K. A F A 4t .7X

Report No. 351 -MOR FILE COPYMorocco: Appraisal of theMaroc-Phosphore Phosphoric Acid andMono-Ammonium Phosphate ProjectApril 19, 1974

Industrial Projects Department

Not for Public Use

Document of the International Bank for Reconstruction and DevelopmentInternational 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 It may not be published,quoted or cited without Bank Group authorization.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 acceptresponsibility for the accuracy or completeness of the report.

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENTS WEIGHTS AND MEASURES

All figures in DH and US$ All weights and measures are inof 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 Pounds1 clearing $ = 4.195 DH 1 Kilometer (Km) = 0.62 miles1 BE = 0.63 DM (Deutsch Mark) 1 Cubic Meter (m.3 ) = 26 4 US Gallons1 iD = 1.58 DH1 US$ = 2.80 DM

ABBREVIATIONS AND ACRONYMS

N Nitrogen - Nutrient Element in Nitrogenous FertilizerP205 Phosphorus Pentoxide - Nutrient Element in Phosphatic FertilizerPA Phosphoric Acid Solution containing 54% P205MAP Mono-Ammonium Phosphate (11-55-0) containing 11% of N and 55% of P205DAP Diammonium Phosphate (18-46-0)

C&F Cost and FreightCIF Cost, Insurance and FreightFOB Free on BoardFAS Free Alongside ShipTPD Metric Tons per DayTPY Metric Tons per Year

Comanav Compagnie Marocaine de NavigationFFM Fertilizantes Fosfatados MexicanosGazocean French Partner in the Shipping CompanyICM Industries Chimiques MaghrebinesKfW Kreditanstalt fUr WiederaufbauMarphocean The Shipping CompanyMC Maroc-Chimie CompanyMP Maroc-Phosphore (Project Company)OCP Office Ch6rifien des Phosphates (Sponsor)

FISCAL YEARS

January 1 - December 31

HOROCCO

APPRAISAL OF TIIEMAROC-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) ......... 1EN. Maroc-Phosphore Company (MP) ...... ............ 2C. Sector Development.... . .... ........ . 3

III. T'HE PROJECT AND THE INFRASTRUCTURE ................. 4

A. Facilities, Products and Raw Materials ........ 4B. General Infrastructure ........................ 5

C.Ecology .................................... 5

IV. WORLD MARKETS AND PRICES ......................... . 5

A. Main Trends ndd Rationale ... 5B. Finished Phosphate Fertilizers . . 6C. Phosphate Rock . ....................... .. s. 6D . Sulfur ..................................... 7E. Phosphoric Acid ............................... 8F. Mono-Ammonium Phosphate ....................... 9

V. MARKETING, TRANSPORT AND TERMINAL' .............. ...... 10

A. Marketing and Sales Arrangements . . 10B. Acid Transport .............. ......... 12C. Receiving Terminal Facilities ......... 13

VI. PROJECT FXECUTION ........ ... ...... 13

A. Background ............. . ... 13B. Selection of Contractors ... 14

This report has been prepared by Messrs. R. Carmignani, S. Cottrell, M. Ferberand A. Gros of the Industrial Projects Department, on the basiLs of missions toMorocco in February and October 1973 and March 1974.

TABLE 01' CONTENTS (Continued)

Page No.

C. The Consortium and the Project Contract....... 14D. Procurementocut.. .. .. ... 16F. Project Organization and Company Management... 16F. Staffing and Training ...... .............. 17

VII. CAPITAL COST AND FINANCING PLAN .................... 17

A. Capital Costs .... .......... ... .... .......... 17B. Working Capital .. 19C. Financing Plann........... 19D. Allocation of Loans and Disbursement Schedule. 20

VIII. FINANCIAL ANALYSIS ....... 22

A. Revenues and Operating Costs . . 22B. Financial Forecasts .... 23C. Financial Return and Sensitivity Analysis 24D. Risks and Financial Covenants . . ............... 25

IX. ECONOMIC JUSTIFICATION ........................ .. . 26

A. World Trade Pattern and Sales Strategy 26B. Additional Rock Sales from Youssoufia 26C. Other Social Benefits. 26D. Economic Rate of Retur .26

X. RECOIMNDATIONS AND AGREEMENTS REACHED...... 27

A. Sector Recommendations . ....................... 27B. 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 Chart3-2 Project Description: Plant Facilities, Auxiliaries and Offsites3-3 General Infrastructure Outside the Project3-4 Ecology

4-1 Phosphate Fertilizers: World Trade and Prices4-2 Phosphate Rock: World Trade, Prices and Prospects4-3 Sulfur: World Supply, Demand and Prices4-4 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 Consortium6-2 The Consortium Organization and the Plant Construction Contract6-3 Industrial Tests6-4 T,entative Project Schedule6-5 Project Execution Charts6-6 Project Team and Company Management Charts6-7 Staffing and Training Charts

7-1 Capital Costs Estimates7-2 Retroactive Financing and Expenditures during Construction7-3 Working Capital Estimates7-4 Financing Plan: Equity Subscription and Loan Withdrawal Schedule

8-1 Operating Costs Estimates8-2 Projected Income StatementsA-3 Projected Cash Flow Statements3-4 Projected Balance Sheets3-5 Schedule of Repayments and Interest on Long-Term Debt8-6 Financial Break-Even Chart8-7 Financial Rate of Return and Sensitivity Analysis

9-1 Fconomic Rate of Return: Investment Costs9-2 Economic Rate of Return: Operating Costs9-3 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 ACIDAND 140NO-AMMONIUM PHOSPHATE PROJECT

MOROCCO

SUMMARY AND CONCLUSIONS

i. This report appraises a project for the construction in Moroccoof a plant to produce for export intermediate phosphate fertilizers. Theproject--for which financing by Kreditanstalt fur Wiederaufbau (KfW) ofGermany, the local development bank Banque Nationale pour le DeveloppementEconomique (BNtDE), and the Bank is envisaged--is sponsored by Olfice Cherifiendes Phosphates (OCP), the State-owned phosphate rock mining agenicy. OCP willown all the shares of the Maroc-Phosphore Company (NP) recently formed tobuild and operate the project. The plant to be located near the Port ofSafi 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 asiiquid phosphoric acid and 225,800 TPY of powdered miono-ammoniumn phosphate(MAP) 1/. It will use local phosphate rock--the major input--from theYoussoufia mine about 80 km from Safi, imported sulfur from Poliand andimported ammonia. The project is expected to cost US$155.5 million equiv-alent and to start commercial operations by January 1976. The proposedBank loan--US$50 million--will be made directly to MP.

ii. OCP is the largest single producer and exporter (32% of worldtrade) 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 projectedfinancial 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 actuallybe the first involvement of OCP in chemical manufacturing. ConLsequently,OCT and MP are assisted by an experienced technical advisor Haldor TopsoeAS of Denmark.

iii. The project, with a capacity of 1,500 TPD of P205 of which up to45% can be converted into MAP, will benefit fully from econoroJes of scale.Because of its vicinity to and cooperation with MC, the project: will alsobenefit--with corresponding cost savings--from existing infrastructure andauxiliary facilities at the plant site and at the Safi port. Additionalinfrastructure needed in connection with the project will be executed bythe appropriate Government agencies.

1/ Phosphoric acid is a key intermediate product in manufacturing highgrade phosphate fertilizers. It is a highly corrosive liquid transportedin special vessels. MAP is a high grade powder semi-finished compoundfertilizer. P2 05 is the nutrient element in phosphate fertilizers.

- ii -

iv. Structural changes -- providing the rationale for the project -- inproduction and trade of phosphate fertilizers have occurred in the past 10years because of: (i) rapid increase in production and trade of high gradefertilizers; (ii) rapid increase in phosphoric acid capacity, prompted bythe 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 developingcountries in the world trade. Consequently, the future trade pattern forP905 products is likely to shift from present domination by rock and sulfurto a more balanced trade combining these materials and increasing quantitiesof intermediates and high grade finished products. To meet the increasingdemand for such products, the Government and OCP have made ambitious plansfor the period 1973-77. They include, in addition to the MP project doublingof the MC capacity and creation, also at Safi, of a new acid plant similarto, but independent from, the project.

v. Though the overall demand and supply for intermediates might welltightly balance towards the end of the 1970s, it is expected that MP willhave an adequate market for its products and be able--given its location andother comparative advantages--to compete effectively with other producers.To reduce market risks and given that the trade for intermediates is onlyemerging, specific contractual narketing arrangements have been made. Underreasonable assumptions for successful completion of sales negotiations bymid 1974, OCP will have, by then, concluded medium-term sales arrangementsrepresenting a substantial portion of the project outptut during the firstfive years of operation. Sales will concentrate in four major zones: EastEurope, 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 theFrench ship engineering firm Gazocean--will enter into a long-term charterarrangement 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 ofthis 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 theproject; and (ii) obtain a firm project cost essential for determining asound sales strategy and for allowing the start of sales negotiations. OCPhas already contracted -- in two stages -- the plant construction and projectexecution has commenced. OCP has signed a first contract (June 1973) tobuild facilities corresponding to about two-thirds of the project capacityand completed negotiations (April 1974) for a supplementary constructioncontract 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 whichis 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 beinvolved. The iowest bid was submitted by a consortium headed by Uhde ofGermany. 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 developedby OCP and includes: the MP project team, the nucleus of the company; thevarious 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 projectexecution. Furthermore, given the expected difficulties in recruitingMoroccan chemical engineers, Topsoe and Uhde, as part of their contractswith 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 whichUS$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 ofUS$8 million, would together cover 97% of the expected convertible foreignexchange costs. The equity funds would finance the local costs, the costsof Polish supplies payable in clearing dollars (US$12.6 million) and US$2.7million equivalent of the remaining convertible foreign exchange costs. Theproposed Bank loan would be made directly to MP at an effective interest rateof 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 theGovernment at 2% for 30 years including 10 years of grace, would be on-lentto I.. The terms and conditions of the KfW relending and the BNDE loan toMP 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 millionadvance payments in convertible foreign exchange, which are proposed to befinanced retroactively by the lenders (US$8 million by BNDE and the remainingUS$4.8 million jointly by the Bank and KfW). Total retroactive financingrequired from the Bank would amount to TUS$3.1 million and represents a rela-tively small percentage of the Bank loan (6%). The proposed retroactivefinancing is a consequence of the strategy adopted: (i) by OCP in firstfirming up project costs and then negotiating sales contracts, and (ii) bythe Bank in evaluating the project on the basis of firmer evidence and seekingto 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 forecastperiod. The project's financial rate of return after taxes is satisfactory(16.9%) particularly in view of the prudent capital, revenues, and operatingcosts 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 consideredrather low. Commercial risks (market, transport and prices) of the project,on the other hand, are judged to be relatively high given the not yet fullyestablished trade in intermediates and the need for complex and coordinatedacid transport. However, commercial risks have been reduced substantiallythrough contractual sales arrangements. In addition OCP has committed it-self to establish and maintain a sound liquidity and financial position ofthe 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 techniquesin a region where employment alternatives are low; develop manufacturingactivities 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 forfuture similar projects in Morocco.

xiii. Based on the agreements reached with the Government, MP and OCP, theproject is suitable for a Bank loan of US$50 million to MP, for a term of 14years including a 4-year grace period and, to be guaranteed by the Kingdomof Morocco.

I. INTRODUCTION

1.01 The Government of Morocco has asked the Bank for technical andfinancial 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 issponsored by the Government-owned phosphate rock mining agency OfficeCherifien desi Phosphates (OCP) and is being executed by the recently formed-Uroc-Phosphore Company (MP). NP is assisted by OCP and its technicaladvisor, Haldor Topsoe AS of Denmark (Topsoe). The project--to cost US$155.5million equivalent--is located near the Safi Port on the Atlantic coast (Map10726R) and is expected to start commercial operations in January 1976. OCPwill supply phosphate rock, the major input, from the Youssoufia mine about80 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 industryand of the technical terms used in the report.

1.02 Ihe project, the first involvement of OCP in chemical manufacturingwas presented to the Bank in June, 1971. The Government of Morocco (the Gov-ernment) and OCP asked for Bank assistance in the formulation, preparationand supervision of a call for turn-key bids and this was followed in December1972, by a formal request to help finance the project. The project wasappraised 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 alsohleld in Europe with the OCP Sales Department; the acid transport partnerGazocean; 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 processMorocco's phosphate rock resources. It was initially organized and operatedas a department of the then existing administration. Its legal status modi-fiedl by decree in 1960, allows OCP to operate as a commercial industrialcompany. OCP now operates as a fully State-owned and financially autonomouspublic establishment. Mr. Karim Lamrani 2/ has been the Gencral Manager of

1/ Phosplhoric acid is a key intermediate product in manufacturing highgrade phosphate fertilizers. It is a highly corrosive liqjuid 'Ind needsto be transported in special rubber-lined or stainless stee' tanks. MAPis a high grade semi-finished compound fertilizer shipped in bulk powderedform. 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 successfullydeveloped OCP's activities in recent years. Annex 2-1 gives details on OCPand its operations. OCP's share capital is DR 554 million and its total netassets exceed DH 1 billion. Sales in 1973 are estimated at about US$230million and its operations are profitable. Its future financial situationis expected to be particularly good in view of sharp increases (by late 1973)in world phosphate rock prices. OCP is the largest single phosphate rockproducer and exporter in the world. In 1972, its share was 16% of the world'stotal production and 32% of world trade. Phosphate rock mining is nowconcentrated in two mining centers: Khouribga, linked to the port ofCasablanca; and Youssoufia, linked to the port of Safi. OCP has improved itsshare in world production and trade in the past years following a largeexpansion program, started in 1967 and now completed, which has increasedrock production capacity to 19 million TPY 1/ by the end of 1973. By farthe 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 afterpr,ocessing 2/) mostly exploited through underground labor-intensive miningtechniques. Facilities at Khouribga are mostly open cast and about two-thirds of Khouribga's 1972 production consisted of high grades (75 BPL andabove) with a high export value. During the period 1973-77, OCP plans tofurther expand its rock mining and processing capacity by about 6 millionTPY to meet the rising world demand for rock. To increase production ofhigh grades and reduce costs, most of the expansion will take place atKhouribga (Annex 2-1). Khouribga will also, however, produce in the fu-ture increasing quantities of 72 BPL grades mined simultaneously with thehigher grades. Khouribga's medium grades are, therefore, likely to competeincreasingly with traditional sales from Youssoufia.

