 1 The Phosphate Industry and Technical Terms 2-1 Thie Sponsor: Office Cherifien des Phosphates (OCP) 2-2 The Technical Advisor 3-1 Process Diagram and Flow Chart 3-2 Project Description: Plant Facilities, Auxiliaries and Offsites 3-3 General Infrastructure Outside the Project 3-4 Ecology 4-1 Phosphate Fertilizers: World Trade and Prices 4-2 Phosphate Rock: World Trade, Prices and Prospects 4-3 Sulfur: World Supply, Demand and Prices 4-4 Intermediate Phosphate Fertilizers: World Trade and Prospects TABLE OF CONTENTS (Continued) 5-1 Acid Transport and Terminals 6-1 B:idding Procedure and Selection of the Consortium 6-2 The Consortium Organization and the Plant Construction Contract 6-3 Industrial Tests 6-4 T,entative Project Schedule 6-5 Project Execution Charts 6-6 Project Team and Company Management Charts 6-7 Staffing and Training Charts 7-1 Capital Costs Estimates 7-2 Retroactive Financing and Expenditures during Construction 7-3 Working Capital Estimates 7-4 Financing Plan: Equity Subscription and Loan Withdrawal Schedule 8-1 Operating Costs Estimates 8-2 Projected Income Statements A-3 Projected Cash Flow Statements 3-4 Projected Balance Sheets 3-5 Schedule of Repayments and Interest on Long-Term Debt 8-6 Financial Break-Even Chart 8-7 Financial Rate of Return and Sensitivity Analysis 9-1 Fconomic Rate of Return: Investment Costs 9-2 Economic Rate of Return: Operating Costs 9-3 Economic Rate of Return: Calculation and Sensitivity, Analysis MAPS 1. Ports, Railroads and Phosphate Rock Deposits (IBRD 10726R) 2. Location of Facilities and General Plant Layout (IBR) 10727R) 3. Port of Safi: Storage and Handling Facilities (IBRD 10371R) APPRAISAL OF THE I4AROC-PHiOSPHOPE PHOSPHORIC ACID AND 140NO-AMMONIUM PHOSPHATE PROJECT MOROCCO SUMMARY AND CONCLUSIONS i. This report appraises a project for the construction in Morocco of a plant to produce for export intermediate phosphate fertilizers. The project--for which financing by Kreditanstalt fur Wiederaufbau (KfW) of Germany, the local development bank Banque Nationale pour le Developpement Economique (BNtDE), and the Bank is envisaged--is sponsored by Olfice Cherifien des Phosphates (OCP), the State-owned phosphate rock mining agenicy. OCP will own all the shares of the Maroc-Phosphore Company (NP) recently formed to build and operate the project. The plant to be located near the Port of Safi and adjacent to the existing phosphate fertilizer plant of Maroc-Chilnie (MC), will produce on average about 371,200 tons per year (TPY) of P205 as iiquid phosphoric acid and 225,800 TPY of powdered miono-ammoniumn phosphate (MAP) 1/. It will use local phosphate rock--the major input--from the Youssoufia mine about 80 km from Safi, imported sulfur from Poliand and imported ammonia. The project is expected to cost US$155.5 million equiv- alent and to start commercial operations by January 1976. The proposed Bank loan--US$50 million--will be made directly to MP. ii. OCP is the largest single producer and exporter (32% of world trade) of Fhosphate rock in the w'orld. Mining is concentrated in two areas: Khouribga linked to the port of Casablanca; and Youssoufia, iinked to Safi, where underground labor-intensive mining techniques are used. The projected financial situation of OCP is good, particularly following the sharp increase (by late 1973) in world phosphate rock prices. Though OCP has some manage- rial responsibility in the State-owned MC plant, the project will actually be the first involvement of OCP in chemical manufacturing. ConLsequently, OCT and MP are assisted by an experienced technical advisor Haldor Topsoe AS of Denmark. iii. The project, with a capacity of 1,500 TPD of P205 of which up to 45% can be converted into MAP, will benefit fully from econoroJes of scale. Because of its vicinity to and cooperation with MC, the project: will also benefit--with corresponding cost savings--from existing infrastructure and auxiliary facilities at the plant site and at the Safi port. Additional infrastructure needed in connection with the project will be executed by the appropriate Government agencies. 1/ Phosphoric acid is a key intermediate product in manufacturing high grade phosphate fertilizers. It is a highly corrosive liquid transported in special vessels. MAP is a high grade powder semi-finished compound fertilizer. P205 is the nutrient element in phosphate fertilizers. - ii - iv. Structural changes --providing the rationale for the project --in production and trade of phosphate fertilizers have occurred in the past 10 years because of: (i) rapid increase in production and trade of high grade fertilizers; (ii) rapid increase in phosphoric acid capacity, prompted by the trend to high grades; (iii) rapidly niounting trade in intermediates (liquid phosphoric acid or solids like MAP); (iv) increase in size of in- termediates production units; and (v) increased participation of developing countries in the world trade. Consequently, the future trade pattern for P905 products is likely to shift from present domination by rock and sulfur to a more balanced trade combining these materials and increasing quantities of intermediates and high grade finished products. To meet the increasing demand for such products, the Government and OCP have made ambitious plans for the period 1973-77. They include, in addition to the MP project doubling of the MC capacity and creation, also at Safi, of a new acid plant similar to, but independent from, the project. v. Though the overall demand and supply for intermediates might well tightly balance towards the end of the 1970s, it is expected that MP will have an adequate market for its products and be able--given its location and other comparative advantages--to compete effectively with other producers. To reduce market risks and given that the trade for intermediates is only emerging, specific contractual narketing arrangements have been made. Under reasonable assumptions for successful completion of sales negotiations by mid 1974, OCP will have, by then, concluded medium-term sales arrangements representing a substantial portion of the project outptut during the first five years of operation. Sales will concentrate in four major zones: East Europe, Northwest Europe--essentially Germany and the Rotterdam area--,India, and Brazil. vi. A new company, Marphocean, has been formed to purchase and operate, under Moroccan flag, three specialized ships to transport the acid. Marph- ocean--owned by the Moroccan national shipping company COMANAV, OCP, and the French ship engineering firm Gazocean--will enter into a long-term charter arrangement with VP. The Bank is not financing the shipping facilities, but their timelv availability is essential to the success of the project. vii. Following a request by the Government for Bank technicai assis- tance, OCIP and the Bank closely cooperated in the preparation and supervi- sion of a call for turn-key bids. The desirable sequence for execution of this particular project as well as the early conclusion of a turn-key con- tract was imposed by the need to: (i) increase buyers confidence in the project; and (ii) obtain a firm project cost essential for determining a sound sales strategy and for allowing the start of sales negotiations. OCP has already contracted -- in two stages -- the plant construction and project execution has commenced. OCP has signed a first contract (June 1973) to build facilities corresponding to about two-thirds of the project capacity and completed negotiations (April 1974) for a supplementary construction contract based on identical terms to cover, together with the first contract, thle overail construction of the project's main facilities and offsites. Since - iii - international competitive bidding was used to select the consortium which is to execute the project--at a lump sum price subject to an agreed escala- tion formula -- no major Bank supervision of bidding and procurement will be involved. The iowest bid was submitted by a consortium headed by Uhde of Germany. The consortium includes Polimex of Poland, Siemens of Germany, Nissan of Japan and Fisons of the UK. viii. A satisfactory organization for project execution has been developed by OCP and includes: the MP project team, the nucleus of the company; the various OCP Departments involved; the technical advisor Topsoe; the Uhde team; and an nCP group of engineers for future intertmediates manufacturing projects. These organizational arrangements are expected to ensure efficient project execution. Furthermore, given the expected difficulties in recruiting Moroccan chemical engineers, Topsoe and Uhde, as part of their contracts with OCP, will assist in the recruitment and training--in Morocco and abroad-- of key personnel, including expatriates if needed. ix. The total financing required--US$155.5 million equivalent of which US$100.1 million in foreign exchange--will be provided in the ratio of 55% debt to 45% equity. The Bank loan of US$50 million (59% of total loan funds), the KfW loan of DM 75 million (about US$26.8 mlllion) and the BNDE loan of US$8 million, would together cover 97% of the expected convertible foreign exchange costs. The equity funds would finance the local costs, the costs of Polish supplies payable in clearing dollars (US$12.6 million) and US$2.7 million equivalent of the remaining convertible foreign exchange costs. The proposed Bank loan would be made directly to MP at an effective interest rate of 9% per annum, including a guarantee fee of 1-3/4% payable to the Government, and for 14 years including 4 years of grace. The KfW loan, granted to the Government at 2% for 30 years including 10 years of grace, would be on-lent to I.. The terms and conditions of the KfW relending and the BNDE loan to MP would be the same as for the Bank loan. x. By the time the Bank loan is expected to be approved (June 1974) OCP would have disbursed about 25% of its equity and made US$12.8 million advance payments in convertible foreign exchange, which are proposed to be financed retroactively by the lenders (US$8 million by BNDE and the remaining US$4.8 million jointly by the Bank and KfW). Total retroactive financing required from the Bank would amount to TUS$3.1 million and represents a rela- tively small percentage of the Bank loan (6%). The proposed retroactive financing is a consequence of the strategy adopted: (i) by OCP in first firming up project costs and then negotiating sales contracts, and (ii) by the Bank in evaluating the project on the basis of firmer evidence and seeking to reduce commercial risks. - iv - xi. The Company's projected financial position is good with satisfac- tory debt/equity and debt service coverage ratios throughout the forecast period. The project's financial rate of return after taxes is satisfactory (16.9%) particularly in view of the prudent capital, revenues, and operating costs estimates used which are only marginally affected by the recent in- crease in energy costs. Technical risks regarding plant design and opera- tions and risks of substantial delays or major cost overruns are considered rather low. Commercial risks (market, transport and prices) of the project, on the other hand, are judged to be relatively high given the not yet fully established trade in intermediates and the need for complex and coordinated acid transport. However, commercial risks have been reduced substantially through contractual sales arrangements. In addition OCP has committed it- self to establish and maintain a sound liquidity and financial position of the MP Company. xii. The economic rate of return of the project, estimated at 21.2%, is satisfactory. In addition to its directly quantifiable economic bene- fits the project will also generate substantial external benefits. It will: increase employment in the Youssoufia mines using labor-intensive techniques in a region where employment alternatives are low; develop manufacturing activities in Safi, in line with the Moroccan policy for industrial decentrali- zation; help OCP participate in the world intermediates trade; provide educa- tion externalities through training of personnel; and constitute a base for future similar projects in Morocco. xiii. Based on the agreements reached with the Government, MP and OCP, the project is suitable for a Bank loan of US$50 million to MP, for a term of 14 years including a 4-year grace period and, to be guaranteed by the Kingdom of Morocco. I. INTRODUCTION 1.01 The Government of Morocco has asked the Bank for technical and financial assistance in the preparation and execution of a project to pro- duce for export 371,250 tons per year (TPY) of P O as phosphoric acid solu- tion and 225,780 TPY of mono-ammonium phosphate RMAP) 1/. The project is sponsored by the Government-owned phosphate rock mining agency Office Cherifien desi Phosphates (OCP) and is being executed by the recently formed -Uroc-Phosphore Company (MP). NP is assisted by OCP and its technical advisor, Haldor Topsoe AS of Denmark (Topsoe). The project--to cost US$155.5 million equivalent--is located near the Safi Port on the Atlantic coast (Map 10726R) and is expected to start commercial operations in January 1976. OCP will supply phosphate rock, the major input, from the Youssoufia mine about 80 km distaLnt from Safi. Sulfur and ammonia, the two other raw materials, will be imp-orted. Annex 1 gives a brief description of the phosphate industry and of the technical terms used in the report. 