2.03 OCP contributes significantly to Morocco's economy. In 1973, itaccounted for nearly 30% of the country's foreign exchange earnings 3/ andemployed about 14,000 persons--mostly unskilled and semi-skilled--providingincome to a population of about 100,000. In addition to dividend paymentsto the Government, OCP pays a considerable amount of direct and indirecttaxes (Annex 2-1). It is the major purchaser of locally manufacturedequipment 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 andoperate the project. The Company is a "Societe Anonyme" under Moroccanindustrial and commercial laws. Its initial authorized share capital isDH 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'saccounts. 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. Plantand production management will be autonomous. The project manager, Mr. SellamM'Hamedi, is expected to become MP's General Manager at start of production.He has, therefore, full responsibility for supervising the plant constructionand will manage its operations aad coordinate the other functions carried outby 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 ofabout 400 people. Provision has, however, been made in the operating costsfor larger staff (500 people).

2.05 After international consultation, OCP selected Topsoe as theirTechnical Advisor. Topsoe is incorporated in Denmark and has a worldwidereputation 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 adjacentto the existing Maroc-Chimie (MC) phosphate fertilizer plant. To meet theincreasing 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 productioncapacity 11; and (ii) creation at Safi of a new Maroc-Phosphore unit (MP2project) similar to but independent from the project. The MC1 project isunder execution and tenders are expected to be called shortly for the MP2project. The Bank initially expressed some reservations as to such a rapidsectoral development because all investments involved would draw on the samescarce resources in Safi (mostly skilled staff, water, transport, storingand handling facilities) and serve the same growing but limited global P205market. The representatives of the Government and OCP agreed to furnishinformation to the Bank on this investment program and on future phosphatemanufacturing and other industrial facilities in the area of Safi and gaveinformal atssurances that no future investments in the Safi area would bemade that could adversely affect the project.

1/ MC produces about 400,000 TPY of phosphate fertilizers, equivalent toabou2t 150,000 TPY P O, more than half of it for export and consumes0.6 million TPY Youssoufia rock and 0.5 million TPY of local pyrrhotine--a naitural iron sulfide whose sulfur content is used in making sulfuricacid. MC will, after expansion (by 1977), produce nearly 1 milliontons 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 containing54%_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 usingtraditional 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 convertedinto MAP, after combination with ammonia. On average about 25% of the totalP205 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 ofMAP. Annex 3-1 shows process diagrams and flow sheets for the project.Since the plant will be adjacent to the existing MC plant, the Companywill 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 1,500TPD P205 phosphoric acid unit; a 4,500 TPD sulfuric acid plant, also withthree trains; and a two train 1,220 TPD MAP unit. The principal units willbe large enough to benefit fully from proven modern technology and economiesof scale. In addition, there will be: the usual utilities; inputs andoutputs storage and handling facilities at the plant and the Safi port;electric and steam generating units; a connection to the national powergrid; a connection to a new rock unloading system (gare haute project) forboth MC and IMP; in-plant intake systems for process fresh water and coolingsea water; administration buildings; maintenance shop and store houses; andplant connections to existing railroads. The port of Safi can receive shipscf 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 sourceson a spot basis. At capacity operation, raw materials consumption will beabout 1.62 million TPY of rock, 481,000 TPY of sulfur, and between 31 and56,000 TPY of ammonia depending on the rate of MAP production. Catalystsand chemicals will all be imported. The Youssoufia rock averages 70-72 BPLand known reserves are adequate to supply the project with the same gradeover a much longer period than its expected life.

-5-

B. GeneraLl Infrastructure

3.04 Certain infrastructure facilities needed for, but not part of theproject, and estimated to cost about DH 36 million (US$8 million), will bebuilt by the appropriate Government agencies but be closely suplervised byOCP and ID; the necessary budget allocations have been made. Ihese facili--ti.es, described in Annex 3-3 include: the supply of fresh water 3throughmcdification of a canal, installation of a new canal, a 56,000 m reservoirand a conduit; installations for unloading sulfur at the port; and railroadequipment and railroad sidings at the Safi port and from the Youssoufia-Safirail line to "gare haute". The tariffs, to be paid by ID for these serviceshave been agreed upon with the agencies involved. Availability of housingis being reviewed by the regional authorities. A schedule for constructionof 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; sulfurfilter cake; gypsum; sulfur and rock dust; tail gas containing sulfur-oxidesand fluorine compounds. The Government has,not yet established specificpollution standards but appropriate measureit to handle these effluents areprovided for as part of the project (Annex :-4). In particular, the filtercake 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 gypsumdisposal method, used by IfC since start-up in 1965, has never created anypollution problem on account of the inert nature of gypsum and the swiftocean current bringing about quick dispersion. All storage and handlinginstallations for solids will receive de-dusting equipment. A new disposalarea for MC's pyrrhotine cinders has been created at some distance from MPand thus will eliminate the dust contamination from IMC. OCP and MP agreedto 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) rapidincrease in phosphoric acid capacity, prompted by the trend to high grades;(iii) emerging trade in intermediates (liquid phosphoric acid or solids likeMAP); (iv) increase in size of intermediates production units and economiesof scale; and (v) increasing participation of developing countries in theworld 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 andlikely 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 morebalanced 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 exportoriented 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 thesame year world capacity was estimated at 25.1 million TPY P205 equivalentto a capacity utilization of about 92%. In recent years world consumptionincreased at an annual rate of about 5%. During the 1970s world demand forP105 is expected to grow at about 6.0% per year to reach some 38 million tonsof P2O5 by 1980. Demand for high-grade fertilizers (essentially phosphoricacid 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% inthe 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 tonsrepresented the intra-trade in North America and Western Europe; 1.2 milliontons were exported from the US and Western Europe to developing countries--principally Latin America and Asia--mostly through tied bilateral aid; and0.4 million tons were exported from Morocco and Tunisia to Europe. MP willrepresent about 10% of the present world trade of finished phosphate fer-tilizers. The world P205 supply/demand situation moved from an oversupplyin 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 andin EasteYn Europe. The severe shortage of high-grade phosphate fertilizersresulted in considerable increases in prices. Representative FOB exportprices for typical finished phosphate fertilizers--an indicator of pricelevels for MP's intermediate products--reached US$220 to US$280 per ton ofP20 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 phosphaterock are showni in Annex 4-2. World production of rock, concentrated in thesix 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 NorthAfrica; West Africa, Middle East, and Pacific Islands) and 5 exportersof sulfur (US, Canada, Mexico, France and Poland). The pattern andlocation of the phosphate industry results from an optimum combinationof: size of local and/or accessible export markets; local availabilityor low cost procurement of raw materials; and general infrastructuraland 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 the1960s was about 85-90%, increased to an estimated 92% in late 1972 and to95% in 1S73, reflecting large increases in demand. World export trade ofphosphate rock increased from 29.2 to 43.5 million tons between 1965 and1972 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%) andthe USSR (14%). Whereas Morocco exports nearly 95% of its outpult and there-fore has little possibility for marginal export pricing, the US and the USSRexport only 25% and 30% respectively. The pattern of trade has been changingduring the same period with an increase in the share of the US (from 24 to30%'t), and a switch of North African exports from Western Europe (paid inhard currency) to Eastern Europe and Asia (with a sizeable part under bartertrade).

4.05 The world rock supply/demand situation also moved from a worldwideover-supply in the late 1960s and early 1970s to a tight balance in early 1973and 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 fortypical 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$9.9 per ton respectively.The sharp increase in prices is also explained by a necessary price recovery--low profits led to reduced investments, particularly in Florida, thereforeaggravating the worldwide supply 3hortage--following a depressed price sit-uation over most of the last decade. Moroccan FOB prices in current US$only regained by mid 1973 their 1953 level--reflecting, therefore, a severedrop in constant prices--after going through a three years up aLnd down cycletypical of the fertilizer industry. OCP will supply rock to ME' on a long-termcontract basis at a price ex-Youssoufia mine equivalent to the average exportprice for the Youssoufia 70/72 BPL grade. It is OCP's determined policy notto subsidize rock prices for sales to local manufacturers. A draft of therock contract was reviewed by the Bank and found satisfactory; signature ofthe rock supply contract is a condition of effectiveness of the Bank loan.World rock prices are expected to remain at their present (early 1974) highlevels through late 1975 because of an expected continuing tight supply.The world rock capacity/demand coverage is, however, likely to improve from1976 onwards; long term FOB equilibrium prices are therefore forecast tostabilize---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 tobe 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 givenin 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 isdue to massive production of recovered sulfur from natural gas mainly inCanada and to increased deliveries of elemental sulfur from Poland. Thoughsupply and demand balanced in 1973 and prices firmed up, becauso- a largeportion of sulfur stocks in Canada cannot be economically moved, over-supplyis expected to last throughout the 1970s and beyond particularly because ofadditional quantities of recovered sulfur and sulfuric acid resulting frompollution controls. World prices (FOB Europe and US) have dropped fromUS$40-50 in 1969 to US$24-30/ton in 1972. FOB Canadian, US and Europeanprices increased to about US$30 to 33 per ton by mid 1973 and to a per tonUS$35-45 range in early 1974. Long term equilibrium prices throughout the1970s are expected to stabilize at their 1973 level and those C&F Moroccoat 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 firstcontract covering about two-thirds of the project's needs has been concludedwith Poland. This contract is initially for 5 years but renewable. Theprice is firm during the first three years 1975-77 at US$32 per ton C&FSafi. Prevailing market prices, with a ceiling of US$34 per ton, will applyfor later years (1978-80). OCP has started negotiations -- with Poland andCanada -- for the supply, also on a long term contract, of the needed additionalsulfur requirements. This second contract is expected to be concludedshortly 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. Between1960 and 1972 world phosphoric acid capacity-virtually all for internalcaptive 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 recentdevelopment of acid manufacturing facilities for non-captive use, an inter-national phosphoric acid trade has emerged. It reached about 380,000 tonsP205 in 1972 1/ representing some 3.3% of the world's production cf finishedP?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, Spainand Iran; the main importers are Western Europe, Brazil, Colombia and India.It is estimated that the international acid trade amounted to about 500,000tons P205 in 1973.

4.08 OCP and the Bank have made a projection of the overall supply anddemand for phosphoric acid 2/ in 1975 and 1977. Considering only the projectsnow committed and likely to come on stream before 1977, the supply/demandsituation on a wforldwide basis is expected to move from a marginal surplusin 1974/75 to a marginal gap in supply of about 0.9 million tons P205 in1977, or about three times the MP production. On a regional basis, someexcess 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 orderivatives like MAP.

-9-

by 1977. However, given statistical uncertainties the best estim.te wouldbe that supply and demand should about balance through 1977 with nore fa-cilities needed by 1980. As a second approach to estimating the futureacid gap and one that is probably nore reliable for evaluating MP's marketprospects, demand from individual customers and offers from individualsellers have been compared. The calculation shows that the potentialuncommitted acid supply for export (1 to 1.2 million tons P205 includingIT's production) and the expected demand yet unsatisfied through mediumto long-term contracts (0.9 to 1.1 million tons P205) might nearly balancefrom 1976/77 onwards. This demand estimate is likely to be conservativesince it does not take account of: (i) a number of countries which mightp'rogressively become acid importers and (ii) additional imports to replacelocal production from marginal obsolete capacities now being increasinglydismantled in Europe. It is therefore considered that, though overalldemand and supply for intermediates might well tightly balance towardsthe 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$150and 170 per ton of P205 FOB supplier's tank for medium term contracts. ForUS local deliveries, they were about US$200/ton P205 FOB. Due to an extremeshiortage in supply of free acid in both Europe and the US and reflecting thelate 1973 increases in rock prices, spot prices reached US$250-300 FOB plantsin early 1974. For the majority of acid sales covered by contracts, priceshave been adjusted upwards to take account of late 1973 rises in raw mate-rials costs and freight rates. It is anticipated that delivered prices onexisting contracts (for West European marke'-s where prices are likely todetermine the pattern of international prices for oceangoing acid) will--by 1976--range between US$210-230 per ton P2025 New contracts are expectedto be negotiated at 1976 prices about US$20 per ton higher. An indicativelong term equilibrium price for acid might, therefore, be about US$230-250per ton C&F Europe (1976 base) for medium-term contracts and US$205-220 FOBSafi or Gulf Coast. The expected average 1976 price for MP's acid sales isUS$210 per ton P205 FOB Safi.

F. Mono-Aimhonium Phosphate (MAP)

4.10 MAP is not yet an internationally traded commodity since onlylimited quantities have been available for export. It has, however, beensuccessfully used as an intermediate for distribution within some countries(Finland, Spain, US). MAP, using phosphoric acid as major input, is a solidintermediate fertilizer which combines a number of advantages: high P205content; cheap transport cost on a per ton of nutrient basis; highly suitablefor 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 mostattractive ways of moving P205 from mines to producers. Compared to acid,MAP will probably emerge as the most favorable product for long shippingdistances while acid will have advantages for use in specific processes

- 10 -

or for specific fertilizer formulae. It is expected that the internationaltrade for intermediates will concentrate on acid in the near future but theninclude a substantial share of MAP. MAP medium to long term equilibriumprices 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 wereabout 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 stabilizeat about US$150-180 in the mid to late 1970s. The assumed average 1976price 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 MAPsales potentials for specific markets, and has had discussions and negotiationswith numerous potential buyers. However, a marketing strategy, covering deter-mination of quantities and selection of buyers and delivery points, has beenfirmed up only recently. It is directed towards a geographically more diver-sified sales pattern than had been contemplated earlier. OCP is completingnegotiation of medium-term sales contracts to ensure a satisfactory salesbuild-up and reduce market risks. The firming up of sales contracts at thisstage is also imposed by the necessity to plan transport, terminal and han-dling facilities for the acid. Clients who initially were hesitant to enterinto contractual sales arrangements have recently (probably following thetight and insecure rock supply situation in the world) been more anxious todo so.

5.02 OCP's sales strategy-to cover the first 5 years of operations--aimsat diversifying sales to key and expanding consumption zones rather than max-imizing PT's earnings. Tthis illustrates OCP's desire to be present in thesekey markets so as to: (i) participate in the pricing policy for intermediatesand (ii) prepare a seeding program for increased production of intermediatesin Morocco. The sales pattern therefore concentrates on four major zones:Eastern Europe, Northwestern Europe--essentially Germany and the Rotterdamarea--, 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 saleson a spot basis to benefit from favorable market conditions. In its strategyOCP 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 CountriesContract signed 70 70 70 70 PolandContracts under finalnegotiation 100 120 120 120 (France (10); Germany (50);

(Brazil (50); India (10).Contract urnder advancednegotiation 80 80 80 80 Romania

Negotiatiorns initiated - 95 105 105 (Brazil (40); Italy (15);(Germany (50).

M4APContracts tinder finalnegotiation 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 additionalsales.

The contract with Poland has been signed and the terms of the contracts withGermany, France and India have been agreed upon. Negotiations with Italiansmall buyers are advanced. Contract proposals have been made to two Brazilianfirms and final negotiations are scheduled for late spring 1974. All contractsare for five years with renewal clauses; acid will be sold on CIF and MAP onan FOB basis. Therefore, under reasonable assumptions for successful comple-tion of sales negotiations by mid-1974, virtually the entire plant outputdurinp the first two years of operation--and about 85%o thereafter--will havebeen contracted. l.vidence of the contracts signed and the terms--satisfactoryto 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 estimatedtotal plant capacity will be provided to the Bank as a condition, of loaneffectiveness. The 60% share corresponds to the profit break-even productionlevel.

5i.04 The acid contracts provide for a base 1973 price and an escalationformula 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 termsof contracts not yet fully negotiated and to preliminary estimates of transportcosts. 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 topredict since it is not yet an internationally traded commodity, but theymiglit 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 deliverypoints in three specialized, self-unloading, ocean-going ships: two 10,500and one 20,000 dwt capacity ships equipped with rubber-lined tanks. A jointcompany, Marphocean, has been formed--with an initial share capital of DH 4million--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 ofMoroccan goods, and by OCP (25%). The balance (30%) will be covered by theFrench ship engineering firm, Gazocean, one of the world's leading firms inthe 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 thethird ship have been issued and offers are expected in May 1974; this shipis expected to be delivered by December 1976.

5.06 Before OCP decided to purchase ships rather than charter them, itconsulted several specialized shipping agencies from the UK, Japan and Norway.The world fleet of phosphoric acid carriers available for chartering, thoughdeveloping rapidly, is still limited and includes mostly small multipurposestainless steel ships or ships owned by competitors. In line with arrange-ments made by other acid export companies, notably FFM 2/ of Mexico, thepioneer firm in acid shipping, OCP decided to build its own transport facil-ities. While Marphocean will be responsible for the operation and maintenanceof the ships, MP will, in accordance with the time charter agreement, pay afixed annual fee to Marphocean and cover the ships' direct operating expenses.Annex 5-1 gives details on arrangements for acid transport and on freightrates 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$/ton of P205) 1973 Basein dwt (US$ 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 properand 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; andlead--if extended beyond January/March 1976 and no charter substitute wereto become available in time--to initial under-capacity utilization of theproject or to the postponement of plant acceptance tests. The Bank is satis-fied that l4arphocean: (i) will quickly conclude a contract for the thirdship; (ii) is firming up a satisfactory financing plan for the three ships;and (iii) will enter into a satisfactory time charter agreement with NP priorto the loan becoming effective.

C. Receiving Terminal Facilities

5.08 Clients will be responsible for terminal facilities--storage tanksand piping--to handle and store the acid delivered. Existing terminals willbe used to the extent possible. More specifically, Poland is constructinga terminatl with a capacity of 20,000 tons of solution at Szczecin. Brazilianpurchasers will use existing terminals in Santos and Rio Grande do Sul, al-though some expansion may be needed. The German buyer plans to enter intonegotiations with FFM to use the under-utilized FFM terminal at Rotterdamor, failing that, will set up its own terminal in Antwerp. Other specificswap arrangements are being worked out to supply the small French purchasers.A terminal is available in Kandla in India. Romania is considering settingup a new terminal. NP and Marphocean agreed to supervise closely the execu-tion and adequacy of the terminals since they constitute an essential elementin the delivery chain of acid. MAP will be handled and stored in bulk usingtraditional fertilizer handling facilities.

VI. PROJECT EXECUTION

A. Background

6.01 The Government and OCP requested, in June 1971, Bank technicalassistance in the preparation and supervision of a call for iturnkey bids.OCP and the Bank closely cooperated and international bidding procedureswere 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 ofthe project capacity--on June 29, 1973 and project execution has commenced.It will take 27 months to build this portion of the project, and commercialoperations are expected to start in January 1976. This first contract inclu-ded provisions for project expansion to full capacity. Following favorablemarket developments and to take advantage of an unchanged price offer, OCPentered into (early 1974) and completed (April 1974) negotiations for asupplementary construction contract based on identical terms and coveringthe additional works to complete the project; corresponding facilities areexpected to start operations in August 1976. The desirable sequence--withwhich the Bank agrees--for project preparation and execution as well as thechoice 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 projectcost essential to determine a sound sales strategy and allow the start ofserious sales and price negotiations, to reduce commercial risks.

B. Selection of Contractors

6.02 Both the Government and OCP decided to execute the main facilitiesof the project as turnkey contracts at lump sum prices subject to an agreedescalation formula because of: (i) single responsibility in project execu-tion; (ii) lack of sufficient technical expertise within OCP; and (iii) firmknowledge of fixed project costs at an early stage. The Bank accetpted, aftersetting up certain safeguards, that this particular project be cairied out onsuch turnkey basis (Annex 6-1). OCP invited bids from consortia of special-ized firms with the leadership entrusted to one firm (the contractor) who wasto 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) callfor 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 broadinternational base and, by scoring methods acceptable to the Bank and withTopsoe's assistance, five consortia were selected by OCP on the basis of theirtechnical offers to present price proposals (Annex 6-1). The five contractorswere from the US, Belgium, France, Germany, and Japan and they had proposedprocesses 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 wassubmitted by the consortium headed by Friedrich Uhde GmbH (Uhde) of Germany.Uhde and all the other members of the consortium are well known and capablefirms (Annex 6-2). Uhde will coordinate the overall engineering and civilworks, 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 thesulfuric acid unit; Lurgi Gesellschaft fur Chemie and Huttenwesen GmbH (Lurgi)wili engineer and procure the MAP unit; Siemens A.G. (Siemens), will performthe electrical work. Nissan of Japan will provide the hemihydrate phosphoricacid process and Fisons of the UK the MAP process. Some initial reservationsabout the Polimex and Nissan processes and about Polimex qualifications wereremoved after a Bank mission visited plants operating with these processesand units constructed by Polimex in Europe.

6.04 The contracts include a lump sum price with payments in DH (localcosts), in clearing dollars for the Polimex part as per a sub-contract betweenUhde and Polimex, and in DM for the remaining balance of foreign exchange.An agreed payment schedule in the three currencies is also included in thecontracts and payments are specified at intervals and in amounts proportionalto expected cash outlays and work done. Thje Polimex lump sum prices are firmfor the forecast duration of the project execution. The DH and DM portionswill be adjusted up or down over time according to agreed formulae includedin the contracts and to be applied between October 1972 and August 1976. Theccontracts 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 continuouste.st--scheduled to take place within a period of 6 months after mechanicalcompletions--with all sections of the plant operating at full capacity.Final acceptance is to occur 12 months later if it is shown that there areno hidden defects or unsuitable equipment. The contracts also provide forunlimited liability of the consortium to meet capacity and products qualityguarantees. Various penalties are provided for late completion, excessiveuse of raw materials, utilities and supplies, which could amount to 10% ofthe lump sum prices (Annex 6-2). Since the lump sum prices total aboutUS$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/ Nissanprocess based phosphoric acid plant of a size and sophistication similar tothe 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 theproject will he completed on time and that the plant will be able to operateat full capacity on a continuous basis (330 days per year). A bar chartshowing the estimated construction schedule for the project and the generalinfrastructure is shown in Annex 6-4. As of April 1974 the project andrelated infrastructure were on schedule. The site preparation work is com-pleted and the engineering work has started at Uhde's headquarters. The Bankis satisfied with the general terms of the plant contracts, including theschedule, 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 equipmentunder the turnkey contract. Self interest will, however, dictate that theconsortium procure these at the lowest possible prices, including multinationalbidding, and the technical specifications and the terms of the turnkey contractwill ensure satisfactory quality of the goods purchased. Spare parts are notincluded in the turnkey contracts and will be procured: partly from theoriginal equipment vendors (simultaneously with purchases of main equipmentand in accordance with a list to be prepared by Uhde); and partly--at thetime 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 andBank approvals. An important portion of the equipment and materials is likelyto come from Germany and most of the remainder from other European countries.Polimex will procure equipment and services from Poland as per the sub-contractswith Uhde in clearing dollars but also from Germany and other European sourceswith payments to be made in DM and as part of the plant contract. Processlicenses will be procured in Japan (Nissan) and in UK (Fisons). Uhde willprepare at the end of project execution an indicative breakdown of foreignexchange 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 MPproject taam; (ii) the various OCP Departments involved; (iii) the technicaladvisor Topsoe; (iv) the Uhde team; and (v) an OCP group working on futureacid and other intermediates manufacturing projects. The main functions forproject execution are described in Annex 6-6. The project team will supervisethe project execution, including infrastructure, and review progress reportsand schedules prepared by Uhde and Topsoe. It will also provide the nucleusfor the operating Company itself. As indicated above various OCP departments-commercial, administrative and finance, and planning-will provide support tothe project team and later to the Company. Topsoe will assist the projectteam in all the activities involved including the review of work progressand start-up. Uhde will have full responsibility for the construction,start-up and performance of the project, which will decrease the immediateburden on the project team. The various governmental agencies will executethe infrastructure work under the combined supervision of MP and OCP planningdepartment. Finally, the OCP group for future intermediates projects includesexperienced engineers and will provide direct and continuous technical supportas needed. These organizational arrangements are expected to ensure an adequatecontrol of project execution. The shipping part of the overall scheme will bedirectly 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 iMPoperating Company are shown in Annex 6-6. The structures are substantiallysimilar 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 atKhouribga and is considered to have the required broad managerial capabilitiesto guide and coordinate all the project activities. As was mentioned previously,he is expected to become MP's General Manager and will contribute to thecontinuity 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 theproject manager already in place, an experienced deputy project manager, for-merly MC plant manager, has been nominated and 1 of 7 department heads and 4of 9 division chiefs have been recruited. However, since more senior staffwill 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)

% ofDirhams US Dollars Total

Local Foreign Total Local Foreign Total Cost

Engineering - 26 26 - 6.0 6.0 4.0Buildings and Civil Works 45 5 50 10.1 1.1 11.2 7.5Equipment and Materials 5 234 239 1.3 52.8 54.1 36.4Erection and Supervision 37 33 70 8.4 7.3 15.7 10.6Miscellaneous 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 3.2Taxes and Registration Fee 18 - 18 4.0 - 4.0 2.7Project Infrastructure 16 - 16 3.7 - 3.7 2.5Pre-operational Expenses 16 6 22 3.7 1.3 5.0 3.4Price Escalation 14 61 75 3.1 13.8 16.9 11.4Additional Contingency 6 21 27 1.3 4.8 6.1 4.1Working 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 405million (US$91.6 million) included in the contracts with UlJde. Thoughreducing largely the chances of cost overruns, firm contract prices do notautomatically eliminate them because of force majeure conditions or contractor'sclaims on account of minor changes in the contract scope. All major itemsoutside the turnkey contracts have been identified and their cost estimatesprepared by OCP and MP were reviewed by the Bank and appear to be adequate.The orovision for price escalation, based on the contracts' escalationformulae and on the estimated annual rates of growth of component prices, isconsidered adequate; on average these annual rates amount to 15% and 13% forforeign and local components respectively. Furthermore, an overall contingency(5% on the local and 7% on the foreign portion of the installed plant costexcluding price escalation) is included to cover miscellaneous unforeseeableexpenditures. While the recent increases in petroleum prices have broughtabout added uncertainties about future price developments it is judged thatthe overall contingency reserve of US$23 million equivalent, or 18% of projectcost before working capital and interest during construction is adequate,particularly in view of the relatively short construction time. The foreignexchange costs include DH 55 million (US$12.6 million) for goods and servicessubcontracted 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 phasingof expenditures during construction corresponds to the agreed contractualpayment schedule (Annex 7-2).

- 19 -

T). Working Capital

7.03 Permanent wvorking capital requirements are conservatively estimatedat DII 73 million, or US$16.5 million (Annex 7-3). They include DH 47 millionto build up inventories, DH 52 million for receivables (40 days>, DH 5 millionfor cash requirements less DH 31 million financing for accounts payable (1month). Inventories for phosphate rock (2 days) are considered sufficientsiven the direct link between the plant and the Youssoufia mine. Accountsreceivables 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 DollarsLocal Foreign Total Local Foreign Total

DebtIBRD - 221 221 - 50.0 50.0K fW - 119 119 - 26.8 26.8BNDE - 35 35 - 8.0 8.0

Sub-Total: - 375 375 - 84.8 84.8

Equity (OC]?)Local Funds 245 - 245 55.4 - 55.4Clearing Currency - 55 55 - 12.6 12.6Converti'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 55:45debt to equity. This ratio represents a sound capitalization for the projectand the Company and provides for an adequate risk sharing between the sponsorand the lenders. Loan financing will be provided by Kreditanstalt furW4iederaufbau (KfW) of Germany, the local bank Banque Nationale pour leDeveloppement Economique (BNDE) and the Bank. Financing will be joint for KfWand the Bank. The Bank loan of US$50 million will amount to 59% of the totalloan funds, and covers about 57% of the total expected convertible foreignexchange costs. The remaining loan financing--in convertible foreignexchange--will be provided by KfW (DM 75 mil lion or US$26.8 million) andBNI)E (USNW million). The German Government has allocated DM 75 million forthe project as part of its capital aid to Morocco; KfW, acting as ExecutiveAgency, 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 ofthe Bank loan will depend on the final approval of the KfW loan by the GermanGovernment. BNDE's financial contribution slould be seen as a step to mobilizeadditional external resources from Arab oil exporting countries and tostrengthen BNDE participation in the preparation and execution of majordevelopment projects in Morocco. Should BNDE's financial participation notmaterialize, OCP has agreed to provide the corresponding amount (US$8 million)on terms and conditions satisfactory to the Bank. The equity funds willfinance the local costs, the costs of Polisl supplies (US$12.6 million) andUS$2.7 million equivalent convertible foreign exchange costs.