1.02 Ihe project, the first involvement of OCP in chemical manufacturing was presented to the Bank in June, 1971. The Government of Morocco (the Gov- ernment) and OCP asked for Bank assistance in the formulation, preparation and supervision of a call for turn-key bids and this was followed in December 1972, by a formal request to help finance the project. The project was appraised in Morocco in February and October 1973 by Mlessrs. R. Carmignani (Chief), S. Cottrell and M. Ferber of the Industrial Projects Department. An updating mission visited Morocco in March 1974. Discussions; were also hleld in Europe with the OCP Sales Department; the acid transport partner Gazocean; and the major co-lender, Kreditanstalt fur Wiederaufbau (KfW). HI. TIE SPONSOR, THE COMPANY AND THE SECTOR A. Office Cherifien des Phosphates (OCP) 2.01 OCP was established by decree in 1920 to exploit and process Morocco's phosphate rock resources. It was initially organized and operated as a department of the then existing administration. Its legal status modi- fiedl by decree in 1960, allows OCP to operate as a commercial industrial company. OCP now operates as a fully State-owned and financially autonomous public establishment. Mr. Karim Lamrani 2/ has been the Gencral Manager of 1/ Phosplhoric acid is a key intermediate product in manufacturing high grade phosphate fertilizers. It is a highly corrosive liqjuid 'Ind needs to be transported in special rubber-lined or stainless stee' tanks. MAP is a high grade semi-finished compound fertilizer shipped in bulk powdered form. P 05 is the nutrient element in phosphate fertilizers. The MAP (11-55-0 produced will contain 11% nitrogen, 55% of P205 and no potash. 2/ Formerly Finance Minister and Prime Minister of Morocco. -2- OCP since 1967. He has extensive experience in management and has successfully developed OCP's activities in recent years. Annex 2-1 gives details on OCP and its operations. OCP's share capital is DR 554 million and its total net assets exceed DH 1 billion. Sales in 1973 are estimated at about US$230 million and its operations are profitable. Its future financial situation is expected to be particularly good in view of sharp increases (by late 1973) in world phosphate rock prices. OCP is the largest single phosphate rock producer and exporter in the world. In 1972, its share was 16% of the world's total production and 32% of world trade. Phosphate rock mining is now concentrated in two mining centers: Khouribga, linked to the port of Casablanca; and Youssoufia, linked to the port of Safi. OCP has improved its share in world production and trade in the past years following a large expansion program, started in 1967 and now completed, which has increased rock production capacity to 19 million TPY 1/ by the end of 1973. By far the most important market for OCP is Europe (82% of sales in 1972). 2.02 The Youssoufia mine produces a medium grade rock (70/72 BPL after pr,ocessing 2/) mostly exploited through underground labor-intensive mining techniques. Facilities at Khouribga are mostly open cast and about two- thirds of Khouribga's 1972 production consisted of high grades (75 BPL and above) with a high export value. During the period 1973-77, OCP plans to further expand its rock mining and processing capacity by about 6 million TPY to meet the rising world demand for rock. To increase production of high grades and reduce costs, most of the expansion will take place at Khouribga (Annex 2-1). Khouribga will also, however, produce in the fu- ture increasing quantities of 72 BPL grades mined simultaneously with the higher grades. Khouribga's medium grades are, therefore, likely to compete increasingly with traditional sales from Youssoufia. 2.03 OCP contributes significantly to Morocco's economy. In 1973, it accounted for nearly 30% of the country's foreign exchange earnings 3/ and employed about 14,000 persons--mostly unskilled and semi-skilled--providing income to a population of about 100,000. In addition to dividend payments to the Government, OCP pays a considerable amount of direct and indirect taxes (Annex 2-1). It is the major purchaser of locally manufactured equipment and the most important (client of the railways company. B. Maroc-Phosphore Company (MP) 2.04 A new company, "Maroc-Phosphore", has been formed to build and operate the project. The Company is a "Societe Anonyme" under Moroccan industrial and commercial laws. Its initial authorized share capital is DH 1 niillion and will be increased to provide for additional equity sub- scriptions as execution of the project proceeds. OCP will own all MP's 1/ About 14.5 million TPY at Khouribga and 4.5 million TPY at Youssoufia. 2/ BPL = Bone Phosphate of Lime (Annex 1). The 70/72 BPL grade is equiva- lent to a 32-33% P20 content. 3/ This share might well reach 50% in 1974. -3- shares. "La Societe Fiduciaire du Mlaroc" has been nominated to audit MP's accounts. It is an independent auditing company satisfactory to the Bank. In view of OCP's well-established and well-run organization, MP sales, finance and accounting functions will be managed by OCP personnel. Plant and production management will be autonomous. The project manager, Mr. Sellam M'Hamedi, is expected to become MP's General Manager at start of production. He has, therefore, full responsibility for supervising the plant construction and will manage its operations aad coordinate the other functions carried out by OCP. Ile reports to the OCP Gineral Manager, also Chairman of the MP Board. Total NP staff, after start of olierations, is planned to reach a minimum of about 400 people. Provision has, however, been made in the operating costs for larger staff (500 people). 2.05 After international consultation, OCP selected Topsoe as their Technical Advisor. Topsoe is incorporated in Denmark and has a worldwide reputation in consulting, engineering and research in the chemical field (Annex 2-2). Although Topsoe was selected before the Bank became involved, the Bank has no objection to this choice. There appears to be good coopera- tion between Topsoe and the MP project team. C. Sector Development 2.06 The project is located about 13 km south of Safi and is adjacent to the existing Maroc-Chimie (MC) phosphate fertilizer plant. To meet the increasing demand for finished and intermediate P 20 products (Chapter IV), the Government and OCP have made plans for the period 1973-77. They include, in addition to the IP project and to the expansion of rock production capa- city to 25 million TPY: (i) a doubling (MC1 project) of the MC production capacity 11; and (ii) creation at Safi of a new Maroc-Phosphore unit (MP2 project) similar to but independent from the project. The MC1 project is under execution and tenders are expected to be called shortly for the MP2 project. The Bank initially expressed some reservations as to such a rapid sectoral development because all investments involved would draw on the same scarce resources in Safi (mostly skilled staff, water, transport, storing and handling facilities) and serve the same growing but limited global P205 market. The representatives of the Government and OCP agreed to furnish information to the Bank on this investment program and on future phosphate manufacturing and other industrial facilities in the area of Safi and gave informal atssurances that no future investments in the Safi area would be made that could adversely affect the project. 1/ MC produces about 400,000 TPY of phosphate fertilizers, equivalent to abou2t 150,000 TPY P O, more than half of it for export and consumes 0.6 million TPY Youssoufia rock and 0.5 million TPY of local pyrrhotine-- a naitural iron sulfide whose sulfur content is used in making sulfuric acid. MC will, after expansion (by 1977), produce nearly 1 million tons of phosphate fertilizers and consume 1.5 million tons of rock. - 4 - III. THE PROJECT AND THE INFRASTRUCTURE A. Facilities, Products and Raw Materials 3.01 The plant will produce commercial-grade phosphoric acid containing 54%_P,O,, suitable for ocean transportation in special ships; and fine-grained (11-5 - ) MAP with a low 1% moisture content suitable for bulk transport using traditional handling and shipping facilities. The project will have a capac- ity of 1,500 tons per day (TPD) of P205, of which up to 45% can be converted into MAP, after combination with ammonia. On average about 25% of the total P205 manufactured will be converted into MAP and the plant will therefore- at full capacity--produce 371,250 TPY of P205 as acid, and 225,780 TPY of MAP. Annex 3-1 shows process diagrams and flow sheets for the project. Since the plant will be adjacent to the existing MC plant, the Company will benefit from available transport infrastructure and existing storage, handling and shipping facilities at Safi with resulting cost savings. 3.02 The main production facilities will include: a three train 1,500 TPD P205 phosphoric acid unit; a 4,500 TPD sulfuric acid plant, also with three trains; and a two train 1,220 TPD MAP unit. The principal units will be large enough to benefit fully from proven modern technology and economies of scale. In addition, there will be: the usual utilities; inputs and outputs storage and handling facilities at the plant and the Safi port; electric and steam generating units; a connection to the national power grid; a connection to a new rock unloading system (gare haute project) for both MC and IMP; in-plant intake systems for process fresh water and cooling sea water; administration buildings; maintenance shop and store houses; and plant connections to existing railroads. The port of Safi can receive ships cf up to 20,000 dwt and the materials and equipment for the plant construc- tion will be Imported through Safi. Annex 3-2 gives a more detailed des- cription of the facilities, off-sites and auxiliaries. 3.03 Of the principal raw materials: (i) phosphate rock will be sup- plied by train from OCP's Youssoufia mine, under a long-term supply contract; (ii) sulfur will be imported in dry lump form also on long-term contracts; ancl (iii) small quantities of ammonia will be bought from various sources on a spot basis. At capacity operation, raw materials consumption will be about 1.62 million TPY of rock, 481,000 TPY of sulfur, and between 31 and 56,000 TPY of ammonia depending on the rate of MAP production. Catalysts and chemicals will all be imported. The Youssoufia rock averages 70-72 BPL and known reserves are adequate to supply the project with the same grade over a much longer period than its expected life. -5- B. GeneraLl Infrastructure 3.04 Certain infrastructure facilities needed for, but not part of the project, and estimated to cost about DH 36 million (US$8 million), will be built by the appropriate Government agencies but be closely suplervised by OCP and ID; the necessary budget allocations have been made. Ihese facili-- ti.es, described in Annex 3-3 include: the supply of fresh water 3through mcdification of a canal, installation of a new canal, a 56,000 m reservoir and a conduit; installations for unloading sulfur at the port; and railroad equipment and railroad sidings at the Safi port and from the Youssoufia-Safi rail line to "gare haute". The tariffs, to be paid by ID for these services have been agreed upon with the agencies involved. Availability of housing is being reviewed by the regional authorities. A schedule for construction of these facilities has been agreed upon with the Government which has under- taken to provide the facilities on time as required by the project. C. 7colo 3.05 The main potential pollutants will be: boiler blow-down; sulfur filter cake; gypsum; sulfur and rock dust; tail gas containing sulfur-oxides and fluorine compounds. The Government has,not yet established specific pollution standards but appropriate measureit to handle these effluents are provided for as part of the project (Annex :-4). In particular, the filter cake will be fed into MC's sulfuric acid unit and the gypsum will be re- pulped in sea water and disposed of directly into the ocean. This gypsum disposal method, used by IfC since start-up in 1965, has never created any pollution problem on account of the inert nature of gypsum and the swift ocean current bringing about quick dispersion. All storage and handling installations for solids will receive de-dusting equipment. A new disposal area for MC's pyrrhotine cinders has been created at some distance from MP and thus will eliminate the dust contamination from IMC. OCP and MP agreed to carry out the project with due regard to environmental requirements. IV. WORLD MARKETS AND PRICES A. Main Trends and Rationale 4.01 The main trends that have brought about structural changes in pro- duction and trade of phosphate fertilizers in the past 10 years are: (i) rapid increase in production and trade of high grade fertilizers; (ii) rapid increase in phosphoric acid capacity, prompted by the trend to high grades; (iii) emerging trade in intermediates (liquid phosphoric acid or solids like MAP); (iv) increase in size of intermediates production units and economies of scale; and (v) increasing participation of developing countries in the world trade. Rock and sulfur are available in large quantities only from - 6 - a limited number of sources 1/ and there is a mounting trade in intermediates. Therefore, the world trade environment in which the project will operate and likely trade-offs anong the different, but highly substitutable, P205 prod- ucts are reviewed in this chapter. The future trade pattern for P205 prod- ucts is likely to shift from present domination by rock and sulfur to a more balanced trade combining these materials and increasing quantities of inter- mediates and high grade finished products. Production and exports of inter- mediates--formerly captive products in integrated plants--by large export oriented units located close to raw material sources is likely to develop. The project will participate in such a development. B. Finished Phosphate Fertilizers 4.02 World supply reached about 23.2 million tons P205 in 1972. In the same year world capacity was estimated at 25.1 million TPY P205 equivalent to a capacity utilization of about 92%. In recent years world consumption increased at an annual rate of about 5%. During the 1970s world demand for P105 is expected to grow at about 6.0% per year to reach some 38 million tons of P2O5 by 1980. Demand for high-grade fertilizers (essentially phosphoric acid based) will increase faster than average and their share in world con- sumption is likely to increase from about 50% in the late 1960s to 70% in the mid 1970s. Annex 4-1 gives details on production, consumption and trade. 