7.06 Based on the expected life of the project, the proposed Bank loanwould be for 14 years, including 4 years of grace. The Bank loan would bemade directly to MP at the Bank interest rate (currently 7-1/4%) and would beguaranteed by the Government. MP would pay to the Government a guarantee feeof 1-3/4%, bringing the total cost of Bank funds for MP to 9%. The KfW loanwould be granted to the Government at 2% for 30 years including 10 years ofgrace and would be on-lent to MP. The terms and conditions of the KfW and3NDE loan to MP would be the same as for the Bank loan. The terms of theproposed 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 MPwhen and in the amounts needed. OCP's present financial structure is soundwith a debt to equity ratio of 36:64 and net income after taxes is expectedto increase sharply from the 1973 level of nearly DII 150 million. TheGovernment has agreed to allow OCP to retain earnings in sufficient amountsto meet NP's equity subscriptions. In the event of a capital cost overrunin the project, OCP would provide--with an adequate back-up by the Government-- additional funds necessary to complete the project, on terms and conditionsacceptable 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 EquityBank KfW BNDE Clearing Convertible

Turnkey Conttract 33.6 19.0 8.0 10.4Spare Parts 2.6 1.5 - 0.7 -Training, Start-up and Project

Supervision - - - - 1.3Interest during Construction 3.0 - - - 1.4Unallocatecd (Contingency andEscalation) 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 ofthe turnkey contract and spare parts, the full amount of interest on theBank 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 beapproved (June 1974) OCP would have: brought into the Company as equityDH 51 milLion to finance local and clearing currency costs; and made DH 57million (US$12.8 million) convertible foreign exchange advance payments(US$8 million to be financed retroactively through the BNDE loan; the remainingUS$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 turnkeycontract will be made pro rata against invoices submitted by MP and in agree-ment with the contracts payments schedule. The Company is aware that theBank will not finance goods and services procured in Poland. Control inthis respect will stem from the fact that Topsoe and VT will certify to theBank--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 theBank 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 willbe US$3.1 million and represents a relatively small percentage of the Bankloan (6%). The proposed retroactive financing is a consequence of the strategyadopted: (i) by OCP in first firming up prqject costs and then negotiatingsales contracts, and (ii) by the Bank in evaluating the project on the basisof much firmer evidence on critical project parameters. The advance contractingcorresponds conceptually, in the present case, to the total irLstalled plantcosts since, as agreed with the Bank, the contract was awardecl on a turnkeybasis. The Bank considered it advisable for the project sponsor to conclude,at an early stage, a plant construction contract and to supervise closelyeachi 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 inAnnex 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 Costsin 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 33.9Other 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 0.3Utilities and Chemicals 2.6 0.1Transport and Handling 1.7 -Personnel 2.3 -Maintenance Materials 5.7 1.3Other 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 ofacid and MAP will remain closely linked to 1)rices of raw materials and,therefore, costs and revenues are likely to move in parallel. Projectionsin constarLt prices are thus justified. In addition all major input priceswill 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 contingenciesover and above costs corresponding to the personnel size proposed by thecontractor. Transport and handling costs are low because of existing infra-structure facilities at the port and at MC. They have been escalated to 1976at 5, per year. These operating cost estimates are considered reliableparticularly since consumption of raw materials is guaranteed in the plantconstruction contract.

B. Financial Forecasts

8.02 Detailed projections of MP's income statements, cash flows andbalance 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 337Interest 34 34 33 31 28Depreciation 45 49 49 49 49Net Income (Loss) before Taxes (10) 49 70 81 84Net 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 379Current Liabilities 22 46 62 63 65

Net Fixecd Assets 570 523 476 429 382

Long-Term Debt 375 360 329 297 263Capital 303 352 422 503 587Current Ratio 6.0 3.3 2.5 2.4 2.4Debt/Equity Ratio 55:45 51:49 44:56 37:63 31:69Debt Service Coverage 2.0 3.9 3.2 2.6 2.7

- 2'. -

The projections of revenues are based on reasonable assumptions as to thebuild-up of output to full capacity in 1979, the fourth year of operations.Given the contractual guarantees, the plant could, from a technical pointof view, reach full capacity over a shorter period of time and operate at100% capacity on a continuous basis. Operating costs include about DH 22million (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 incomeduring 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 (above2) during the life of the project. The lo&ns' interest and repayment schedulesare shown in Annex 8-5.

8.03 The cash break-even point (Annex 8-6) of the project is expectedto be at about 50% of capacity utilization. The profit break-even point willbe at about 60% of capacity utilization until 1980 and thereafter declinesteadily to 52% in 1988. A cash build-up occurs in the projections becausethey 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 aprovision for equity funds for expansion in later years. The current ratiowill remain satisfactory throughout the project life and the working capitalfunds would provide financing for unexpected operating losses and for reim-bursable taxes, and give a safety margin for unexpected cash requirementsand debt service coverage. The financial position of the Company is expectedto 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 returnof the project would be 17.4% before and 16.9% after taxes on income (Annex8-7). The satisfactory financial return is based on realistic capital, ope-rating costs and revenue assumptions. A revenues' increase of 5%, aboutUS$10.5 per ton of P205, would increase the base return of the project to20.0%; the same applies to a 9% decrease in raw material costs. Since thespread of rock export prices might be as much as US$2 per ton, OCP agreedto consider selling rock to NP during the first three to four years at theprice offered to the most favored client of equivalent importance; in sucha case, the base financial rate of return will increase to 18.6%. Lowerthan estimated revenues and higher raw material costs are possible though unlike-ly. In such a situation, a 5% reduction in revenues would reduce the returnto 13.8%'. The risks of increases in investment costs or delays in projectimplementation to an extent which would substantially affect the project'sreturn are considered low because of the advanced stage of the project. Therate of return sensitivities for different revenues and costs assumptions areshown 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-reimbursableand 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 designand operations and risks of substantial delays or major cost overruns canbe considered relatively low since the project is carried out: (i) by areputable and experienced consortium; and (ii) on the basis of turn-keycontracts already concluded. The commercial risks (market, transport andprices) of the project are considered relatively high given: the presentlyrather narrow and not yet fully established world trade; and the need forcomplex and coordinated acid transport. However, commercial risks havebeen reduced. substantially through contractual sales arrangements for asubstantial part of NP's production. This will guarantee MP a reasonablelevel of capacity utilization and limit commercial risks primarily to pricefluctuations. 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 whenconsidering VP as part of OCP's overall activities. Provisions against someof the risks outlined above entirely depend on the phosphate sa:Les strategyof OCP, who is MP's sponsor, shareholder, supplier of the major raw materialand commercial agent. In view of the close relationship between OCP's andTP's activities and the commercial risks involved in the project, it has beenagreed that OCP would help maintain MP's sound financial condition; there isno doubt that OCP has the financial strength to be able to fulfill such anundertaking. In particular, OCP would: (i) provide the amount of initialworking capital included in the financing plan and, if necessary, provideadditional funds to establish a current ratio of at least 1.5 at the completionof 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 notincur any cdebt if this would result in a debt to equity ratio greater than55:45. In addition, to assure the preservation of the Company's cash, MPhas agreed: not to pay any dividend or make any other distribution to OCPduring the first two years after project completion; and not tc, make suchdistributions thereafter unless after such payments the Company's currentratio is at least 1.2. The Bank will obtain an independent audit of MP'saccounts 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 thedifferent P205 products and the increasing share of intermediates, and theinvestments made or contemplated by OCP's competitors has induced OCP--as partof its overall P205 sales strategy--to enter into the rapidly emerging inter-mediates trade: (i) to maintain and possibly increase its overall share in theworld P205 market; (ii) to avoid substantial substitution of OCP's rock salesby intermediates produced and sold by competitors; (iii) to offer to its clientsan optimum mix of products; and (iv) to participate in the international acidpricing policy which might well influence, if not guide, rock prices in thelong 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 MPabout 1.6 million tons of medium grade 70/72 BPL Youssoufia rock converted tointermediates. This quantity of rock representing about 30% of Youssoufia'smining capacity might well -- in part -- be considered as constituting addi-tional sales of Moroccan rock on international markets by the second half ofthe 1970s because of: (i) increased competition from Khouribga sales ofmedium grades; (ii) a likely balanced world supply/demand situation by late1970s and thus lower sales prospects for low to medium grades; (iii) lowercosts at the Khouribga mine which therefore should be used to the fullestpossible capacity; and (iv) boomerang effect on prices of high grades iflarge amounts of low to medium grades are marketed. MP is therefore likelyto contribute toward using to a fuller extent capacity at Youssoufia wherelabor 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 whereemployment alternatives are reduced; (ii) develop, in line with the Moroccandecentralization policy, manufacturing activities at Safi and, therefore, helpuse more extensively the port facilities; (iii) help OCP participate in theworld trade of intermediates; (iv) provide education externalities throughtraining of personnel; and, quite importantly, (v) constitute a model and atraining 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 operatingcosts valued at world prices (Annexes 9-1, 2 and_3). The opportunity costof the Youssoufia rock used in the calculation is equivalent (US$24.90 perton 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 inthe sensitivity calculation and is based on a conservative mix between marketprices for export and economic costs of production for the quantities un-likely to be exported in a without-the-project situation. The main factorsaffecting the mix are: (i) likely high negative rock price elasticity toexcess export deliveries; (ii) relatively large spread of Youssoufia prices--wvhen supply and demand balance--with additional sales at prices closer tothe bottom of the range; and (iii) reduction of captive sales at above worldprices. In case of surpluses in the rock market, the opportunity cost ofrock might move closer to the economic cost of production, likely to be inthe 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 ERRis satisfactory. It was subjected to sensitivity tests, using differentassumptions for the most significant and uncertain factors (Annex 9-3). TheERR is highly sensitive to output prices (a 5% increase in revenues addsnearly 3 percentage points) and to rock prices (a 10% drop in rock pricesadds 2 percentage points). It, however, remains satisfactory (19.2%) if boththe market price for rock is used and the sulfur price is increased by asmuch 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 plantperformance.

X. RECOMMENDATIONS AND AGREEMENTS REACHED

A. Sector Recommendations

10.01 The representatives of the Government and OCP indicated theiragreement with the Bank that the projected forward integration into inter-mediates manufacturing calls for careful planning--particularly in the useof materials, utilities and personnel resources in Safi--to ensure an optimumsectoral development and to adjust production of intermediates to the worlddemand pattern (para 2.06).

B. Agreements Reached

10.02 Agreement has been reached between the Government, OCP, MP and theBank on the following principal points:

Sector Development

(a) The Government and OCP will furnish prior information tothe 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 necessaryinfrastructure 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 salesarrangements covering at least 50% (in 1976) and 60% (for eachof the four years thereafter) of the estimated total plantcapacity (para 5.03);

Transport and Terminals

(e) MP will enter, as a condition of loan effectiveness, into atime charter agreement with Marphocean (para. 5.07);

Organization and Staffing

(f) The project execution and the Company organization will besatisfactory to the Bank (para 6.08);

(g) The project staff will be recruited and trained accordingto a schedule satisfactory to the Bank (para 6.10);

Financial

(h) OCP will provide-and the Government will agree to al.low OCPto retain earnings to that effect-in accordance with theproject payment schedule a minimum of DH 313 million inequity (para 7.07) of which at least DH 12 million will beconvertible into foreign exchange (para 7.05);

(i) BNDE or OCP will provide a loan to 22 of an amount equivalent toUS$8 million and on terms and conditions satisfactory to theBank (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 termsto MP similar to the Bank loan (para 7.06);

(k) The Government and OCP will provide an unlimited guaranteefor project completion and cost overruns (para 7.07);

- 29 -

(1) rCP and MP will observe certain financial covenants tomaintain a sound liquidity and financial position of theMP 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 constitutesa suitable basis for a Bank loan of US$50 million to MP, for a term of 14years including a 4-year grace period and, to be guaranteed by the Kingdom ofMorocco.

Industrial Projects DepartmentApril 19, 1974

ANNEX 1Page 1

MOROCCO

MAROC-PHOSPHORE PROJECT

THE PHOSPHATE INDUSTRY AND TECHNICAL TERMS

Introduction

1. The main source of phosphorus is phosphate rock (aboat 94% ofthe world supply). The other source is organic materials (essentiallybone 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 ofthe phosphorus industry from phosphate rocktTointermediates and finishedproducts. Phosphorus is usually found in the form of various salts of theP20 phosphoric anhydride, called phosphates. In order to measure theactive nutrient content of a phosphorus combipation, two indices are commonlyused, the equivalent in Bone Phosphate Lime1 /(or BPL) and the equivalent inphosphoric anhydride (P2 05). The former is mostly used for phLosphate rockand 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% ofthe sulfur produced in the world.

Main Process Flow Sheets

3. The main process flow sheets of the phosphate industry can bedivic.ed as follows (see also Chart 1):

Process Intermediary Finished or Semi-FinishedProduct Products

hitric Acid NitrophosphatesSulfuric 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 productionof high grade phosphate fertilizers or of sodium tripolyphosphate (STPP, the

1/ (PO4 )2 Ca3

ANNEX 1Page 2

basic input into the detergent industry). The two main processes to manu-facture phosphoric acid are the wet process and the thermal process. Inthe wet process, phosphate rock is attacket by sulphuric acid (H2SO4). Inthe thernal process, elemental phosphorus is first obtained by thermaltreatment of phosphate rock and then transformed into acid. T4e vet processproduces phosphoric acid (54 percent P2 05 ) which is less pure!/ than theacid produced by the thermal process (54 to 80 percent P205). Although someplants in Europe and the U.S. traded phosphoric -acid-temporarily to meetshort-term requirements, phosphoric acid was, until the late sixties,a"captive" product in integrated plants. It is only in the late 1960's thatlarge sales oriented phosphoric acid plants with substantial economies ofscale were set up to serve domestic and overseas customers. A number oftechnical difficulties have been overcome for ocean shipping, storage andhandling. 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 agitationwith air streams or circulation pumps during transport and storage.

The main uses of phosphoric acid are for high grade fertilizersand STPP. The bulk of the wet acid manufactured goes to the production offertilizers and the bulk of the thermal acid to the production of STPP.However, some thermal acid is used for fertilizer production and some wetacid for STPP production. The most important events of recent years bring-ing about structural changes in this industry have been as follows: (i) therapid increase in installed wet phosphoric acid capacity for production ofhigh grade fertilizers; (ii) the "decaptivation" of phosphoric acid previous-ly used internally in integrated plants; (iii) competition between wet andthermal 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 forother purposes such as organic derivatives.

Western/ 'World Cons tion of Phosphorus(million tons P205)

Actual Forecast1970 1980

ertilizers 14.9 26.1Drntergerts 1e.4 1.5Cattle Feed 0.9 1.5Other 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 hardlyrequires clarifying--than Florida phosphate.

2/ Total World minus Eastern Europe, USSR and Communist countries

A1INEX 1Pa-ge 3

7. STPP is widely used in detergents. However, phosphates arelargely held responsible for the phenomenon of eutrophication which causes:

(i) an acce:Lerated growth of algae in lakes which reduces the amount ofoxygen in the water, thus affecting the fauna; (ii) a reduced transparency;(iii) filtration difficulties in water treatment plants. At present, invarious countries, legislation is being implemented to limit the productionof STPP and manufacturers have started to include phosphate substitutes indetergents. Consequently, little or no growth can be anticipated for thisphosphate 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 (cattlefeed). Aboat 20% of the phosphorus requirements for cattle feed comes fromthe treatment of bones, the rest is mineral.

9, Fertilizer is by far the major outlet of phosphorus (85% of thetotal applications). The main phosphate fertilizers are:

(i) Single superphosphate (18-21% P205) obtained by sulphuric acidattack on phosphate rock;

(ii) Triple superphosphate (44-46% P205) obtained by phosphoric acidattack on phosphate rock;

(iii) Amonium phosphates: MAP (mono-ammonium phosphate 11-55-O) andDAP (diammonium phosphate 18-46-0) obtained by reacting phosphoricacid with ammonia;

(iv) Nitrophosphate (16-16-o or 20-20-0) obtained by nitric acidattack on phosphate rock;

(v) Urea phosphate (18-45-o) produced from urea and concentratedphosphoric acid.

10. These "basic" phosphate fertilizers can be used as such or blendedmechanically with nitrogen and potassic materials to reach a given formilation(complex fertilizers). In particular, phosphoric acid and MAP are increasinglyutilized as intermediate products to prepare complex fertilizers.Secondary manufacturing units call for lower investment costs and are machless 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 isin the form of phosphate rock (about 14 million tons P2 05 ). Trade of phos-phate fertilizer amounts to 3.6 million tons P2 05 and trade of phosphoricacid to an additional 0.4 million tons P205. The main future choices that willinfluence 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) productionunits geared to exports or local consumption; (iv) various locations forproduction units; (v) import of rock phosphate, finished fertiLizers orphosphoric acid/MAP by countries not producing rock phosphate.

ANNEX 1Page 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 futurepattern of world P205 trade; this structure could well: (i) remain substan-tially unchanged (trade dominated by raw materials - rock phosphate andsulphur); (ii) change as a result of increased substitution of phosphoricacid and other solid intermediates with future production units located incountries producing rock phosphate; (iii) change as a result of a rapiddevelopment in trade of intermediates and finished products with a highP205 content. There is, however, a consensus of opinion on the overalleconomic interest resulting from an adequate replacement of flows of rawmaterials 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 rockphosphate.

Industrial Projects DepartmentNovember 15, 1973

Ajmx lMOROCCO Chart 1

MAROC-PHOSPHORE PROJECT

STRUCTURE OF THE PHOSPHATE INDTJSTRY

PRINCIPAL PROCESSES

Phosphate Rock

Nitric Hydrochloric SulfrricAcid 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 AcidIndustrial

Grade

lfuric | |Potash Amonia Super osphoric Acid

Ordinary Triple Ammonium Poly IndustrialCalcium Super Super Phosphates Ammoniu i andNitrate 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 2-1Page 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 exploitand process Morocco's phosphate rock resources. Until 1960, the productionof 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 Algerianphosphate productions. The original legal status of OCP was similar to thatof an Administrative Agency. OCP's legal status was modified through severalamendments, and particularly a Royal decree of 1960. The company now operatesunder the Moroccan industrial and commercial laws along the lines of privatecompanies. OCP is fully State-owned but has its own legal and financialautonomy. It has a capital of DH 554 million. OCP applies accounting principlesaccording to the commercial code and has the same fiscal status as privatecompanies.

2. T'he Board of Directors?/of OCP consists of 14 members of which themajority are Ministers whose responsibilities are related to OCPls activities.The authorlty and functions of the OCP's Board are comparable to those ofBoards of private companies. The full responsibility for management of opera-tions is left to the "Directeur General" (General Manager). The Board meetsupon request from the "Directeur Gene'ral" and is mainly concerned with policyquestions, such as expansion plans, plan of operation and sales3, dividenddistribution and control of management. Sinice 1967 the I'Directeur General" ofOCP has been Mr. Karim M. Lamrani, formerly Prime Minister of Morocco.Mr. Lamrani has extensive experience in corporate management anad has, in recentyears, successfully reorganized OCP and developed mining capacity and exports.Following a management consultant study (by McKinsey & Company), OCP undertookan 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 reportdirectly to the "Directeur Ge'neral". The directors for Planning and Develop-ment, for Marketing and Finance have also largely contributed to the preparationof the NP project. OCP has participations in several companies related to itsmining activities. It also owns a Shipping Agency STAR (Societ' de Transportset d'Affre-tements Reunis), responsible for shipping a major portion ofOCP'sphosphate 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 asignificant influence on its management. Chart 1 shows the OCP organizationalstructure as of July 1972.

I/ OCP, the sponsor of the Maroc-Phosphore (MP) project, will: providethe equity financing for the project; supply rock to the plant; be theonly shareholder of MP; and have major responsibility in marketing itsoutput and processing its inputs.

j Chairec[ by the Prime Minister.

ANNEX 2-1Page 2

B. Deposits, Mines and Processing Facilities

3. Deposits of phosphate rock were discovered in the Oued Zem areanear Khouribga at the beginning of 1917. Eifective mining started in theKhouribga area in 1921 (see Map IBRD 10726,. The rock reserves in Moroccoare mainly located in the Khouribga and Youssoufia areas. They are estimatedat about half of the known world total reserves. The present mining operationsare concentrated in these two areas, Khouribga and Youssoufia. About 77 to80% of Morocco's present production originates from Khouribga, mainly extractedin 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 andKerkour) are located about 120 km from the port of Casablanca to which thephosphate 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 facilitiesat Khouribga are one of the largest phosphate rock mining/processing 2 unitsin the world and the deposits stretch over an area of about 4,000 km andconsist of four phosphate layers divided by interlayers of gangue. Totalemployment at Khouribga is about 8,500 people. Up to now the mining activityhas been concentrated on layer 1 and 2 now situated at a depth of 0 to 40meters. After screening and drying,a rock with an average BPL content of 72 toabout 75% (dry basis) is obtained. At present about two thirds of Khouribga'sproduction is in the form of 75 BPL and higher grades. In future years itis expected that Khouribga will produce increasing quantities of 72 BPL gradeswhich are to be mined simultaneously with 75 BPL rock. The facilities instal-led at Khouribga consist of: some underground and open cast capital intensivemining operations; several washing and drying units; and a calcination plantto upgrade some of the low grades mined in combination with high grades. Theinstalled mining and processing capacity at Khouribga has reached about 14.5million TPY of phosphate rock by end of 1973, after a large expansion programof 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 Contentmillion 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 characteristicsas those of Khouribga, although on a smaller scale. However, the phosphatelayer which has been exploited is mainly underground and provides a 70 BPLrock (dry basis) after screening and drying. The development of the Youssoufia

AYNEX 2-1Page 3

mnnes -- which started production in 1931 -- responded to some major Govern-ment and OC' objectives: (i) to ease the strain on the KhouribgaL productioncenter and the port of Casablanca, (ii) to promote industrial activity in theSafi region, and (iii) to meet the demand for intermediate grades. The present-ly instqllec. mining and processing capacity (1973) at Youssoufia is about4.5 million TPY of phosphate rock. Capacity would easily be inc:reased by1974 to about 5.0 million tons through some debottlenecking. This capacityincludes about 0.5 million tons mined through open cast mining methods byOCP's sub-contractors. Total employment at Youssoufia amounts to about4000 people. Employment per ton of rock is higher than at Khouribga becausemore labor intensive mining methods are used. In addition to the existingscreening and drying facilities, OCP is constructing a 500,000 TPY calcinationplant, 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 andinternational trade are summarized in the Table below:

Morocco's Phosphate Rock Sales and Share in WorldProduction and Trade

Sales in Share of Share ofmillion TPY World Production World Trade

(in %_ _ (in %)

1961 7.6 18.8 n.a.1965 9.8 16.3 32.51969 10.7 13.9 27.81970 11.4 14.1 30.01971 12.0 1h.2 30.01272 14.2 16.2 32.6

Morocco's share of world trade decrease in and stagnated through the late196 0's. It improved considerably since 1969 due to OCP's large' expansionprogram and to more favorable worlc market conditions which resulted in highcapacity utilization of all major phosphate rock facilities since 1971. Thedistribution of rock sales by BPL content was as follows for 1971 to 1973:

In BPL Percentage of Annual Production1971 1972 1973

69 to 72 -4g-73 to 77 63 63 5178 and more 4 4 3

The share of medium to low grades (69 to 72 BPL) rock has increased substantiallybetween 1971 and 1973 following higher capacity utilization at Youssoufia andcompulsory production of low grades which -- >due to the structure of thedeposits -- are mined simultaneously with higher grades at Khouribga. It is

ANNEX 2-1Page 4

expected that the share of 69 to 72 BPL grades will be as much as 40% oftotal 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 1.2France 1.5 Yugoslavia 0.8Belgium 1.3 Czechoalovakia 0.3United Kingdom 1.3 Others 0.2Italy 1.1 Sub-Total 7Others 2.3

Sub-Total 9.2 Far East and Australia

Latin America 0.5 China 0.7Japan 0.5

Local Consumption 0.6 India 0.1Others 0.1

Sub-Total a

TOTAL 14.2

At present Europe is by far the most important market for OCP who enjoyssome comparative advantages (location, long established relationships androck quality -- like purity and softness -- other than grade). It is expectedthat supplies to developing countries and to Eastern countries will increasein the future with therefore a relative decrease of sales to convertibleareas. 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 socialactivity. It employs about 14,000 people distributing income to a populationof some 100,000 people in a relatively low income region. OCP staff'spurchasing power generates activities for merchants, craftsmen, and smallbusinesses in an area where little potential employment, even in agriculture,is available. OCP also generates external benefits in the economr such astraining and skills promotion. Through its exports of rock, OCP contributesabout 30% of the country's foreign exchange earnings.!/In addition to dividendpayments to the Government (at annual level of about DH 60 million), the directand indirect local taxes paid by OCP are substantial and estimated at morethan DH 120 million in 1972. OCP is also a major purchaser of locallymanufactured equipment estimated to amount to about DH 100 million -- whichreflects 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 ofan expanded sales program and of increases in world phosphate rock prices.

ANNEX 2-1Page 5

share of its equipment. OCP is furthermore a particularly substantial sourceof revenues for the National Railroad Company (ONCF), the Nationa]l PowerCompany (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 rockmining and processing capacity by about 6 million TPY as indicated in thetable 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 20.0Youssomfia 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 inthe Table below. Increased production of high grades (74/75 1PL) fromKhouribga coupled with increased production of 72 BPL grades is likely tolimit exports of 70/72 BPL Youssoufia grades. Only local sales (to Maroc-Ghimie and Maroc-Phosphore) might, therefore, help maintain the level ofactivity at the Youssoufia Mining Center.

Present and Likely Future Phosphate Rock Sales (Bank Estimates)(in Million TPi)

Actual Projected1972 1973 1974 1977

Youssoufia 70/72 BPLLocal 0.55 0.61 0.65 2.20Export 2.30 3.39 4.05 2.30 2/Calcined (for export) - - - 0.40

Khouribga (Exports)72 BPL 1.80 3.75 6.60 5.2075 BPL 9.00 8.75 7.60 13.30Calcined & 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 mightenter into prodauction by 1977-78.