4.03 The 1972 world export trade, most of which is in high-grade fer- tilizers, was about 3.6 million TPY P205 of which about 1.3 million tons represented the intra-trade in North America and Western Europe; 1.2 million tons were exported from the US and Western Europe to developing countries-- principally Latin America and Asia--mostly through tied bilateral aid; and 0.4 million tons were exported from Morocco and Tunisia to Europe. MP will represent about 10% of the present world trade of finished phosphate fer- tilizers. The world P205 supply/demand situation moved from an oversupply in the late 1960s and early 1970s to a tight balance in 1972 and to a short- age in 1973 as a result of increased domestic demand mainly in the US and in EasteYn Europe. The severe shortage of high-grade phosphate fertilizers resulted in considerable increases in prices. Representative FOB export prices for typical finished phosphate fertilizers--an indicator of price levels for MP's intermediate products--reached US$220 to US$280 per ton of P20 at the end of 1973 as compared to about US$100 in 1970 (Annex 4-1). C. Phosphate Rock 4.04 Production, trade patterns and price developments for phosphate rock are showni in Annex 4-2. World production of rock, concentrated in the six areas mentioned above rose from 40 to 90 million tons between 1960 and 1/ There are only 6 major rock exporting areas (US, USSR, Morocco and North Africa; West Africa, Middle East, and Pacific Islands) and 5 exporters of sulfur (US, Canada, Mexico, France and Poland). The pattern and location of the phosphate industry results from an optimum combination of: size of local and/or accessible export markets; local availability or low cost procurement of raw materials; and general infrastructural and policy factors. 1972. The :Leading producers were the US (42%); the USSR (22%); and Morocco (16%). During the same period world capacity more than doabled and was es- timated at about 99 million tons in 1972. Capacity utilization which in the 1960s was about 85-90%, increased to an estimated 92% in late 1972 and to 95% in 1S73, reflecting large increases in demand. World export trade of phosphate rock increased from 29.2 to 43.5 million tons between 1965 and 1972 with about two-thirds of the trade going to Western and Eastern Europe. The main exporters were Morocco (31% of world exports), the US (29%) and the USSR (14%). Whereas Morocco exports nearly 95% of its outpult and there- fore has little possibility for marginal export pricing, the US and the USSR export only 25% and 30% respectively. The pattern of trade has been changing during the same period with an increase in the share of the US (from 24 to 30%'t), and a switch of North African exports from Western Europe (paid in hard currency) to Eastern Europe and Asia (with a sizeable part under barter trade). 4.05 The world rock supply/demand situation also moved from a worldwide over-supply in the late 1960s and early 1970s to a tight balance in early 1973 and a serious shortage by late 1973. Prices reflected this development; export prices for 1974 are 2.5 times (Florida) to more than 3 times (Morocco) higher than those prevailing in early 1973. The 1974 export prices for typical 72 BPL grades are US$40 (FOB Morocco) and US$24 per ton (FOB Florida); the early 1973 prices were only US$12.0 and US$9.9 per ton respectively. The sharp increase in prices is also explained by a necessary price recovery-- low profits led to reduced investments, particularly in Florida, therefore aggravating the worldwide supply 3hortage--following a depressed price sit- uation over most of the last decade. Moroccan FOB prices in current US$ only regained by mid 1973 their 1953 level--reflecting, therefore, a severe drop in constant prices--after going through a three years up aLnd down cycle typical of the fertilizer industry. OCP will supply rock to ME' on a long-term contract basis at a price ex-Youssoufia mine equivalent to the average export price for the Youssoufia 70/72 BPL grade. It is OCP's determined policy not to subsidize rock prices for sales to local manufacturers. A draft of the rock contract was reviewed by the Bank and found satisfactory; signature of the rock supply contract is a condition of effectiveness of the Bank loan. World rock prices are expected to remain at their present (early 1974) high levels through late 1975 because of an expected continuing tight supply. The world rock capacity/demand coverage is, however, likely to improve from 1976 onwards; long term FOB equilibrium prices are therefore forecast to stabilize---by 1976/77--at about 20% below the 1974 price levels. The projec- ted 1976/77 export price for the 70/72 BPL grade is US$28-30 per ton FAS Safi. The corresponding 1976/77 price for delivery to MP is therefore expected to be about US$25 per ton (DH 110 per ton) ex-Youssoufia mine. D. Sulfur 4.06 A detailed account of trade pattern and price develolpments is given in Annex 4-3. Following a very tight supply/demand situation in the 1960s, supply has exceeded demand since 1969 causing a substantial drop in prices - 8 - and a continued build-up of unsold stocks. This over-supply situation is due to massive production of recovered sulfur from natural gas mainly in Canada and to increased deliveries of elemental sulfur from Poland. Though supply and demand balanced in 1973 and prices firmed up, becauso- a large portion of sulfur stocks in Canada cannot be economically moved, over-supply is expected to last throughout the 1970s and beyond particularly because of additional quantities of recovered sulfur and sulfuric acid resulting from pollution controls. World prices (FOB Europe and US) have dropped from US$40-50 in 1969 to US$24-30/ton in 1972. FOB Canadian, US and European prices increased to about US$30 to 33 per ton by mid 1973 and to a per ton US$35-45 range in early 1974. Long term equilibrium prices throughout the 1970s are expected to stabilize at their 1973 level and those C&F Morocco at about US$32 to 36 per ton for Polish or French supplies. As mentioned, sulfur consumed by MP will be supplied under long term contracts. A first contract covering about two-thirds of the project's needs has been concluded with Poland. This contract is initially for 5 years but renewable. The price is firm during the first three years 1975-77 at US$32 per ton C&F Safi. Prevailing market prices, with a ceiling of US$34 per ton, will apply for later years (1978-80). OCP has started negotiations -- with Poland and Canada -- for the supply, also on a long term contract, of the needed additional sulfur requirements. This second contract is expected to be concluded shortly and on approximately similar terms. L. Phosphoric Acid .4.07 Annex 4-4 describes briefly the present and likely future produc- tion, trade patterns and price developments for phosphoric acid. Between 1960 and 1972 world phosphoric acid capacity-virtually all for internal captive use--increased from about 3.6 to 15.1 million tons P205 and is ex- pected to attain about 20 million tons by 1975. As a result of the recent development of acid manufacturing facilities for non-captive use, an inter- national phosphoric acid trade has emerged. It reached about 380,000 tons P205 in 1972 1/ representing some 3.3% of the world's production cf finished P?05 products and over 10% of the world P205 trade. The main existing sup- piiers of free phosphoric acid are Mexico, the US, Tunisia, Israel, Spain and Iran; the main importers are Western Europe, Brazil, Colombia and India. It is estimated that the international acid trade amounted to about 500,000 tons P205 in 1973. 4.08 OCP and the Bank have made a projection of the overall supply and demand for phosphoric acid 2/ in 1975 and 1977. Considering only the projects now committed and likely to come on stream before 1977, the supply/demand situation on a wforldwide basis is expected to move from a marginal surplus in 1974/75 to a marginal gap in supply of about 0.9 million tons P205 in 1977, or about three times the MP production. On a regional basis, some excess capacity is likely to appear in the US and the deficit in acid sup- ply in the rest of the wgorld might well reach about 2 million tons P205 1/ In addition to the trade for finished P205 products (para. 4.03). 2/ Trade balances and supply/demapd gaps are evaluated/expressed in terms of acid--the primary product--though the actual products can be acid or derivatives like MAP. -9- by 1977. However, given statistical uncertainties the best estim.te would be that supply and demand should about balance through 1977 with nore fa- cilities needed by 1980. As a second approach to estimating the future acid gap and one that is probably nore reliable for evaluating MP's market prospects, demand from individual customers and offers from individual sellers have been compared. The calculation shows that the potential uncommitted acid supply for export (1 to 1.2 million tons P205 including IT's production) and the expected demand yet unsatisfied through medium to long-term contracts (0.9 to 1.1 million tons P205) might nearly balance from 1976/77 onwards. This demand estimate is likely to be conservative since it does not take account of: (i) a number of countries which might p'rogressively become acid importers and (ii) additional imports to replace local production from marginal obsolete capacities now being increasingly dismantled in Europe. It is therefore considered that, though overall demand and supply for intermediates might well tightly balance towards the end of the 1970s, IP will have a market for its products and be able-- given its locational advantages--to compete efficiently with other pro- ducers. Specific marketing arrangements are discussed in Chapter V. 4.09 Mid-1973 acid prices in North West Europe ranged between US$150 and 170 per ton of P205 FOB supplier's tank for medium term contracts. For US local deliveries, they were about US$200/ton P205 FOB. Due to an extreme shiortage in supply of free acid in both Europe and the US and reflecting the late 1973 increases in rock prices, spot prices reached US$250-300 FOB plants in early 1974. For the majority of acid sales covered by contracts, prices have been adjusted upwards to take account of late 1973 rises in raw mate- rials costs and freight rates. It is anticipated that delivered prices on existing contracts (for West European marke'-s where prices are likely to determine the pattern of international prices for oceangoing acid) will-- by 1976--range between US$210-230 per ton P2025 New contracts are expected to be negotiated at 1976 prices about US$20 per ton higher. An indicative long term equilibrium price for acid might, therefore, be about US$230-250 per ton C&F Europe (1976 base) for medium-term contracts and US$205-220 FOB Safi or Gulf Coast. The expected average 1976 price for MP's acid sales is US$210 per ton P205 FOB Safi. F. Mono-Aimhonium Phosphate (MAP) 4.10 MAP is not yet an internationally traded commodity since only limited quantities have been available for export. It has, however, been successfully used as an intermediate for distribution within some countries (Finland, Spain, US). MAP, using phosphoric acid as major input, is a solid intermediate fertilizer which combines a number of advantages: high P205 content; cheap transport cost on a per ton of nutrient basis; highly suitable for blending. It is expected that large quantities of MAP will be increas- ingly traded in the future and that MAP might well become one of the most attractive ways of moving P205 from mines to producers. Compared to acid, MAP will probably emerge as the most favorable product for long shipping distances while acid will have advantages for use in specific processes - 10 - or for specific fertilizer formulae. It is expected that the international trade for intermediates will concentrate on acid in the near future but then include a substantial share of MAP. MAP medium to long term equilibrium prices will be closely linked to acid prices but with a likely markup be- cause of MAP's lower transport and handling costs. Late 1973 prices were about US$120-150 per ton FOB Gulf Coast or Europe. Due to the sharp in- crease in rock, ammonia and acid prices, early 1974 prices reached US$160- 200 per ton FOB plants. It is expected that these prices will stabilize at about US$150-180 in the mid to late 1970s. The assumed average 1976 price for MAP sales is US$150 per ton FOB Safi. V. MARKETING, TRANSPORT AND TERMINALS A. Marketing and Sales Arrangements 5.01 During the period 1971-73, OCP has analyzed in depth acid and MAP sales potentials for specific markets, and has had discussions and negotiations with numerous potential buyers. However, a marketing strategy, covering deter- mination of quantities and selection of buyers and delivery points, has been firmed up only recently. It is directed towards a geographically more diver- sified sales pattern than had been contemplated earlier. OCP is completing negotiation of medium-term sales contracts to ensure a satisfactory sales build-up and reduce market risks. The firming up of sales contracts at this stage is also imposed by the necessity to plan transport, terminal and han- dling facilities for the acid. Clients who initially were hesitant to enter into contractual sales arrangements have recently (probably following the tight and insecure rock supply situation in the world) been more anxious to do so. 5.02 OCP's sales strategy-to cover the first 5 years of operations--aims at diversifying sales to key and expanding consumption zones rather than max- imizing PT's earnings. Tthis illustrates OCP's desire to be present in these key markets so as to: (i) participate in the pricing policy for intermediates and (ii) prepare a seeding program for increased production of intermediates in Morocco. The sales pattern therefore concentrates on four major zones: Eastern Europe, Northwestern Europe--essentially Germany and the Rotterdam area--, India and Brazil. Marginal sales are foreseen to other areas prob- ably better served by OCP's competitors (Northwest of France, Italy and Asia). About 15% of the plant's projected output at full capacity has not been al- located. This will allow for increasing sales to current clients or sales on a spot basis to benefit from favorable market conditions. In its strategy OCP rightly has put emphasis on acid but will likely shift increasingly to- wards MAP in the longer run. 5.03 The-status of sales contracts, either completed or being negotiated, is summarized in the table below: - 11 - Status of Phosphoric Acid and MAP Contractual Sales (in '000 tons of P205) Acid 1976 1977 1978 1979La Purchasing Countries Contract signed 70 70 70 70 Poland Contracts under final negotiation 100 120 120 120 (France (10); Germany (50); (Brazil (50); India (10). Contract urnder advanced negotiation 80 80 80 80 Romania Negotiatiorns initiated - 95 105 105 (Brazil (40); Italy (15); (Germany (50). M4AP Contracts tinder final negotiation 40 40 40 40 India 290 405 415 415 of Projected MP's Sales lb 97 88 84 /a First vear of operations assumed at full capacity. 