Industrial Projects DepartmentFebruary 15, 1974

MOROCCO

MAROC-PHOSPHORE PROJECT

OCP ORGANIZATION CHART (JULY 1972)

DIRECTEURGENERAL

Okwour: de IIso'C| donif1ptm et 1 d.6*

|Ptcol,IICMIOfl! D4veIqoo~.ent ||Hors.Cadres o °ndeme c Or;oi scilon ][1

D,rect w | lecte D'eeceur du nnelonnee | la oceia, |t-

Indutria Prjet Department L >L C

November 15, 1973

Dlejson ~ ~ P,. n.-eer D.le MrwnSrieDwso Ge!ed GeiisCe uCr u c, e d Cfd

.'e"C..b ... ri

Industrial Projects Department g Novernber 15, 1973 0,

Annex 2-2

MOROCCO

MAROC-PHOSPHORE PROJECT

THE TECHNICAL ADVISOR

1. After internatioffal consultation, OCP selected Haldor Topsoe AS(Topsoe) as their Technical Advisor. Although Topsoe was chosen before theBank became involved in the project, the Bank has no objection to thischoice. Topsoe is a Danish firm with a worldwide reputation in consulting,engineering and research in the chemical field and over 30 years experience.The firm--originally known as Haldor Topsoe--was founded by Dr Haldor Topsoein 1940. It has developed five main fields of activity: Research and Develop-ment; Catalyst and Catalytic Process Development; Catalyst and High PuritySilicon Manufacture; Specialized Engineering; Consulting Services. The firmhas about 300 employees about half of whom are engineers, chemists, physicistsand other technically trained persons. While Topsoe is perhaps.most widelyknown for its work in ammonia synthesis and catalysts, it has experience inother fertilizer fields, including sulfuric acid, phosphoric acid and phos-phate fertilizers. Mr Mogen Pedersen, who is heading up the Topsoe team forthe Maroc-Phosphore project, has been with the Topsoe organization for about25 years and has participated in the design and construction of amionin, urea,nitric acid, sulfuric acid, phosphoric acid and phosphate plants.

a. The firm incorporated cnly recently (October 1972) wrhen it soldhalf of its assets to Snam Progetti S.p.A. of Milan, wholly owned subsidiaryof the Italiarn state organization Ente Nazionale Idrocarburi (ENI). Dr Topsoehas remained as Chairman and his organization has remained intact.

3. The functions of the Technical Advisor are spelled out in a contractdated June 30, 1970 between OCP and Topsoe.J These include the following:(a) preparation of a feasibility study--(completed); (b) preparation of tenderdocuments, including a draft conf?ract, soliciting and evaluating bids andrecommending the best bid, and assistance in final contract negotiations--(completed); (c) assistance to the Project Team on all of the items listedunder the functions of the Project Team; (d) advice on staffing the new facili-ties and assistance in recruiting local and expatriate staff; (e) assistanceduring start-up and commissioning of the uew facilities.

1/ The contract was amended on October 8, 1973, but the main functionsand responsibilities of the Technical Advisor have not been modified.

Industrial Projects DepartmentFebruary 1$, 1974

ANNEX 3-1Page 1

MOROCCOMAROC PHOSPHORE PROJECT

PROCESS DIAGRAM - A

…_____ _-------------- - _--

YOUSSOUFIA | PORT OF SAFIMINES

K ROCK~~~~~~~~~~~~~~~~~~2EIT

C GA E \ \LINE

TOMAROC._\CHIMIE PLANT

> RAWk t 60.0003 MT \ AMMONIA MAP PHOS. ACID

81.125 MT

SULFURIC ACID

MILL . -_ .3 x 1,500 MTDMILL MI TRAINS

GROUND O ROUNDO GROUND\\ROCKROCK LHROCK

1,OOOMT 1.OOOAT 1.OOO MT

PHOSPHOC EC ACID MAP

3 x 500 MTD " 2 >3610 MTD

_ TRAINS TRA INS

SLUDGE __

3 ~~~~~~~~~~~~~~MAP l11 Bso

S < ~~WILL HANDLE

GYPSUM _ SYSTEM |UP TO 495,000 MTA

TO SEAI

l ~~~~~~~~~~CLARI FIED PHOS. ACI D -54% P2a5

= Annual Quantities of Raw Materials and ProductsAssu-mig that 25% of the P205 Produced isConverted to Map. World Bank-813312RI

ANNEX 3-1Piae 2

MOROCCO

MAROC PHOSPHORE PROJECTPROCESS DIAGRAM-B

SULFUR

Il ,

SULFURIC ACID3x1,500 MTD

TRAINS

YOUSSDUFIA ROCK

PHOSPHORIC ACID SLUDGE3x500 MTD -

lTR/AINS

AMMONIA 0 b CLARIFYING WILL HANDLESYSTEM UP TO 495,000 MTA

MAP2x610 MTD

TRINGYPSUM BULK CLARIFIEDlO SEA MAP P2 05

2475.000:MT| 225,940 MT |50MT

Note: C } = Annual Tonnage of Raw Materials and ProductsAssuming that 25% of the P2 05 Produced isConverted to Map. World Bank-8131i2R)

Annex 3-2page 1

MOROCCO

MAROC PHOSPHORE PROJECT

PROJECT DESCRIPTION: PLANT FACILITIES, AUXILIARIES AND OFF-SITES

A. Plant Facilities

1. Process Intalltions

a) Sulfuric Acid Unit

1. The sulfuric acid necessary for the phosphoric acid production willbe produced in three production lines, each with a capacity of 1,500 TPD (expressedas 100% H2S04) of sulfuric acid produced as 98% solution. The sulfuric acid unitwill use elemental sulfur (brimstone) as raw material. It will also use thePolimex process, based on single absorption, giving a conversion of about 98%.The sulfuric acid unit includes the following: (i) three lines for sulfur meltingand filtration of liquid sulfur, capable of melting in 12 hours the sulfur con-sumption for 24 hours; (ii) three storage tanks for liquid sulfur, each with acapacity of 3,500 tons; (iii) two furnaces for combustion of sulfur, one foreach line; (iv) heat recovery facilities to produce high pressure steam to coverthe steam consumption for: the sulfuric acid unit, the evaporation of phosphoricacid to produce the 54% solution, and the generation of electricity in two turbo-alternators;(v) facilities for the conversion of sulfur-dioxide to sulfur-trioxideand absorption of the sulfur-trioxide in sulfuric acid; and (vi) three storage tanksfor sulfuric; acid, each with a capacity of 10,000 tons.

b) Phosphoric Acid Unit

2. The phosphoric acid unit will consist of three lines, each with acapacity of 500 TPD of P205 as clarified and stabilized solutioni containing54% P2Q5. The raw materials for the phosphoric acid production will be 70/72BPL Youssoulfia phosphate rock, and sulfuric acid. The phosphoric acid unitwill include the following: (i) a phosphate rock grinding insta:Llation in threelines, each with a capacity of 100 tons of rock per hour. This capacity makesit possible to grind in 16 hours the rock consumption for 24 hours in thereaction section; (ii) intermediate storage for ground rock in three silos, eachwith a capacity of 1,000 tons; (iii) a reaction and filtration section to produceweak phosphoric acid solution containing 30% P2 05, using the Nissan hemihydrate/dihydrate p:rocess; (iv) three stox,age tanks for weak phosphoric acid, each with acapacity of 1,250 mJ, i.e. approxiinately 500 tons of P20 5 in each; (v) facilitiesfor the concentrationC of the weak acid from 30% P205 to 54% P205; (vi) facilitiesfor the clarification of the 54% acid, including removal of suspended solids by

2! The concentration section, designed by Struthers Wells, will useexcess steam from the sulfuric acid unit, and will include provisionfor future installation of facilities for recovery of fluorine as asolution of hydrofluosilicic acid.

Annex 3-2page 2

decantation and by centrifugation; (vii) three tank8 for storage for clarifiedacid, each with a capacity of 5,000 m3 corresponding in total to approximately10 days' production; and (viii) two loading stations each with a capacity of500 tons/hour of acid solution for delivering the acid into railroad cars.

c) MAP Unit

3. The M&P unit will consist of two lines, each with a capacity for utilizingup to 330 TPD of P205, corresponding to 610 TPD of MAP with a composition of11-55-0.1 The raw materials for the MAP unit will be phosphoric acid andimported liquid ammonia. The MAP unit will use the Fisons "MINIFOS" process and eachllne will include the following: (i) a pressure reactor for reacting the phos-phoric acid and ammonia; (ii) a prilling tower for solidifying the MAP product;and (iii) a fuel-oil fired rotary dryer for reducing the humidity of the productto 1% in order to make it suitable for long periods of bulk storage and oceantransport.

2. Utility Installations

a) Power Station

4. The power station will include a two 15 MW turboalternators for generatingelectric power, using excess high pressure steam from the sulfuric acid plant.The power generated corresponds closely to the power consumption in the plant.Any excess or deficit of power is delivered to or supplied from the public gridthrough a 60/6 KV transformer. The rating of this transformer is sufficient to comple-ment the total power needed by the plant from the public grid in case oneturbo-alternator is out of service. There will also be a 2500 KW air cooledemergency diesel electric generating unit.

b) Water Treatment Unit

5. This unit will deliver the various qualities of treated water necessaryfor the operation of the plant. The raw material will be fresh water deliveredfrom the Safi dam. The following qualities of treated water will be produced:(i) demiaerali4ed water as process water for the sulfuric acid unit; (ii)process water for the phosphoric acid unit; (iii) desilicized water as boiler feedwater; (iv) filtered water for fire-fighting;and (v) drinking water.

c) Cooling Water Installation

6. Sea water will be used for cooling purposes in the plant. The plantwill include a sea water intake, a sea water pumping station, and the necessarydistribution system.

1/ 11% Nitrogen, 55% P205 and no potash.

Annex 3-2page 3

d) Auxiliary Boiler

7. The plant will include an auxiliary boiler with a capacity of 30 tons/hour of high pressure superheated steam. This auxiliary boiler serves twopurposes: (i) to supply high pressure steam to start up the sulfuric acid plant;and (ii) to keep the phosphoric acid unit in operation at reduced load when thesulfuric acid unit is either stopped or at reduced capacity.

B. Auxiliaries and Off-sites

1. In Plant Storages and Phosphate Rock Handling facilities

a) Sulfur Storage

8. The sulfur storage installations will include the following:(i) unloading station for railroad cars, bringing sulfur from the port, withan unloading capacity of 250 tons/hour; (ii) open air sulfur storage with acapacity of 60,000 tons corresponding to 30 dayst consumption of sulfur; and(iii) installation for reclaiming sulfur and delivering it to the melting pitat a rate of 100 tons/hour.

b) Phosphate Rock Storage and Handling

9. Thke phosphate rock handling system will include the following itemsunder the general heading of the "Gare Haute Projectt" which is cutside the scopeof the Plant Construction Contract: (i) spur tracks; leading off the mainYoussoufia to Safi rail line at a point on high ground above the plant site, todeliver the rock wagons to an unloading system; (ii) a series of' unloading hoppersl/in a shed into which dried rock (1% moisture) may be dumped from six wagons at atime at such a rate that 72-wagon trains containing 3,600 tons each may be unloadedat intervals of 2 hours 30 minutes; (iii) a system of conveyors which will reclaimthe rock from the hoppers and deliver it either to Maroc-Chimiejg or to Maroc-Phosphore, with separate weigh bridges to weigh the rock to each destination;(iv) a 25,0(0 ton storage building for the rock delivered to Mar-oc-Phosphore;(v) a reclaiming system and conveyors to deliver the rock from the storage build-ing to the rock grinding system at a rate of 300 tons/hour. Maroc-Phosphore hasissued tender documents for performing the portion of the "Gare Haute Project"tincluded in Maroc-Phosphore, has received three bids and awarded the contract tothe lowest bidder by mid-January 1Y74.

c) MAP Storage

10. The MAP storage installations will include the following: (i) 1KAP bulkstorage building with a capacity of 30,000 tons; and (ii) reclaiming of MAP andloading of railroad cars, with a c,apacity of 250 tons/hour.

11 This portion of the "Gare Haute Project" will be done by the RailwayCompany at no cost to Maroc-Phosphore. Payment will be ref'lected inthe freight rate on rock.

/ The transfer point will be installed but the conveyor to Maroc-Chimiewill be installed at a later date.

Annex 3-2page 4

d) Ammonia Storage

11. A high pressure ammonia sphere, with a capacity of 1,000 tons, willbe included.

2. Storages and handling facilities at the Safi Port

a) Sulfur Storage

12. Sulfur storage will include the following main items: (i) a conveyorsystem for transporting the sulfur from the bin located under a gantry cranel!(installed and operated by the Port Authority) to a storage bin having acapacity of 35,000 tons, corresponding to 35 days usage at the sulfuric acidunit; and (ii) a reclaiming and rail car loading system having a capacity of250 tons/hour.

b) Phosphoric Acid Storage

13. The phosphoric acid storage will include the following main items:(i) facilities for unloading phosphoric acid railroad tank wagons at a rateof 500 tons of 54% solution per hour; (ii) eight storage tanks, each with acapacity of 4,500 tons of P205 in 54% solution, corresponding to a total storagecapacity of 25 dayst production; and (iii) facilities for loading of phosphoricacid into ships at a rate of 1,500 tons of solution per hour. Loading facilitieswill be installed both on the northern quay of basin No. 3--the sulfur unloadingquay (see Map IBRD 10371). There will also be pumps for reclaiming settled sluagefrom the storage tanks into tank cars for return to the plant.

c) MUP Storage

14. No storage and handling facilities for MAP will be provided. The MAPwill be stored in Maroc Chimiets existing storage building for TSP and DAP.The loading of MAP into ships will be made by the existing installations on theOCP phosphate loading pier.

d) Ammonia Storage

i5. A 3,000 tons capacity ammonia sphere will be installed adjacent tothe two existing 3,000 tons spheres owned by Maroc Chimie. The new sphere willbe connected to the existing MC pumps and pipeline for delivery to the plantsite. A branch line to the MP plant will be installed at the plant site.

3. Electricity: Connection to the Power Grid

i6. The existing national power grid can furnish sufficient energy to meetthe project power needs when the project's own generating system is idlle.

j The crane and receiving bin are not part of the project nor of the plantconstruction contract (see Annex 3-3).

Annex 3-2page

A connection to the electrical grid will be made at Sidi Bouguedra some 17miles fro9 the plant site, via the 17-mile 60 KV line which is part of theproject-1 All switchgear, transformers and connections at the plant areincluded in the plant construction contract. The Power Company (O.N.E.) willprovide the switchgear for the connection at Sidi Bouguedra and will constructthe 17-mile 60 KV line. There will be no cross-connection between Maroc Chimieand Maroc Phosphore. However, both plants may receive power from or deliverpower to the O.N.E. grid. The work contract has been awarded in November 1973.

4. Railroad Sidings at the Plant Site

17. This item includes in plant railroad sidings and about 2 km extensionof existing sidings--and necessary switches and signals--serving the MarocChimie plant to connect to sidings in Maroc-Phosphore.

5. Auxiliary Buildings

18. The plant will include the following auxiliary buildings: maintenanceshops and storages; laboratory; lockers; first aid station; fire-fightingstation; administration building.

InduEtrial Projects DepartmentApril 15, 1974

1/ See Maps IBRD 10726 and 10727

Annex 3-3page 1

MOROCCO

MAROC-PHOSPHORE PROJECT

GENERAL INFRASTRUCTURE OUTSIDE THE PROJECT

1. Certain infrastructure additions needed in connection with but notexclusively for the project will be made by the appropriate Government Agencies(essentially the Ministry of Public Works and the National Railroad Company--ONCF). The infrastructure work, which is closely supervised by OCP and MP,includes the following: (a) fresh water supply; (b) harbor installations; and(c) railroad sidings and equipment. Related investment costs are not includedin the total. project cost. They have been estimated by the responsible Agenciesand financing provisions have been included in the Five-Year Devrelopment Plan.Corresponding service charges to be paid by MP, have been discussed with, and inmost cases, agreed upon with the Agencies involved. Annex 6-4 shows a tentativeschedule for the execution of the infrastructure.

A. Fresh Water Supply

2. The fresh water supply for the new facilities will come from the Safireservoir--where water is retained by the Safi dam--which, through existing con-duits, supplies the City and the Port of Safi and the Maroc-Chimie plant. Waterfrom the Oum-Rbia river is supplied to the Safi reservoir through the Doukhalaand Safi canals. The water needs for the project will be handled by the follow-ing infrastructure work: (i) enlargement and cleaning of the Doukhala and Saficanals; (ii) construction of a new canal delivering to a new 56,ooo m3 reservoirto be located near the MC-MP site; and (iii) a new conduit to supply both MC andMP. These works and improvements will handle the water requirements of the MCexpansion (MC1), the MP project and the MP expansion (MP1) and the potentialaddition of a new Maroc-Phosphore (MP2) project in Safi (see Ma_ IBRD 10726).The water charge will be DH 0.027 per m3 equivalent to approximately US$2.2 centsper M gallona.

B. Harbor Installations (Safi Port)

3. The Department of Public Works will set up a gantry crane and a receivingbin for unloading and handling imported sulfur, provide some rail sidings and makesome improvements on the north side of Basin 3 (see Map IBRD 10371) so that shipsof approximately 36 foot draft (20,000 tons) can be accommodated and unloaded ata rate of 500 tons per hour. Tender documents for the portal crane have beenprepared and have been issued by SMESI (Socie'te Marocaine dtEtudes SpecialesIndustrielles), a subsidiary of OCP. The total cost for such harbor installationsis estimated at DR 11,250,000 (US$2.5 million). MP will pay sulfur handlingcharges to the Safi Port Authority for the provision of this service.

C. Railroad Sidings and Equipment

4. The facilities to be executed by the National Railroad Company ONCFinclude: (i) a new siding on the direct rail line--between the Youssoufia mine

Annex 3-3page 2

and Safi--to direct rock cars to the "Gare Haute" unloading system; and(ii) rolling stock (see Mp IBRD 10727). ONCF will purchase--for the needsof the project during the-Tirst two years of operatipns--3 locomotives,86 covered hopper cars for handling phosphate rockf', 39 hopper cars forhandling sulfur and MAP and 32 rubber-lined tank cars for phosphoric acid.Additional wagons needs for plant operations at full capacity are beingdetermined. The locomotives have already been ordered. Tender documentsfor the tank wagons have been issued. The total cost for railroad sidingsand equipment attributed to the project is estimated at about DH 18 million(US$4 million). Railroad transport charges have been negotiated with ONCFand are shown in Annexes 8-1 and 9-2.

J Most of these hopper cars, however, are being ordered in connectionwith the expansion of OCP rock production.

Industrial Projects DepartmentApril 15, 1974

Annex 3-4page 1

MOROCCO

MAROC-PHOSPHORE PROJECT

ECOLOGY

1. Thes project will be located in a non-inhabited area andL Maroc -Chimieis the only nearby industry or establishment. The main potential pollutantsfrom the project will be: boiler blow-down; filter cake from the sulfur filters;gypsum from the phosphoric acid plant; dust from sulfur and rock-handling;dust from the MAP unit; tail gas from the sulfuric acid unit containing sulfur-oxides; and tail gas from the phosphoric acid unit containing fluorine compounds.Appropriate measures to handle these effluents are or will be taken as describedbelow.

A. Sulfuric Acid Units

2. Thie tail gas from the absorbers will be let out through stacks witha height of 230 feet. The acid content in the stack gas will be of the orderof 4oo mg of S03 and H2SO4 per m3 (equivalent to approximately 0.4 ounces per 1000cu.ft.). The total quantity of sulfur oxides emitted is about 60 tons/day.These figures correspond to the design of sulfuric acid plants built in non-congested areas, and this will not. give rise to any pollution problems. Thefilter cake from the sulfur filters will amount to about 4 tons/day, with acontent of about 2 tons of sulfur. This filter cake will be delivered to Maroc-Chimie and fed into their sulfuric acid units with the normal pyrrhotine feed.

B. Phosphiric Acid Units

3. All wet process phosphoric acid plants emit fluorine containinggases at various steps in the process. It was initially contemplated thatsufficient fluorine would be generated to warrant the inclusion of facilitiesto convert it into sodium silicofluoride (SSF), a marketable chemical.However, bolh laboratory tests of Youssoufia rock and tests in a 300 TPDplant employing the Nissan process, showed that the bulk of the fluorinedisappears in the gypsum which is formed in the process. These tests indicatedthat the amount of fluorine remaining to be absorbed was not sufficient tojustify the installation of SSF facilities. Hence, the fluorine-containinggas from thie different sections of the phosphoric acid units wiLl be collectedand let out through stacks approximately 130 feet high. Based upon the testresults the quantity of fluorine discharged is expected to be 1.6 TPD from eachtrain. This is not expected to give rise to any pollution problems. However,connections will be provided and space left for the future installation of SSFfacilities, should the amount of fluorine generated in actual plant operationexceed the quantities predicted by the tests sufficiently to juStify theinstallation.

4. The gypsum from the phosphoric acid filtration will be re-pulpedwith sea wa,ter and disposed of by sending this pulp directly to. the sea.This gypsuml disposal method has been used by Maroc-Chimie since start-up in1965 and, clue to the strong currents in the sea, it has never giver, rise toany local or medium distance pollution problems.

Annex 3-4page 2

C. Storage and Handling Installations for Solids

5. All storage and handling facilities for sulfur, rock and MAP will beequipped with appropriate de-dusting equipment, reducing the dust pollution toacceptable levels. However, large quantities of dust stem from the handlingand disposal on nearby vacant land of pyrrhotine cinders from Maroc-Chimieexisting sulfuric acid operations. A large tonnage of these cinders has beencleared from the proposed plant site. A new disposal area on the opposite sideof the Maroc-Chimie plant and at some distance from both the project and Maroc-Chimie will be used. This will substantially eliminate the dust contaminationfrom MC. Since there are no nearby habitations and no other manufacturing estab-lishments in the vicinity, this disposal method is tolerable.

D. Industrial Zone

6. It is unlikely that expansion of the residential area surrounding theport of Safi will extend southward toward the MC/MP site since the south side ofthe town is already fairly well industrialized and, in particular, numerous fishprocessing plants are located in this area. Residential expansion is movingnorthward and eastward. It does not appear necessary therefore to declareofficially an industrial zone to the north of the proposed project site.

E. Fishing Industry

7. There have been fluctuations in the take of the commercial fishingindustry centered in Safi and recently the trend has been generally downward.This has been blamed on over-fishing, on changes in the ocean currents, changesin water temperature, etc. Recently the Government of Morocco has extended itsterritorial waters from eleven miles off-shore to seventy miles off-shore inorder to exert more control over foreign nationals who fish off the coast. Thusfar no connection has been traced between fluctuations in the fish harvest andeffluents from Maroc-Chimie.

F. General Discussion

8. The Bank expressed its concern with the possible ecological impact ofthe new facilities, discussing each of the matters in this section with appro-priate Moroccan personnel. The provisions mentioned above are regarded asacceptable, but should the plant effluents become objectionable in the future,further measures will be developped and, enforced by OCP and MP in agreementwith their commitments in the legal documents.

Industrial Projects DepartmentFebruary 15, 1974

ADNEX 4-1Page 1

MOROCCO

MAROC-PHOSPHORE PROJECT

PHOSPHATE FERTILIZERS: WORLD TRADE AND PRICES

A. World Supply and Consumption

1. From 1965 to 1972, world phosphate fertilizer production increasedby more than 40% reaching 23.2 million tons of P2 0 in 1972. Capacity reachedabout 25 million tons POg during the same year. the rapid inveestment growthin phosphoric acid plants has been responsible to a large extent for theincrease in phosphate fertilizers tiupply. While capacity additions far exceededthe growth in P205 consumption, the movement to concentrated fertilizers causeda growth rate for phosphoric acid demand far greater than that for the P205market as a whole.

World Supply of Selected/ Phosphate Fertilizers(million tons P2 05 and >)

Products P2 0 Actual ForecastCQonent 1965 1970 1975

______ ______ ton ton % ton %

Single Superphosphate 18 7.1 48 7.0 35 6.o 27Triple Superphosphate 46 2.0 13 2.9 14 4.2 19Basic slag - 1.5 10 1.2 7 1.1 5Complex fertilizers 20/55 4.3 29 8.9 44 10.8 49

Total 14-9 100 20.0 100 22.1 100

The main prcducers and consumers of phosphate fertilizers are Ncrth America andWest and East Europe. Together they account for about 80% of thLe world produc-tion against only 10% for the developing countries. An oversupply situationdeveloped in the North American industry in the late 1960's and the early 1970'sbut was followed by a tight supply/demand situation in 1973. Thie same phenomenonhas happenecd in Europe where the progressive closure of obsolete single super-phosphate plants has increased capacity utilization. Table 1 shows WorldProduction of Phosphate Fertilizers by main areas.

2. Total phosphate fertilizer consumption reached about 22.3 milliontons P205 in 1972. World consumption grew at a rate of 4.8% per annum duringthe period 1969-73. Whereas developed countries used about 84% of all phos-phate fertilizers in 1969 their share dropped to 83% in 1972 and is expectedto further decrease down to 74% by 1980. Developing countries have usednitrogen extensively in recent years. Large applications of nitrogen ferti-lizers have produced a major increase in crops (the "Green Revolution"),but, in turn, have depleted the soil of its phosphate and potash content. Hencea greatly expanded use of phosphate is likely to take place, particularly in

j Excluding essentially sales of intermediates and nitrophosphates.

Annex 4-1page 2

developing countries. The current tight supply situation of all forms ofphosphate underlines this situation. World consumption is expected to growat 6.0% per annum between 1973 and 1980 reaching a level of about 38 milliontons P205 by 1980 (Table 2).

B. Supply/Demand Situation and Trade

3. The phosphate fertilizer supply exceeded demand in the late 1960sand the early 1970s, but supply became tight during 1973. World capacityutilization decreased from about'94% in 1965 to 87% in 1970 but is estimatedto have increased again to 92% in 1972. Demand is likely to exceed presentlyestimated capacity for 1975 (about 26.1 million tons P205). A tight supply/demand situation might therefore result and last through 1975. Supply willprogressively exceed demand from 1975 onwards following coming on stream ofon-going construction of new facilities. Annual trade of phosphate fertilizersamounts to about 3.6 million tons P205 in 1972 as compared to an estimated tradeof phosphoric acid of about 0.4 million tons P205 (see Annex 4-4). NorthAmerica is the leading exporter of phosphate material followed by Western Europeand by "tAfrica" (in fact only Tunisia and Morocco). Leading importers have beenLatin America and Asia (Table 3). If exports from Africa are deducted, netimports of developing countries (Asia, Latin America and Africa) can be esti-mated at a level of 1,400,000 tons P205 per annum (one third of world trade).Much of these imports were financed through tied bilateral aid given by WestEuropean and North American countries with--according to the OECD publication"Phosphate Rock and Phosphatic Fertilizers in the World", Paris 1972--the follow-ing main effects: (i) higher FOB export prices; (ii) distortion in trade andhigher freight costs; and (iii) maintenance of trade patterns (imports of finishedfertilizers) which to a certain extent prevent the free play of market forces anddelay the implementation of the most economic solutions.

c. Phosphate Ferti-lizr Prices

14. Following a period of dep^essed prices from 1968 to 1970, worldprices have increased sharply since 1970. These prices in current US$ reflecta tightening of the supply/demand situation and the effect of the successiveUS$ devaluations. The evolution of FOB export prices is shown in the tablebelow for two typical phosphate fertilizers (TSP and DAP) particularly repre-sentative of market and price trends.

Average FOB (US Gulf and Europe) Prices of Selected Phosphate Fertilizers(Carrent US$/ton)

1970 1 971 1972 First Half Second Half Early- 1 - 1973 1973 19714

TSP Bulk 38/45 45/50 55/70 75/85 100/130 160/200DAP Bulk 60/65 65/70 85/90 95/110 115/150 150/225

The phosphate fertilizer industry has been characterized by a 3 to 5 yearprice/investment cycle with an accelerated distorting effect resulting frominvestment decisions made when prices are high and the supply situation tight,This cycle, coupled with the supply/demand cycle, would correspond to levellingoff or decreasing prices by 1975/76.