7/1 Likely contractual sales exceed projected MP's sales during 1976; OCP is planning to subcontract acid manufacturing in Europe to meet these additional sales. The contract with Poland has been signed and the terms of the contracts with Germany, France and India have been agreed upon. Negotiations with Italian small buyers are advanced. Contract proposals have been made to two Brazilian firms and final negotiations are scheduled for late spring 1974. All contracts are for five years with renewal clauses; acid will be sold on CIF and MAP on an FOB basis. Therefore, under reasonable assumptions for successful comple- tion of sales negotiations by mid-1974, virtually the entire plant output durinp the first two years of operation--and about 85%o thereafter--will have been contracted. l.vidence of the contracts signed and the terms--satisfactory to the Bank--of those still to be finalized have been provided during negotia- tiolls. Pinally sales arrangements covering at least 50% (in 1976) and 60% (for eacth of the four subsequent years 1977 through 1980) of the estimated total plant capacity will be provided to the Bank as a condition, of loan effectiveness. The 60% share corresponds to the profit break-even production level. 5i.04 The acid contracts provide for a base 1973 price and an escalation formula Linking the acid price to rock and sulfur prices and to freight costs. An exceptiork is Germany for which the market price prevailing at: timne of de- livery will apply. The estimated weighted average price for negotiated con- tracts is about USS150 per ton of P 205 FOB Safi (1973 base) and US$218 (1976 - 12 - base) 1/. The Bank's present best estimate--used in the financial projections-- of the average price for total acid sales is US$210 per ton P205 (1976 base) F)B Safi. This estimate takes account. of uncertainties related to the terms of contracts not yet fully negotiated and to preliminary estimates of transport costs. The Bank's best estimate for the average MAP prices is US$150 per ton (1976 base) FOB Safi, or US$270 per ton P205. MAP prices are difficult to predict since it is not yet an internationally traded commodity, but they miglit well reach US$160-170 per ton FOB Safi by the mid 1970s--or some 6-13% above those used in the financial projections. B. Acid Transport .5.05 It is planned to transport phosphoric acid from Safi to delivery points in three specialized, self-unloading, ocean-going ships: two 10,500 and one 20,000 dwt capacity ships equipped with rubber-lined tanks. A joint company, Marphocean, has been formed--with an initial share capital of DH 4 million--to purchase and operate, under Moroccan flag, the three ships. Marphocean is owned by the Moroccan National Shipping Company COMANAV (45%) which already owns 11 ships and has a leading role in sea transport of Moroccan goods, and by OCP (25%). The balance (30%) will be covered by the French ship engineering firm, Gazocean, one of the world's leading firms in the shipping of liquefied or pressurized gases and specialty chemicals. Marphocean will enter into a long-term time charter arrangement with Maroc- Phosphore. Contracts have been awarded for the first two ships to be de- livered in January and March 1976 respectively. Tender documents for the third ship have been issued and offers are expected in May 1974; this ship is expected to be delivered by December 1976. 5.06 Before OCP decided to purchase ships rather than charter them, it consulted several specialized shipping agencies from the UK, Japan and Norway. The world fleet of phosphoric acid carriers available for chartering, though developing rapidly, is still limited and includes mostly small multipurpose stainless steel ships or ships owned by competitors. In line with arrange- ments made by other acid export companies, notably FFM 2/ of Mexico, the pioneer firm in acid shipping, OCP decided to build its own transport facil- ities. While Marphocean will be responsible for the operation and maintenance of the ships, MP will, in accordance with the time charter agreement, pay a fixed annual fee to Marphocean and cover the ships' direct operating expenses. Annex 5-1 gives details on arrangements for acid transport and on freight rates for selected routes. The rates are summarized in the table below: 1/ Using assumptions made in the financial projections for future rock, sulfur and ammonia prices and freight costs. 2/ Fertilizantes Fosfatados Mexicanos (FFM). - 13 - Estimated Ship Investment Cost and Freight Rates Size Investment Cost Freight Rates in US$/ton of P205) 1973 Base in dwt (US$ million) Szczecin Rotterdam Rouen Santos 10,500 /1 12.3 23 19 17 - 20,000 21.6 - - - 37 /1 The two 10,500 dwt ships will be identical and will cost the same amount. 5.07 The Bank does not finance the shipping facilities, but their proper and timely implementation is es8ential to the success of the overall scheme. The delivery of the first two ships must not suffer any delays. Their con- struction time might: mark the critical path for the overall project; and lead--if extended beyond January/March 1976 and no charter substitute were to become available in time--to initial under-capacity utilization of the project or to the postponement of plant acceptance tests. The Bank is satis- fied that l4arphocean: (i) will quickly conclude a contract for the third ship; (ii) is firming up a satisfactory financing plan for the three ships; and (iii) will enter into a satisfactory time charter agreement with NP prior to the loan becoming effective. C. Receiving Terminal Facilities 5.08 Clients will be responsible for terminal facilities--storage tanks and piping--to handle and store the acid delivered. Existing terminals will be used to the extent possible. More specifically, Poland is constructing a terminatl with a capacity of 20,000 tons of solution at Szczecin. Brazilian purchasers will use existing terminals in Santos and Rio Grande do Sul, al- though some expansion may be needed. The German buyer plans to enter into negotiations with FFM to use the under-utilized FFM terminal at Rotterdam or, failing that, will set up its own terminal in Antwerp. Other specific swap arrangements are being worked out to supply the small French purchasers. A terminal is available in Kandla in India. Romania is considering setting up a new terminal. NP and Marphocean agreed to supervise closely the execu- tion and adequacy of the terminals since they constitute an essential element in the delivery chain of acid. MAP will be handled and stored in bulk using traditional fertilizer handling facilities. VI. PROJECT EXECUTION A. Background 6.01 The Government and OCP requested, in June 1971, Bank technical assistance in the preparation and supervision of a call for iturnkey bids. OCP and the Bank closely cooperated and international bidding procedures were followed throughout the bidding phase. OCP signed a first plant con- struction contract-including two sulfuric acid, two phosphoric acid and - 14 - one MAP trains and related offsites, corresponding to about two-thirds of the project capacity--on June 29, 1973 and project execution has commenced. It will take 27 months to build this portion of the project, and commercial operations are expected to start in January 1976. This first contract inclu- ded provisions for project expansion to full capacity. Following favorable market developments and to take advantage of an unchanged price offer, OCP entered into (early 1974) and completed (April 1974) negotiations for a supplementary construction contract based on identical terms and covering the additional works to complete the project; corresponding facilities are expected to start operations in August 1976. The desirable sequence--with which the Bank agrees--for project preparation and execution as well as the choice and early conclusion of a turnkey contract was imposed by the need to: (i) increase buyers confidence in the project; and (ii) obtain a firm project cost essential to determine a sound sales strategy and allow the start of serious sales and price negotiations, to reduce commercial risks. B. Selection of Contractors 6.02 Both the Government and OCP decided to execute the main facilities of the project as turnkey contracts at lump sum prices subject to an agreed escalation formula because of: (i) single responsibility in project execu- tion; (ii) lack of sufficient technical expertise within OCP; and (iii) firm knowledge of fixed project costs at an early stage. The Bank accetpted, after setting up certain safeguards, that this particular project be cairied out on such turnkey basis (Annex 6-1). OCP invited bids from consortia of special- ized firms with the leadership entrusted to one firm (the contractor) who was to have responsibility for the entire project. The Bank agreed to a three- phase procedure for selecting the consortium: (i) pre-qualification of con- sortia after international advertising; (ii) invitation to pre-qualified con- sortia to submit unpriced technical offers conforming to detailed tender docu- ments, and, after clarification and technical adjustments of offers; (iii) call for a lump sum price for most of the project scope of work (Chapter VII) which, together with the technical offer, was to serve as the basis for bid evalua- tion. Thirteen responsive pre-qualification bids were received from a broad international base and, by scoring methods acceptable to the Bank and with Topsoe's assistance, five consortia were selected by OCP on the basis of their technical offers to present price proposals (Annex 6-1). The five contractors were from the US, Belgium, France, Germany, and Japan and they had proposed processes and technology from the same countries plus Poland and UK. Thus, a good international spread was obtained. C. The Consortium and the Project Contract 6.03 One consortium withdrew voluntarily and evaluation of the four re- maining bids was completed by the end of 1972. The lowest evaluated bid was submitted by the consortium headed by Friedrich Uhde GmbH (Uhde) of Germany. Uhde and all the other members of the consortium are well known and capable firms (Annex 6-2). Uhde will coordinate the overall engineering and civil works, engineer and build the phosphoric acid unit, build the MAP unit and - 15 - design and construct the off-sites and auxiliaries; Polimex-Cekop (Polimex) of Poland will provide the sulfuric acid process and engineer and build the sulfuric acid unit; Lurgi Gesellschaft fur Chemie and Huttenwesen GmbH (Lurgi) wili engineer and procure the MAP unit; Siemens A.G. (Siemens), will perform the electrical work. Nissan of Japan will provide the hemihydrate phosphoric acid process and Fisons of the UK the MAP process. Some initial reservations about the Polimex and Nissan processes and about Polimex qualifications were removed after a Bank mission visited plants operating with these processes and units constructed by Polimex in Europe. 6.04 The contracts include a lump sum price with payments in DH (local costs), in clearing dollars for the Polimex part as per a sub-contract between Uhde and Polimex, and in DM for the remaining balance of foreign exchange. An agreed payment schedule in the three currencies is also included in the contracts and payments are specified at intervals and in amounts proportional to expected cash outlays and work done. Thje Polimex lump sum prices are firm for the forecast duration of the project execution. The DH and DM portions will be adjusted up or down over time according to agreed formulae included in the contracts and to be applied between October 1972 and August 1976. The ccontracts guarantee, subject to penalty/bonus clauses, that mechanical com- pletion will occur by October 1, 1975 (first contract) and by August 1976 (second contract). Provisional acceptance is subject to a 7-day continuous te.st--scheduled to take place within a period of 6 months after mechanical completions--with all sections of the plant operating at full capacity. Final acceptance is to occur 12 months later if it is shown that there are no hidden defects or unsuitable equipment. The contracts also provide for unlimited liability of the consortium to meet capacity and products quality guarantees. Various penalties are provided for late completion, excessive use of raw materials, utilities and supplies, which could amount to 10% of the lump sum prices (Annex 6-2). Since the lump sum prices total about US$92 million equivalent, the possible total penalties are severe. 6.05 In agreement with the contract, Uhde carried out a full-scale in- dustrial test with some 20,000 tons of Youssoufia rock in the Rupel 1/ Nissan process based phosphoric acid plant of a size and sophistication similar to the one proposed. Results were above expectations and Uhde was able to guar- antee a higher efficiency than originally foreseen in the use of raw mate- rials. Some of the acid made was tested in a unit using the Fisons MAP proc- ess (Annex 6-3). 6.06 With these provisions, it is expected that the turnkey part of the project will he completed on time and that the plant will be able to operate at full capacity on a continuous basis (330 days per year). A bar chart showing the estimated construction schedule for the project and the general infrastructure is shown in Annex 6-4. As of April 1974 the project and related infrastructure were on schedule. The site preparation work is com- pleted and the engineering work has started at Uhde's headquarters. The Bank is satisfied with the general terms of the plant contracts, including the schedule, given the guarantees and previous experience of Uhde. 1/ Societe Chimique du Rupel at Sauvegarde, Belgium. - 16 - T). Procurement 6.07 Since international competitive bidding was used to select the con- sortium which is to execute the major part of the project at a lump sum price, there will be no further supervision by the Bank of procurement of equipment under the turnkey contract. Self interest will, however, dictate that the consortium procure these at the lowest possible prices, including multinational bidding, and the technical specifications and the terms of the turnkey contract will ensure satisfactory quality of the goods purchased. Spare parts are not included in the turnkey contracts and will be procured: partly from the original equipment vendors (simultaneously with purchases of main equipment and in accordance with a list to be prepared by Uhde); and partly--at the time of start-up--through international bidding in agreement with a comple- mentary list also to be prepared by Uhde. Both lists are subject to OCP and Bank approvals. An important portion of the equipment and materials is likely to come from Germany and most of the remainder from other European countries. Polimex will procure equipment and services from Poland as per the sub-contracts with Uhde in clearing dollars but also from Germany and other European sources with payments to be made in DM and as part of the plant contract. Process licenses will be procured in Japan (Nissan) and in UK (Fisons). Uhde will prepare at the end of project execution an indicative breakdown of foreign exchange expenditures by country. E. Project Organization and Company Management 6.08 A satisfactory organization for project execution has been developed (Annex 6-5) and is progressively being built-up. It includes: (i) the MP project taam; (ii) the various OCP Departments involved; (iii) the technical advisor Topsoe; (iv) the Uhde team; and (v) an OCP group working on future acid and other intermediates manufacturing projects. The main functions for project execution are described in Annex 6-6. The project team will supervise the project execution, including infrastructure, and review progress reports and schedules prepared by Uhde and Topsoe. It will also provide the nucleus for the operating Company itself. As indicated above various OCP departments- commercial, administrative and finance, and planning-will provide support to the project team and later to the Company. Topsoe will assist the project team in all the activities involved including the review of work progress and start-up. Uhde will have full responsibility for the construction, start-up and performance of the project, which will decrease the immediate burden on the project team. The various governmental agencies will execute the infrastructure work under the combined supervision of MP and OCP planning department. Finally, the OCP group for future intermediates projects includes experienced engineers and will provide direct and continuous technical support as needed. These organizational arrangements are expected to ensure an adequate control of project execution. The shipping part of the overall scheme will be directly supervised by COMANAV, Gazocean and the OCP commercial department. The project team will merely provide the necessary coordination in this area. - 17 - 6.09 Tentative organization charts for the project team and for the iMP operating Company are shown in Annex 6-6. The structures are substantially similar and therefore will allow for an adequate continuity from the execu- tion of the project to the management of the Company. The Chief of the proj- ect ream, 'Mr. M'Hamedi, was formerly head of the processing facilities at Khouribga and is considered to have the required broad managerial capabilities to guide and coordinate all the project activities. As was mentioned previously, he is expected to become MP's General Manager and will contribute to the continuity during the transition from project execution to actual operation. F. -Stafi-ing and Training 6.10 MP has prepared plans for staffing the project team and the Company (Annex 6-7). Staffing of the project team is in progress. In addition to the project manager already in place, an experienced deputy project manager, for- merly MC plant manager, has been nominated and 1 of 7 department heads and 4 of 9 division chiefs have been recruited. However, since more senior staff will have to be added by mid-1974, some recruitment difficulties might be en- countered given the lack of experienced Moroccan engineers in this field. Thus more young engineers with limited experience, and requiring intensive training, will have to be relied upon. It has therefore been arranged that: (i) Topsoe will assist in the recruitment and training-in Ilorocco and abroad-- of key persornel; and (ii) under the plant contract, Uhde will assist in re- cruiting expatriate personnel, if needed and in arranging in-plant training abroad. PIC, as well as OCP and the local utility companies will be used as additional, training grounds. A detailed program for staffing and training taking account of a desirable cooperation with MC, has been prepared by the Company in close cooperation with Uhde and Topsoe; these arrangements are satisfactory. VII. CAPITAL COSTS AND FINANCING PLAN A. Capital Costs 7.01 Total investment costs for the project, summarized below and de- tailed in Annex 7-1, are estimated to be DH 657 million (US$148.6 million). Total financing, including interest during construction, is DH 687 million (US$155.5 million). - 18 - Summary of Capital Costs (in millions) % of Dirhams US Dollars Total Local Foreign Total Local Foreign Total Cost Engineering - 26 26 - 6.0 6.0 4.0 Buildings and Civil Works 45 5 50 10.1 1.1 11.2 7.5 Equipment and Materials 5 234 239 1.3 52.8 54.1 36.4 Erection and Supervision 37 33 70 8.4 7.3 15.7 10.6 Miscellaneous 4 16 20 0.8 3.8 4.6 3.1 Total Turnkey Contract 91 314 405 20.6 71.0 91.6 61.6 Spare Parts - 21 21 - 4.8 4.8 3.2 Taxes and Registration Fee 18 - 18 4.0 - 4.0 2.7 Project Infrastructure 16 - 16 3.7 - 3.7 2.5 Pre-operational Expenses 16 6 22 3.7 1.3 5.0 3.4 Price Escalation 14 61 75 3.1 13.8 16.9 11.4 Additional Contingency 6 21 27 1.3 4.8 6.1 4.1 Working Capital 73 - 73 16.5 - 16.5 11.1 Total Capital Cost 234 423 657 52.9 95.7 148.6 100.0 Interest during Construction 11 19 30 2.5 4.4 6.9 Total Financing Required 245 442 687 55.4 100.1 155.5 7.02 These estimates are based on a total lump sum price of DH 405 million (US$91.6 million) included in the contracts with UlJde. Though reducing largely the chances of cost overruns, firm contract prices do not automatically eliminate them because of force majeure conditions or contractor's claims on account of minor changes in the contract scope. All major items outside the turnkey contracts have been identified and their cost estimates prepared by OCP and MP were reviewed by the Bank and appear to be adequate. The orovision for price escalation, based on the contracts' escalation formulae and on the estimated annual rates of growth of component prices, is considered adequate; on average these annual rates amount to 15% and 13% for foreign and local components respectively. Furthermore, an overall contingency (5% on the local and 7% on the foreign portion of the installed plant cost excluding price escalation) is included to cover miscellaneous unforeseeable expenditures. While the recent increases in petroleum prices have brought about added uncertainties about future price developments it is judged that the overall contingency reserve of US$23 million equivalent, or 18% of project cost before working capital and interest during construction is adequate, particularly in view of the relatively short construction time. The foreign exchange costs include DH 55 million (US$12.6 million) for goods and services subcontracted by TJhde to Polimex and are to be paid for in clearing dollars. Local costs include DH 18 million for taxes and registration fee. The phasing of expenditures during construction corresponds to the agreed contractual payment schedule (Annex 7-2). - 19 - T). Working Capital 7.03 Permanent wvorking capital requirements are conservatively estimated at DII 73 million, or US$16.5 million (Annex 7-3). They include DH 47 million to build up inventories, DH 52 million for receivables (40 days>, DH 5 million for cash requirements less DH 31 million financing for accounts payable (1 month). Inventories for phosphate rock (2 days) are considered sufficient siven the direct link between the plant and the Youssoufia mine. Accounts receivables are based on OCP's experience with phosphate rock sales. C. Financing Plan 7.04 T'he sources of funds to finance the project (Annex 7-4) are sum- marized below: Financinig Plan (in millions) Dirhams US Dollars Local Foreign Total Local Foreign Total Debt IBRD - 221 221 - 50.0 50.0 K fW - 119 119 - 26.8 26.8 BNDE - 35 35 - 8.0 8.0 Sub-Total: - 375 375 - 84.8 84.8 Equity (OC]?) Local Funds 245 - 245 55.4 - 55.4 Clearing Currency - 55 55 - 12.6 12.6 Converti'ble Currency - 12 12 - 2.7 2.7 Sub-Total: 245 67 312 55.4 15.3 70.7 Total Financing: 245 442 687 55.4 100.1 155.5 7.05 The total project financing will be provided in the ratio of 55:45 debt to equity. This ratio represents a sound capitalization for the project and the Company and provides for an adequate risk sharing between the sponsor and the lenders. Loan financing will be provided by Kreditanstalt fur W4iederaufbau (KfW) of Germany, the local bank Banque Nationale pour le Developpement Economique (BNDE) and the Bank. Financing will be joint for KfW and the Bank. The Bank loan of US$50 million will amount to 59% of the total loan funds, and covers about 57% of the total expected convertible foreign exchange costs. The remaining loan financing--in convertible foreign exchange--will be provided by KfW (DM 75 mil lion or US$26.8 million) and BNI)E (USNW million). The German Government has allocated DM 75 million for the project as part of its capital aid to Morocco; KfW, acting as Executive Agency, iE; considering making a corresponding loan to MP. 11W expects to - 20 - reach a final decision on its loan by June/July 1974 and the effectiveness of the Bank loan will depend on the final approval of the KfW loan by the German Government. BNDE's financial contribution slould be seen as a step to mobilize additional external resources from Arab oil exporting countries and to strengthen BNDE participation in the preparation and execution of major development projects in Morocco. Should BNDE's financial participation not materialize, OCP has agreed to provide the corresponding amount (US$8 million) on terms and conditions satisfactory to the Bank. The equity funds will finance the local costs, the costs of Polisl supplies (US$12.6 million) and US$2.7 million equivalent convertible foreign exchange costs. 7.06 Based on the expected life of the project, the proposed Bank loan would be for 14 years, including 4 years of grace. The Bank loan would be made directly to MP at the Bank interest rate (currently 7-1/4%) and would be guaranteed by the Government. MP would pay to the Government a guarantee fee of 1-3/4%, bringing the total cost of Bank funds for MP to 9%. The KfW loan would be granted to the Government at 2% for 30 years including 10 years of grace and would be on-lent to MP. The terms and conditions of the KfW and 3NDE loan to MP would be the same as for the Bank loan. The terms of the proposed loans are satisfactory for the project. 7.07 Equity financing for the project would amount to DH 313 million (US$70.7 million) and would be provided by OCP. After review of OCP's finan- cial forecasts and given expected high rock prices for the next two years (para. 4.05), the Bank is satisfied with OCP's capability to generate suffi- cient funds in the forthcoming years and to provide equity financing for MP when and in the amounts needed. OCP's present financial structure is sound with a debt to equity ratio of 36:64 and net income after taxes is expected to increase sharply from the 1973 level of nearly DII 150 million. The Government has agreed to allow OCP to retain earnings in sufficient amounts to meet NP's equity subscriptions. In the event of a capital cost overrun in the project, OCP would provide--with an adequate back-up by the Government --additional funds necessary to complete the project, on terms and conditions acceptable to the Bank. These provisions are deemed satisfactory. D. Allocation of Loans and Disbursement Schedule 7.08 A tentative allocation of foreign exchange financing to the differ- ent categories of expenditures would be as follows: - 21 - Allocation of Foreign Exchange Financing (in million US$) Debt OCP's Equity Bank KfW BNDE Clearing Convertible Turnkey Conttract 33.6 19.0 8.0 10.4 Spare Parts 2.6 1.5 - 0.7 - Training, Start-up and Project Supervision - - - - 1.3 Interest during Construction 3.0 - - - 1.4 Unallocatecd (Contingency and Escalation) 10.8 6.3 - 1.5 - Sub-Total: 50.0 26.8 8.0 12.6 2.7 Total: 50.0 26.8 8.0 15.3 The Bank loan would cover 56% of the convertible foreign exchange costs of the turnkey contract and spare parts, the full amount of interest on the Bank loan during construction and the estimated share of escalation and con- tingencies. 7.09 A detailed quarterly schedule of equity subscriptions and loan with- drawals is shown in Annex 7-4. By the time the Bank loan is expected to be approved (June 1974) OCP would have: brought into the Company as equity DH 51 milLion to finance local and clearing currency costs; and made DH 57 million (US$12.8 million) convertible foreign exchange advance payments (US$8 million to be financed retroactively through the BNDE loan; the remaining US$4.8 million proposed to be financed retroactively by KfW and the Bank). Disbursements of the Bank and KfW portions of the loans financing the turnkey contract will be made pro rata against invoices submitted by MP and in agree- ment with the contracts payments schedule. The Company is aware that the Bank will not finance goods and services procured in Poland. Control in this respect will stem from the fact that Topsoe and VT will certify to the Bank--through progress reports and transmittal of detailed purchase orders-- eligibility of the goods and services to be reimbursed by the Bank. 7.10 As indicated above, total retroactive financing required of the Bank and KfW up to the expected date of approval of the Bank loan (June 1974) is estimated at US$4.8 million equivalent. The proportionate Bank share will be US$3.1 million and represents a relatively small percentage of the Bank loan (6%). The proposed retroactive financing is a consequence of the strategy adopted: (i) by OCP in first firming up prqject costs and then negotiating sales contracts, and (ii) by the Bank in evaluating the project on the basis of much firmer evidence on critical project parameters. The advance contracting corresponds conceptually, in the present case, to the total irLstalled plant costs since, as agreed with the Bank, the contract was awardecl on a turnkey basis. The Bank considered it advisable for the project sponsor to conclude, at an early stage, a plant construction contract and to supervise closely eachi step of the bidding procedure. - 22 - VIII. FINANCIAL ANALYSIS A. Revenues and Operating Costs 8.01 A detailed description of revenues and operating costs is given in Annex 8-1. They are summarized below for plant operations at full capacity: Revenues and Operating Costs at Full Capacity (75% of P 205 as Acid and 25%' as MAP) Unit Prices (1976) Annual Revenues and Costs in US$ per ton (in US$ millions) Total of which Taxes Revenues Phosphoric Acid (FOB Safi) 210.0 of P 0 78.1 -AP (FOB Safi) 150.0 of rJP 33.9 Other Revenues 0.7 Total 112.7 Operating Costs Raw ltaterials: - Phosphate Rock (delivered Plant) 26.2 of product 42.5 - - Sulfur (unloaded Safi) 32.1 of product 14.7 0.8 - Ammonia (unloaded Safi) 110.0 of product 3.4 0.3 Utilities and Chemicals 2.6 0.1 Transport and Handling 1.7 - Personnel 2.3 - Maintenance Materials 5.7 1.3 Other 3.7 2.5 Subtotal 76.6 5.0 Depreciation 11.1 Interest 4.8 Total 92.5 5.0 Net Income before Taxes on Income 20.2 - 23 - Operating costs at start of produclion hlave been estimated by Topsoe and 0CP and, like the financial projections, are made at 1976 prices. The revenues and najor material inputs prices retained (1976 base) are discussed in Chap- ter IV. Though short-term distortions between revenues and costs may occur-- the impact on account of energy costs is exbected to be minimal--ptices of acid and MAP will remain closely linked to 1)rices of raw materials and, therefore, costs and revenues are likely to move in parallel. Projections in constarLt prices are thus justified. In addition all major input prices will be contractual except for the ammonia which is today in short supply and therefore almost impossible to contract for on a medium- or long-term basis. Annual maintenance materials cost have been assumed at about 5, of the total plant costs. Labor costs, escalated to 1976 at 6% per year, include contingencies over and above costs corresponding to the personnel size proposed by the contractor. Transport and handling costs are low because of existing infra- structure facilities at the port and at MC. They have been escalated to 1976 at 5, per year. These operating cost estimates are considered reliable particularly since consumption of raw materials is guaranteed in the plant construction contract. B. Financial Forecasts 8.02 Detailed projections of MP's income statements, cash flows and balance sheets are contained in Annexes 8-2, 3 and 4 and are summarized be- low: Summary of Financial Projections (in million DH) 1976 1977 1978 1979 1980 Income Statements and Cash Flow Capacity Utilization 65% 85% 95% 100% 100% Sales Percentage of Capacity 61% 85% 95% 100% 100% Revenues 249 423 472 498 498 Operating Costs 1'30 291 320 337 337 Interest 34 34 33 31 28 Depreciation 45 49 49 49 49 Net Income (Loss) before Taxes (10) 49 70 81 84 Net Income (Loss) after Taxes (10) 49 70 81 84 Cash Flow (before interest and taxes) 69 132 152 161 161 Debt Service 34 34 48 62 60 Balance Sheets (December 31) Current Assets 130 154 154 154 154 Accumulated Cash Surplus - 81 183 280 379 Current Liabilities 22 46 62 63 65 Net Fixecd Assets 570 523 476 429 382 Long-Term Debt 375 360 329 297 263 Capital 303 352 422 503 587 Current Ratio 6.0 3.3 2.5 2.4 2.4 Debt/Equity Ratio 55:45 51:49 44:56 37:63 31:69 Debt Service Coverage 2.0 3.9 3.2 2.6 2.7 - 2'. - The projections of revenues are based on reasonable assumptions as to the build-up of output to full capacity in 1979, the fourth year of operations. Given the contractual guarantees, the plant could, from a technical point of view, reach full capacity over a shorter period of time and operate at 100% capacity on a continuous basis. Operating costs include about DH 22 million (US$5.0 million) non-reimbursable 1/ domestic taxes. MP as an export- oriented project located in the Safi Region is exempted from taxes on income during the first ten years of operations. 'At the assumed capacity build-up, the financial projections show a small prolit during the first year of opera- tion. The debt service coverage ratio remtins at a satisfactory level (above 2) during the life of the project. The lo&ns' interest and repayment schedules are shown in Annex 8-5. 8.03 The cash break-even point (Annex 8-6) of the project is expected to be at about 50% of capacity utilization. The profit break-even point will be at about 60% of capacity utilization until 1980 and thereafter decline steadily to 52% in 1988. A cash build-up occurs in the projections because they do not include provision for dividend payments and do not assume rein- vestment of depreciation in the form of future investment expenditures. The cash build-up provides a financial buffer during the early years and a provision for equity funds for expansion in later years. The current ratio will remain satisfactory throughout the project life and the working capital funds would provide financing for unexpected operating losses and for reim- bursable taxes, and give a safety margin for unexpected cash requirements and debt service coverage. The financial position of the Company is expected to be good after the initial one to two years of operations. C. Financial Return and Sensitivity Analysis 8.04 Based on the above projections, the base financial rate of return of the project would be 17.4% before and 16.9% after taxes on income (Annex 8-7). The satisfactory financial return is based on realistic capital, ope- rating costs and revenue assumptions. A revenues' increase of 5%, about US$10.5 per ton of P205, would increase the base return of the project to 20.0%; the same applies to a 9% decrease in raw material costs. Since the spread of rock export prices might be as much as US$2 per ton, OCP agreed to consider selling rock to NP during the first three to four years at the price offered to the most favored client of equivalent importance; in such a case, the base financial rate of return will increase to 18.6%. Lower than estimated revenues and higher raw material costs are possible though unlike- ly. In such a situation, a 5% reduction in revenues would reduce the return to 13.8%'. The risks of increases in investment costs or delays in project implementation to an extent which would substantially affect the project's return are considered low because of the advanced stage of the project. The rate of return sensitivities for different revenues and costs assumptions are shown in detail in Annex 8-7. 1/ The project will pay duties and taxes on operating costs items, which, under the investment code regulations, will be partly non-reimbursable and partly reimbursable after a period of six to twelve months. - 25 - D. Risks and Financial Covenants 8.05 The project faces technical, commercial and managerial risks, typi- cal of undertakings of this nature. Technical risks regarding plant design and operations and risks of substantial delays or major cost overruns can be considered relatively low since the project is carried out: (i) by a reputable and experienced consortium; and (ii) on the basis of turn-key contracts already concluded. The commercial risks (market, transport and prices) of the project are considered relatively high given: the presently rather narrow and not yet fully established world trade; and the need for complex and coordinated acid transport. However, commercial risks have been reduced. substantially through contractual sales arrangements for a substantial part of NP's production. This will guarantee MP a reasonable level of capacity utilization and limit commercial risks primarily to price fluctuations. The risks of delays in the availability of ships and possibly, in the completion of general infrastructure outside the project are poten- tially high but all efforts are being made to avoid such delays.. 8.06 However, the commercial risks have to be viewed differently when considering VP as part of OCP's overall activities. Provisions against some of the risks outlined above entirely depend on the phosphate sa:Les strategy of OCP, who is MP's sponsor, shareholder, supplier of the major raw material and commercial agent. In view of the close relationship between OCP's and TP's activities and the commercial risks involved in the project, it has been agreed that OCP would help maintain MP's sound financial condition; there is no doubt that OCP has the financial strength to be able to fulfill such an undertaking. In particular, OCP would: (i) provide the amount of initial working capital included in the financing plan and, if necessary, provide additional funds to establish a current ratio of at least 1.5 at the completion of the project; (ii) guarantee that a minimum debt service coverage ratio (before taxes on income) of l.4 will be maintained; and (iii) MP shall not incur any cdebt if this would result in a debt to equity ratio greater than 55:45. In addition, to assure the preservation of the Company's cash, MP has agreed: not to pay any dividend or make any other distribution to OCP during the first two years after project completion; and not tc, make such distributions thereafter unless after such payments the Company's current ratio is at least 1.2. The Bank will obtain an independent audit of MP's accounts in accordance with generally accepted accounting rules. - 26 - IX. ECONOMIC JUSTIFICATION A. World Trade Pattern and Sales Strategy 9.01 The change in the pattern of world trade, the trade-offs among the different P205 products and the increasing share of intermediates, and the investments made or contemplated by OCP's competitors has induced OCP--as part of its overall P205 sales strategy--to enter into the rapidly emerging inter- mediates trade: (i) to maintain and possibly increase its overall share in the world P205 market; (ii) to avoid substantial substitution of OCP's rock sales by intermediates produced and sold by competitors; (iii) to offer to its clients an optimum mix of products; and (iv) to participate in the international acid pricing policy which might well influence, if not guide, rock prices in the long term. In addition to the economic benefits described below, the project, therefore, partly finds its justification in terms of sales strategy. B. Additional Rock Sales from Youssoufia 9.02 From 1976 onwards, the project will permit OCP to sell through MP about 1.6 million tons of medium grade 70/72 BPL Youssoufia rock converted to intermediates. This quantity of rock representing about 30% of Youssoufia's mining capacity might well -- in part -- be considered as constituting addi- tional sales of Moroccan rock on international markets by the second half of the 1970s because of: (i) increased competition from Khouribga sales of medium grades; (ii) a likely balanced world supply/demand situation by late 1970s and thus lower sales prospects for low to medium grades; (iii) lower costs at the Khouribga mine which therefore should be used to the fullest possible capacity; and (iv) boomerang effect on prices of high grades if large amounts of low to medium grades are marketed. MP is therefore likely to contribute toward using to a fuller extent capacity at Youssoufia where labor intensive mining techniques are used. C. Other Social Benefits 9.03 The project will also generate substantial external benefits: (i) help increase employment levels in the Youssoufia mines in a region where employment alternatives are reduced; (ii) develop, in line with the Moroccan decentralization policy, manufacturing activities at Safi and, therefore, help use more extensively the port facilities; (iii) help OCP participate in the world trade of intermediates; (iv) provide education externalities through training of personnel; and, quite importantly, (v) constitute a model and a training center for future similar projects in Morocco. D. Economic Rate of Return (ERR) 9.04 The calculation of the ERR is based on investment and operating costs valued at world prices (Annexes 9-1, 2 and_3). The opportunity cost of the Youssoufia rock used in the calculation is equivalent (US$24.90 per ton ex-mine) to the expected average export price for Youssoufia 70/72 BPL. - 27 - An opportunity cost about US$1.5 per ton below this price has been used in the sensitivity calculation and is based on a conservative mix between market prices for export and economic costs of production for the quantities un- likely to be exported in a without-the-project situation. The main factors affecting the mix are: (i) likely high negative rock price elasticity to excess export deliveries; (ii) relatively large spread of Youssoufia prices-- wvhen supply and demand balance--with additional sales at prices closer to the bottom of the range; and (iii) reduction of captive sales at above world prices. In case of surpluses in the rock market, the opportunity cost of rock might move closer to the economic cost of production, likely to be in the region of US$13/16 per ton. 9.05 Based on the above estimates, the ERR for the project would be 21.2%. The difference between the economic and financial returns stems from: ex- clusion of taxes and transfer payments; valuation at world prices of non- tradables- use of a 75% shadow wage rate for unskilled labor. The above ERR is satisfactory. It was subjected to sensitivity tests, using different assumptions for the most significant and uncertain factors (Annex 9-3). The ERR is highly sensitive to output prices (a 5% increase in revenues adds nearly 3 percentage points) and to rock prices (a 10% drop in rock prices adds 2 percentage points). It, however, remains satisfactory (19.2%) if both the market price for rock is used and the sulfur price is increased by as much as US$8 per ton. The ERR is also quite sensitive to the sales build-up, an additional reason for securing contractual sales and guaranteed plant performance. X. RECOMMENDATIONS AND AGREEMENTS REACHED A. Sector Recommendations 10.01 The representatives of the Government and OCP indicated their agreement with the Bank that the projected forward integration into inter- mediates manufacturing calls for careful planning--particularly in the use of materials, utilities and personnel resources in Safi--to ensure an optimum sectoral development and to adjust production of intermediates to the world demand pattern (para 2.06). B. Agreements Reached 10.02 Agreement has been reached between the Government, OCP, MP and the Bank on the following principal points: Sector Development (a) The Government and OCP will furnish prior information to the Bank on future phosphate manufacturing and other in- dustrial facilities in the area of Safi (para 2.06); - 28 - Infrastructure (b) The Government will provide on time the necessary infrastructure facilities (para 3.04); Ecology (c) The project will be carried out with due regard to environ- mental requirements (para 3.05); Sales Contract (d) 'P will, as a condition of loan effectiveness, make sales arrangements covering at least 50% (in 1976) and 60% (for each of the four years thereafter) of the estimated total plant capacity (para 5.03); Transport and Terminals (e) MP will enter, as a condition of loan effectiveness, into a time charter agreement with Marphocean (para. 5.07); Organization and Staffing (f) The project execution and the Company organization will be satisfactory to the Bank (para 6.08); (g) The project staff will be recruited and trained according to a schedule satisfactory to the Bank (para 6.10); Financial (h) OCP will provide-and the Government will agree to al.low OCP to retain earnings to that effect-in accordance with the project payment schedule a minimum of DH 313 million in equity (para 7.07) of which at least DH 12 million will be convertible into foreign exchange (para 7.05); (i) BNDE or OCP will provide a loan to 22 of an amount equivalent to US$8 million and on terms and conditions satisfactory to the Bank (para 7.05 and 7.06); (j) KfW is expected to provide a loan of DM 75 million on terms and con- ditions agreed upon with OCP and the Government, and on terms to MP similar to the Bank loan (para 7.06); (k) The Government and OCP will provide an unlimited guarantee for project completion and cost overruns (para 7.07); - 29 - (1) rCP and MP will observe certain financial covenants to maintain a sound liquidity and financial position of the MP Company (para 8.06); (m) OCP and MP will enter, before the Bank loan becomes effective, into a long-term rock supply contract on conditions satis- factory to the Bank (para 4.05); (n) 'he Bank will obtain independent audits of MP accounts (para 8.06); 10.03 B3ased on the assurances obtained, the proposed project constitutes a suitable basis for a Bank loan of US$50 million to MP, for a term of 14 years including a 4-year grace period and, to be guaranteed by the Kingdom of Morocco. Industrial Projects Department April 19, 1974 ANNEX 1 Page 1 MOROCCO MAROC-PHOSPHORE PROJECT THE PHOSPHATE INDUSTRY AND TECHNICAL TERMS Introduction 1. The main source of phosphorus is phosphate rock (aboat 94% of the world supply). The other source is organic materials (essentially bone flour). The main applications of phosphorus materials and deriva- tives are fertilizers (about 85% of total applications), detergents (about 8% ) and cattle feed (about 5%). Chart 1 shows the structure of the phosphorus industry from phosphate rocktTointermediates and finished products. Phosphorus is usually found in the form of various salts of the P20 phosphoric anhydride, called phosphates. In order to measure the active nutrient content of a phosphorus combipation, two indices are commonly used, the equivalent in Bone Phosphate Lime1/(or BPL) and the equivalent in phosphoric anhydride (P205). The former is mostly used for phLosphate rock and the latter for phosphate fertilizers. Primary Products 2. The main primary raw materials of the phosphate induLstry are: phosphate rock and sulfur. The phosphate industry consumes about 50% of the sulfur produced in the world. Main Process Flow Sheets 3. The main process flow sheets of the phosphate industry can be divic.ed as follows (see also Chart 1): Process Intermediary Finished or Semi-Finished Product Products hitric Acid Nitrophosphates Sulfuric Acid ( Low Grade SuperphLosphates Wet Process (High Grade Superphosphates and 'Phosphoric Acid (complexes Thermal Process Thermal Phosphoric Mostly produced for technical use. Acid Process Intermediary Product: Phosphoric Acid 4. Phosphoric Acid is the main intermediary product for the production of high grade phosphate fertilizers or of sodium tripolyphosphate (STPP, the 1/ (PO4 )2 Ca3 ANNEX 1 Page 2 basic input into the detergent industry). The two main processes to manu- facture phosphoric acid are the wet process and the thermal process. In the wet process, phosphate rock is attacket by sulphuric acid (H2SO4). In the thernal process, elemental phosphorus is first obtained by thermal treatment of phosphate rock and then transformed into acid. T4e vet process produces phosphoric acid (54 percent P205) which is less pure!/ than the acid produced by the thermal process (54 to 80 percent P205). Although some plants in Europe and the U.S. traded phosphoric -acid-temporarily to meet short-term requirements, phosphoric acid was, until the late sixties,a "captive" product in integrated plants. It is only in the late 1960's that large sales oriented phosphoric acid plants with substantial economies of scale were set up to serve domestic and overseas customers. A number of technical difficulties have been overcome for ocean shipping, storage and handling. Since phosphoric acid is a corrosive product, specially construct- ed ships (with stainless or rubberlined tanks) must be used. Eventually, sludge formation requires clarification at the producing plant and agitation with air streams or circulation pumps during transport and storage. The main uses of phosphoric acid are for high grade fertilizers and STPP. The bulk of the wet acid manufactured goes to the production of fertilizers and the bulk of the thermal acid to the production of STPP. However, some thermal acid is used for fertilizer production and some wet acid for STPP production. The most important events of recent years bring- ing about structural changes in this industry have been as follows: (i) the rapid increase in installed wet phosphoric acid capacity for production of high grade fertilizers; (ii) the "decaptivation" of phosphoric acid previous- ly used internally in integrated plants; (iii) competition between wet and thermal process; (iv) increase in size of phosphoric acid units; (v) develop- ment of the international phosphoric acid trade. Finished anid SemiFli.shed Products 0. Phos3phoru5 materials have three main applications: fertilizers, detergents a,rd cattt;le feed. Marginal quantities of phosphorus are used for other purposes such as organic derivatives. Western/ 'World Cons tion of Phosphorus (million tons P205) Actual Forecast 1970 1980 ertilizers 14.9 26.1 Drntergerts 1e.4 1.5 Cattle Feed 0.9 1.5 Other 0.1 0.3 Total: 17.3 29.4 1/ The degree of purity depends on the nature of the phosphate used. Moroccan phosphate, for example, produces a purer acid--that hardly requires clarifying--than Florida phosphate. 2/ Total World minus Eastern Europe, USSR and Communist countries A1INEX 1 Pa-ge 3 7. STPP is widely used in detergents. However, phosphates are largely held responsible for the phenomenon of eutrophication which causes: (i) an acce:Lerated growth of algae in lakes which reduces the amount of oxygen in the water, thus affecting the fauna; (ii) a reduced transparency; (iii) filtration difficulties in water treatment plants. At present, in various countries, legislation is being implemented to limit the production of STPP and manufacturers have started to include phosphate substitutes in detergents. Consequently, little or no growth can be anticipated for this phosphate outlet, and in 1980, STPP will represent at most 6% of the utili- zation of phosphorus versus 8% in 1970. 8. P]nosphorus is an essential component of animal nutrition (cattle feed). Aboat 20% of the phosphorus requirements for cattle feed comes from the treatment of bones, the rest is mineral. 9, Fertilizer is by far the major outlet of phosphorus (85% of the total applications). The main phosphate fertilizers are: (i) Single superphosphate (18-21% P205) obtained by sulphuric acid attack on phosphate rock; (ii) Triple superphosphate (44-46% P205) obtained by phosphoric acid attack on phosphate rock; (iii) Amonium phosphates: MAP (mono-ammonium phosphate 11-55-O) and DAP (diammonium phosphate 18-46-0) obtained by reacting phosphoric acid with ammonia; (iv) Nitrophosphate (16-16-o or 20-20-0) obtained by nitric acid attack on phosphate rock; (v) Urea phosphate (18-45-o) produced from urea and concentrated phosphoric acid. 10. These "basic" phosphate fertilizers can be used as such or blended mechanically with nitrogen and potassic materials to reach a given formilation (complex fertilizers). In particular, phosphoric acid and MAP are increasingly utilized as intermediate products to prepare complex fertilizers. Secondary manufacturing units call for lower investment costs and are mach less affected by economies of scale than the basic phosphoric acid manufactur- ing units. Trade and T'rends 11. At present, (1972) the bulk of the international trade of phosphorus is in the form of phosphate rock (about 14 million tons P205). Trade of phos- phate fertilizer amounts to 3.6 million tons P205 and trade of phosphoric acid to an additional 0.4 million tons P205. The main future choices that will influence the industry structure will be made between following possibilities: (i) various types of phosphate fertilizers or intermediates to be produced; (ii) the processes used (nitric, thermal or wet process); (iii) production units geared to exports or local consumption; (iv) various locations for production units; (v) import of rock phosphate, finished fertiLizers or phosphoric acid/MAP by countries not producing rock phosphate. ANNEX 1 Page 4 12. The decisions will be governed by policy (the desire for indus- trialization in certain developing countries) as well as economic considera- tions. Opinions in the industry at the moment differ as regards ;he future pattern of world P205 trade; this structure could well: (i) remain substan- tially unchanged (trade dominated by raw materials - rock phosphate and sulphur); (ii) change as a result of increased substitution of phosphoric acid and other solid intermediates with future production units located in countries producing rock phosphate; (iii) change as a result of a rapid development in trade of intermediates and finished products with a high P205 content. There is, however, a consensus of opinion on the overall economic interest resulting from an adequate replacement of flows of raw materials by trade in intermediates (phosphoric acid, MAP or other poly- ammonium phosphates) in conjunction with more intensive location of produc- tion units in countries (particularly developing countries) producing rock phosphate. Industrial Projects Department November 15, 1973 Ajmx l MOROCCO Chart 1 MAROC-PHOSPHORE PROJECT STRUCTURE OF THE PHOSPHATE INDTJSTRY PRINCIPAL PROCESSES Phosphate Rock Nitric Hydrochloric Sulfrric Acid Acid Acid Thermal Process Process Process Process I r - Phosphoric Acid Phosphoric Acid Phosphoric Acid Elemental Phosphorus Pertili zer Grade Fertilizer Grade Fertilizer Grade Phosphorus Derivatives Phosphoric Acid Industrial Grade lfuric | |Potash Amonia Super osphoric Acid Ordinary Triple Ammonium Poly Industrial Calcium Super Super Phosphates Ammoniu i and Nitrate Phosphate Phosphate | DAP - MAP Phosphates Food Grade Phosphates 1 ~ ~ _ l ? -' -Bulk Bl~~ending t- onial Nitro Gompound Y Mxed Cattle |Phosphates | |Fertilizers Fertilizers Feed L u | N-P-K ! | N-P-K |FSupplenents Industrial Projects'Department -ANNEX 2-1 Page 1 MOROCCO I4AROC-PHOSPHORE PROJECT THE, SPONSOR: OFFICE CHERIFIEN DES PHOSPHATES (OCP )/ A. History, Organization and Main Activities 1. COP was established by a Royal decree (Dahir) in 1920 to exploit and process Morocco's phosphate rock resources. Until 1960, the production of OCP was marketed by the Comptoir des Phosphates de l'Afrique du Nord, whiich was at the same time in charge of selling the Tunisian and Algerian phosphate productions. The original legal status of OCP was similar to that of an Administrative Agency. OCP's legal status was modified through several amendments, and particularly a Royal decree of 1960. The company now operates under the Moroccan industrial and commercial laws along the lines of private companies. OCP is fully State-owned but has its own legal and financial autonomy. It has a capital of DH 554 million. OCP applies accounting principles according to the commercial code and has the same fiscal status as private companies. 2. T'he Board of Directors?/of OCP consists of 14 members of which the majority are Ministers whose responsibilities are related to OCPls activities. The authorlty and functions of the OCP's Board are comparable to those of Boards of private companies. The full responsibility for management of opera- tions is left to the "Directeur General" (General Manager). The Board meets upon request from the "Directeur Gene'ral" and is mainly concerned with policy questions, such as expansion plans, plan of operation and sales3, dividend distribution and control of management. Sinice 1967 the I'Directeur General" of OCP has been Mr. Karim M. Lamrani, formerly Prime Minister of Morocco. Mr. Lamrani has extensive experience in corporate management anad has, in recent years, successfully reorganized OCP and developed mining capacity and exports. Following a management consultant study (by McKinsey & Company), OCP undertook an interna:L reorganization in 1970. The new structure is divided into function- al departments (Production; Personnel and Social Affairs; Planning and Develop- ment; Finance; and Marketing). The directors of these departments report directly to the "Directeur Ge'neral". The directors for Planning and Develop- ment, for Marketing and Finance have also largely contributed to the preparation of the NP project. OCP has participations in several companies related to its mining activities. It also owns a Shipping Agency STAR (Societ' de Transports et d'Affre-tements Reunis), responsible for shipping a major portion ofOCP's phosphate rock exports. In addition, OCP has a small equity share (2%) in Maroc- Chimie. Mr. Lamrani is also Chairman of the Board of Maroc-Chinie and has a significant influence on its management. Chart 1 shows the OCP organizational structure as of July 1972. I/ OCP, the sponsor of the Maroc-Phosphore (MP) project, will: provide the equity financing for the project; supply rock to the plant; be the only shareholder of MP; and have major responsibility in marketing its output and processing its inputs. j Chairec[ by the Prime Minister. ANNEX 2-1 Page 2 B. Deposits, Mines and Processing Facilities 3. Deposits of phosphate rock were discovered in the Oued Zem area near Khouribga at the beginning of 1917. Eifective mining started in the Khouribga area in 1921 (see Map IBRD 10726,. The rock reserves in Morocco are mainly located in the Khouribga and Youssoufia areas. They are estimated at about half of the known world total reserves. The present mining operations are concentrated in these two areas, Khouribga and Youssoufia. About 77 to 80% of Morocco's present production originates from Khouribga, mainly extracted in the form of open cast mining. The remaining production -- from Youssoufia -- is predominantly exploited through underground labor intensive mining methods. 4. The Khouribga deposits (including Beni Idir, Khouribga proper and Kerkour) are located about 120 km from the port of Casablanca to which the phosphate rock is transported by ONCF (Office National des Chemins de Fer - the National Railway Company). At the port of Casablanca, rock is tranship- ped through OCP's highly mechanized rock handling terminal. The facilities at Khouribga are one of the largest phosphate rock mining/processing2units in the world and the deposits stretch over an area of about 4,000 km and consist of four phosphate layers divided by interlayers of gangue. Total employment at Khouribga is about 8,500 people. Up to now the mining activity has been concentrated on layer 1 and 2 now situated at a depth of 0 to 40 meters. After screening and drying,a rock with an average BPL content of 72 to about 75% (dry basis) is obtained. At present about two thirds of Khouribga's production is in the form of 75 BPL and higher grades. In future years it is expected that Khouribga will produce increasing quantities of 72 BPL grades which are to be mined simultaneously with 75 BPL rock. The facilities instal- led at Khouribga consist of: some underground and open cast capital intensive mining operations; several washing and drying units; and a calcination plant to upgrade some of the low grades mined in combination with high grades. The installed mining and processing capacity at Khouribga has reached about 14.5 million TPY of phosphate rock by end of 1973, after a large expansion program of about 5 million tons undertaken by OCP from 1968 to 1973. It is concentra- ted on the fol1owing m;air extraction and treatment centers: Installed Mining Capacity at Khouribga (end of 1973) Mining Center Capacity in Type of BPL Content million TPY Mining Beni Idir 9.0 Open cast Mainly 75. Khouribga 4.7 Underground ( 68, 72 and 75: low grades ( are mined with high grades. Kerkour Rih 0.8 Open cast 80. 5. The Youssoufia mining center is located some 80 km from the coast. Rock is transported by railroad to the Safi port for local use by Maroc- Chimie or export. Its deposits present similar technical characteristics as those of Khouribga, although on a smaller scale. However, the phosphate layer which has been exploited is mainly underground and provides a 70 BPL rock (dry basis) after screening and drying. The development of the Youssoufia AYNEX 2-1 Page 3 mnnes -- which started production in 1931 -- responded to some major Govern- ment and OC' objectives: (i) to ease the strain on the KhouribgaL production center and the port of Casablanca, (ii) to promote industrial activity in the Safi region, and (iii) to meet the demand for intermediate grades. The present- ly instqllec. mining and processing capacity (1973) at Youssoufia is about 4.5 million TPY of phosphate rock. Capacity would easily be inc:reased by 1974 to about 5.0 million tons through some debottlenecking. This capacity includes about 0.5 million tons mined through open cast mining methods by OCP's sub-contractors. Total employment at Youssoufia amounts to about 4000 people. Employment per ton of rock is higher than at Khouribga because more labor intensive mining methods are used. In addition to the existing screening and drying facilities, OCP is constructing a 500,000 TPY calcination plant, which will allow up-grading some of the Youssoufia rock to 75 BPI. C. Past Production and Sales 6. Morocco's sales of phosphate rock and share in world production and international trade are summarized in the Table below: Morocco's Phosphate Rock Sales and Share in World Production and Trade Sales in Share of Share of million TPY World Production World Trade (in %_ _ (in %) 1961 7.6 18.8 n.a. 1965 9.8 16.3 32.5 1969 10.7 13.9 27.8 1970 11.4 14.1 30.0 1971 12.0 1h.2 30.0 1272 14.2 16.2 32.6 Morocco's share of world trade decrease in and stagnated through the late 1960's. It improved considerably since 1969 due to OCP's large' expansion program and to more favorable worlc market conditions which resulted in high capacity utilization of all major phosphate rock facilities since 1971. The distribution of rock sales by BPL content was as follows for 1971 to 1973: In BPL Percentage of Annual Production 1971 1972 1973 69 to 72 -4g- 73 to 77 63 63 51 78 and more 4 4 3 The share of medium to low grades (69 to 72 BPL) rock has increased substantially between 1971 and 1973 following higher capacity utilization at Youssoufia and compulsory production of low grades which -->due to the structure of the deposits -- are mined simultaneously with higher grades at Khouribga. It is ANNEX 2-1 Page 4 expected that the share of 69 to 72 BPL grades will be as much as 40% of total annual rock production by 1977 (see para 9). 7. The regional distribution of OCP's sales in 1972 is as followst 1972 Regional Distribution of Rock Sales (In Million TPY) Western Europe Eastern Europe Spain 1.7 Poland 1.2 France 1.5 Yugoslavia 0.8 Belgium 1.3 Czechoalovakia 0.3 United Kingdom 1.3 Others 0.2 Italy 1.1 Sub-Total 7 Others 2.3 Sub-Total 9.2 Far East and Australia Latin America 0.5 China 0.7 Japan 0.5 Local Consumption 0.6 India 0.1 Others 0.1 Sub-Total a TOTAL 14.2 At present Europe is by far the most important market for OCP who enjoys some comparative advantages (location, long established relationships and rock quality -- like purity and softness -- other than grade). It is expected that supplies to developing countries and to Eastern countries will increase in the future with therefore a relative decrease of sales to convertible areas. In addition to exports, OCP sells Youssoufia rock phosphate to Maroc- Chimie (about 0.6 million TPY). D. Importance of OCP for the Domestic Econozmr 8. OCP largely contributes to Morocco's overall economic and social activity. It employs about 14,000 people distributing income to a population of some 100,000 people in a relatively low income region. OCP staff's purchasing power generates activities for merchants, craftsmen, and small businesses in an area where little potential employment, even in agriculture, is available. OCP also generates external benefits in the economr such as training and skills promotion. Through its exports of rock, OCP contributes about 30% of the country's foreign exchange earnings.!/In addition to dividend payments to the Government (at annual level of about DH 60 million), the direct and indirect local taxes paid by OCP are substantial and estimated at more than DH 120 million in 1972. OCP is also a major purchaser of locally manufactured equipment estimated to amount to about DH 100 million -- which reflects OCP's efforts to encourage the local manufacture of an important I/ This share is expected to increase to about 50% for 1974, as a result of an expanded sales program and of increases in world phosphate rock prices. ANNEX 2-1 Page 5 share of its equipment. OCP is furthermore a particularly substantial source of revenues for the National Railroad Company (ONCF), the Nationa]l Power Company (OhE), the ports of Casablanca and Safi. These revenues were esti- mated at about DH 150 million in 1972. E. Future Prospects and Expansion Plans 9. OCP has started executing a program for expanding its total rock mining and processing capacity by about 6 million TPY as indicated in the table below: Existing and Likely Fulture Rock Minin8 and Processing Capacity (in Million TPY) Mining Center End 1973 197h End 1977 Khouribga 14.5 15.0 20.0 Youssomfia 4.5 5.0 5.o / Total 19.0 20.0 25.0 . Capacity utilization will depend on likely future exports (Annex 4-2). Produc- tion and sales estimated by mining center and by grade are, however, shown in the Table below. Increased production of high grades (74/75 1PL) from Khouribga coupled with increased production of 72 BPL grades is likely to limit exports of 70/72 BPL Youssoufia grades. Only local sales (to Maroc- Ghimie and Maroc-Phosphore) might, therefore, help maintain the level of activity at the Youssoufia Mining Center. Present and Likely Future Phosphate Rock Sales (Bank Estimates) (in Million TPi) Actual Projected 1972 1973 1974 1977 Youssoufia 70/72 BPL Local 0.55 0.61 0.65 2.20 Export 2.30 3.39 4.05 2.30 2/ Calcined (for export) - - - 0.40 Khouribga (Exports) 72 BPL 1.80 3.75 6.60 5.20 75 BPL 9.00 8.75 7.60 13.30 Calcined & high grades 0.50 0.50 o.60 o.60 Total 14.15 17.00 19.50 24.00 1/ Excluding the new Ben Guerir mine, east of Youssoufia, which might enter into prodauction by 1977-78. Industrial Projects Department February 15, 1974 MOROCCO MAROC-PHOSPHORE PROJECT OCP ORGANIZATION CHART (JULY 1972) DIRECTEUR GENERAL Okwour: de IIso'C | donif1ptm et 1 d.6* |Ptcol,IICMIOfl! D4veIqoo~.ent ||Hors.Cadres o
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Morocco - Phosphate Fertilizer Project
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