Industrial Projects DepartmentFebruarv 15. 197h

Annex 4-1Table 1

MOROCCO

MAROC-PHOSPHORE PROJECT

World Production of Phosphate Fertilizers(in million tons P205)

Areas-/ 1970 1971 1972 Estimate 1973

North America 5.2 5-5 6.D 6.4West and South Europe 5.8 6.1 6.5 6.7East Europe and USSR 4.7 5.4 5.8 6.2Latin America 0.4 o.4 0.5 o.6Africa 0.8 0.8 0.8 0.8Asia and Japan 2.1 2.1 2.5 2.6Australasia 1.2 1.0 1.1 1.1

World Total 20.2 21.3 23.2 24.4- - grs::= ~ ~~~~~~~~~~~~~ = _= m =

World Capacity 2341.3 25.1 25.4

/ In this analysis the world regional breakdown is as follows:

Devlped CountriesNorth America: U.S.A. and CanadaWest Europe : Geographical Europe less East and South EuropeEast Europe : Communist European countries less U.S.S.R. amd YugoslaviaU.S.S.R.South Euirope : Spain, Italy, Greece, Yugoslavia and TurkeyJapanAustralasia : Australia and New Zealand

Developing CountriesLatin America : Central and South AmericaAfricaCommunist Asia : (including People's Republic of China)Non-Communist Asia : including the Middle East, excluding Japan).

Industrial Irojects DepartmentFebruary 15, 1974

MOROCCO

MAROC-PHOSPHORE PROJECT

World Consumption of Phosphate Fertilizers(million tons P2 0s)

Average Growth idateActual Estimate Forecast p.a. (%)

World 1969 1970 1971 1972 1973 1975 1977 1980 1969-73 1973-80North America 4.6 4.7 4.7 4.7 5.0 5.5 6.1 7.0 1.7 5.0Latin America 0.8 0.9 1.0 1.1 1.4 1.7 2.0 2.7 11.9 10.0West Europe 4.0 4.2 4.6 4.8 5.0 5.3 5.6 6.1 4.6 2.8Southern Europe 1.3 1.4 1.4 1.5 1.7 1.9 2.2 2.7 5.5 6.6Eastern Europe and USSR 4.3 4.7 5.3 5.7 5.9 6.9 8.0 10.1 6.5 8.0Africa o.6 o.6 o.6 o.6 0.7 0.9 1.1 1.5 3.1 11.0Non-Comuunist Asia o.8 0.9 1.0 1.1 1.4 1.8 2.2 3.1 11.9 12.0Communist Asia o.8 o.8 0.9 1.0 1.1 1.4 1.8 2.6 6.6 13.0Japan 0.7 0.7 0 7 0.7 0.7 0.7 0.7 0.7 0.0 0.0Australasia 1.2 1.2 1.1 1.1 1.2 1.4 1.6 1.9 0.0 7.1

World Total: 19.1 20.1 21.3 22.3 24.1 27.5 31.3 38.4 4.8 6.o

Developed Countries 16.1 16.9 17.8 18.5 19.5 21.7 24.2 28.5 3.9 4.8

Developing Countries 3.0 3.2 3.5 3.8 4.6 5.8 7.1 9.9 8.9 10.1

Industrial Projects DepartmentFebruar -15, '974

(D X

M)rs

NOROCCO

MALROC-PHOSPHORE PROJECT

World Trade of Phosphate Fertilizers-00 %ooo OF 20°5) -

1970 1971 1972Imports Exports Net Imports Exports Net Imports Exports tet

North America 295 1,004 709 330 1,068 738 331 1,329 998

West Europe 917 1,186 269 1,091 1,211 120 1,214 1,408 194

South Europe 272 113 (159) 291 118 (173) 310 i146 (164)

East Europe and USSR 283 89 (194) 240 165 (75) 253 145 (108)

Latin America 531 36 (495) 637 82 (555) 606 93 (513)

Africa 87 284 197 140 295 155 191 369 178

Asia and Japan 411 93 (318) 364 106 (258) 600 149 (451)

Australasia 19 - tl9) 13 - (13) 13. (13)

World Total 2,815 2,805 (10)- 3,106 3,045 (61)-/ 3,518 3,639 1211/

Discrepancies due to statistical errors and difference in time recording.

Snurce- BMrtiih Sulohur Corporation-

Industrial Projects DepartmentFebruary 15, 1974 13

ANNEX 4-2Page 1

AOROCCO

MAROC-PHOSPHORE PROJECT

PHOSPHATE ROCK: WORLD TRADE, PRICES AND PROSPECTS

World Reserves

1. Though there is a considerable uncertainty about the amount ofeconomically nineable phosphate rock reserves, the world reserves are estimatedat 45.3 billion tons of P2 05 equivalent. Morocco is estimated to possess about42% of the world identified reserves (more than 19 billion tons P2,!O) and thehighest estimated average grade (70 BPLI/), and the USA 14 billiori tons of P2 0Owith an average grade of 50 BPL:

Estimate of the World Phosphate Rock Reserves (1972)(billion tons P205)

Country Tonnage Estimated Averae Grade (BPL)

Morocco 19.1 70U?. 14.1 50U.3.S.R. 5.4 45Tunisia 1.9 65Algeria o.8 60People's RepubDlic of China 1.9 55Other 2.1 55

Total: 45.3 59

World Supply

2. As Table 1 shows, four principal production areas (USA, USSR, NorthAfrica and Australasia) account for 90% of the world's production of phosphaterock. The U.S., the U.S.S.R. and Morocco alone account for 80% of the world'sproduction. Whereas Morocco is essentially an exporter of rock, the U.S. andthe U.S.S.R. have large domestic markets to satisfy:

Domestic and Export Sales for the Major Suppliers - 1972(million tons of product)

country Exports Domestic Total Sales Export as a Percentage of Total Sales

IJ.S. 12.5 27.3 39.8 31.4U.S.S.R. 6.2 13.8 20.0 31--0Morocco 13.6 o.6 14.2 95.8Tunisia 2.3 1.0 3.3 69.7

1/ Bone Phosphate Lime or Tricalcium Phosphate -- Ca3 (PO4) 2 .31% P205 = 13.6% P = 68% BPL.

ANNEX 4-2Page 2

Production of phosphate rock grew on average at 7.0% per annum between 1960and 1972 rising from 39.8 million tons in 1960 to 90.0 million tons in 1972.Growth was particularly rapid in the U.S.S.R. (10.9% per annum). Installedcapacity rose from 45.6 million tons in 1960 to 98.4 million tons in 1972.Capacity is often difficult to estimate and figures are usually confidential.The production constraint is not always at the mine level but frequently atthe inland transportation and harbor facilitie3 levels. World capacity utili-zation has fluctuated since 1960 (Table 1) reflecting the variations in theworld supply/demand situation.

3. The expected major additions to existing capacities between 1972and 1977 will be in Morocco, Spanish Sahara, the U.S. and the U.S.S.R. Moroccois expected to increase its capacity to 25 million tons of rock. The SpanishSahara -- a new supplier of high grade 75 BPL -- will start production in 1973and is likely to have an installed capacity of 9 million tons by 1977; the U.S.and the U.S.S.R.'s objectives are to reach 50 and 30 million ton capacitiesrespectively by 1977 but the lack of information makes it difficult to ascertainwhether this objective can be attained. In particular, for example, the likelyfuture U.S. rock production is difficult to assess because: (i) the averagegrade produced is decreasing which might affect export potentials; (ii) environ-ment and land reshaping obligations might increase the production cost of rockand reduce production in marginal mines.

Trade

h. World trade increased from 29.2 million tons of rock in 1965 to 43.5million tons in 1972 at an average rate of about 6% per annum. The majorexporters are Morocco, the U.S., the U.S.S.R. and Tunisia. These four countriesaccount for about 80% of world exports. About 65% of the world exports ofphosphate rock is directed to Europe. Table 2 shows a trade matrix for 1972by main sources and destinations. In the 1965-1972 period, the market shareof the U.S. increased from 24% to 30% whereas the share of Morocco and theU.S.S.R. remained constant (30% and 16% respectively). Tunisia's share isdeclining as its sales have been stationary in the period considered. Theemergence of the U.S. as a major exporter of rock has caused some changes intrade patterns. North African exports have been increasingly directed toEastern and South Europe and to some developing countries where markets areexpanding faster. Western Europe obtained 65% of its phosphate rock require-ments from North Africa in 1965 and only 44% in 1972.

5. A tentative Trade Matrix for 1975 (Table 3) shows: (i) a likely 1/decreasing share of the U.S. in the world trade particularly if freight rates-on the Atlantic route are maintained at the present high levels; (ii) anincreased share of Morocco(to about 37% of the world trade)which is likely toremain the leading exporter in view of its locational advantages and theaverage high quality of its rock; and (iii) at the best a likely stagnant sharefor the U.S.S.R. The Spanish Sahara will, however, become a major exporter

/ Freight rates -- which represent between one-third to two-thirds of thedelivered price of rock -- also play an important role in the formationof prices. As known, these rates fluctuate quite substantially and largelyaffect delivered prices. As a result the Moroccan price advantage to Euro-pean destinations over the U.S. varied from US$2 to 5 per ton of rock through1973 and reached US$10 per ton in early 197T.

ANNEX 4-2Page 3

and the most important OCP's competitor particularly because its sales willbe concentrated on high grades (75 BPL and above) and directed to the samemarkets.

World Demand

6. Table 4 shows past and projected consumption of rock on a regionalbasis. Rock conlsumption doubled between 1960 and 1970 and is likely to doubleagain between 1970 and 1980. However, developing countries, which consumedless than 10% of the world total in 1960, raised their share to 12.15% in 1970aid are likely to increase their share further to 19% in 1980:

Consumption of Phosphate Rock(million tons of product)

1960 1970 1975 1977 1980

Developed countries 35.7 68.2 97.0 107.3 125.4Developing countries 3.9 9.7 18.1 22.1 29.7

World Total: 39.6 77.9 115.1 129.4 155.1

The world consumption grew at about 7.3% per year over the 1960-1972 period(11'S for developing countries and only 7% for developed countries). Worldconsumption is expected to increase by 7.5% per annra in the 1972-1975 period.nd by 6.1% per annum thereafter. Since a high rate of capacity utilizationin existing finished P20< manufacturing units is projected, the demnand forphosphate rock will mostty result from high levels of operations in additionalphosphoric acid capacity that will come on stream in the next five years. Suchlarge phosphoric acid units can have a marked impact on the pattern of phosphaterock imports since each unit can consume up to 1 to 1.5 million TPY of rock.

Prices

7. The main factors affecting the delivered price of phosphate rock areits grade and quality, the freight structure and its end use. Since practicallyall the rock traded in the world is under short and medium-term contracts whoseterms are kept confidential, prices can only be estimated. The industry pub-lishes listed FOB prices which are indicative of world prices and wrere close to actual3rices in 1973/74. Those prices are summarized in the table below:

Listed FOB Exort Prices for Phosphate Rock(in $/ton of product)

1973Suppliers Grade 1966-1972 January Mareh November(for 1974)

(BPL)tPhosrock/Florida 68 7.58 8.56 9.74 20.00

72 8.88 9.86 11.32 24.0073 9.15 lo.14 11.81 25.5075 10.02 11.00 12.89 27.50

OCPYoussoufia 70 10.15 11.15 12.30 37.50Khouribga ( 72 11.00 12.00 13.30 40.00

( 75 11.75 12.75 14.20 42.00

Annex 4-2page 4

b5. During the 1966-1972 period, surplus capacity in the world encouragedthe concession of substantial discounts (up to 20% of the listed price). Listedprices have remained stagnant during the period because of an over-supply situa-tion. Roclc supplies became tighter in 1972; prices are now closer and probablyequal to the listed ones. In the middle of 1972, the US producers raised theirlisted prices by $1 .00 per short ton after having formed (in 1971) an exportorganization "Phosrock" whose purpose was to reduce the competition among exporters.The increase in US prices was followed by a similar increase (US$1 per ton) inMoroccan prices by late 1972. The 1972 price recovery can be attributed to both atighter supply/demand ratio and a better understanding among producers. Thoughthe quality of rock and its phosphorus content have a definite effect on its prices,phosphorus is cheaper in low grade rock than in high grade rock since high graderock contains less lime and will demand less sulfuric acid on a per ton basis tomake phosphoric acid. Using the early 1973 listed US prices, the price per BPLpercent is 12.6/BPL percent/ton for 68 BPL rock and 1h.7g/BPL percent/ton for 75BPL rock.

°. In 1973, phosphate rock prices increased sharply both for Florida andMoroccan exports. In March 1973 FOB prices increased by US$1 to 1.5 per ton.Further major price increases occurred by November 1973; prices increased 2 times[or Florida rock, and about 3 times in the case of Morocco over their March 1973level. The main reasons were: (i) a current tight supply/demand situation in theworld; and (ii) a necessary price recovery to improve the profitability in thesector following a lasting depressed prices situation over most of the last decade.The level of actual rock prices (delivered to Europe) remained constant in currentterms over the period 1953-1973. Prices (in current US$) were at about the samelevel in 1972 as they were some 10 years before (in 1963); 1973 prices (about US$3/ton higher than prices in 1972) were barely equivalent to 1953 prices. Prices inconstant US$ have therefore largely dropped over the period though fluctuations inprices (plus or minus $1 to 2) were recorded during the period and a two to threeyears up and down price cycle seems to have been in force:

Long-Term Trends in Rock Prices (in current US$/ton)

1963 1965-66 1968-69 1c70-71 1972 Mid 1973 1974p P + 2 P P - 1 P P+ 3 3P

10. The FOB export prices of rock also result from the freight rates struc-ture. Freight rates fluctuate and depend on a number of factors which aredifficult to predict. Taking European ports as an example, over the last sixyears the following rates were applied:

Typical Freight Rates (FIO) in 1968-1974 ($/ton)

Date Tampa to Rotterdam Casablanca to Rotterdam Difference(or Antwerp) (or Antwerp)

June 1S'68 5.00 3.20 1.80June 1969 4.50 2.70 1.80June I170 10.25 5.00 5.25May 1971 4.1J 2.70 1.40June 1972 2.75 2.75 -November 1972 4.60 2.60 2.00June 1973 7.50 4 40 3.10September 1973 11.50 6.50 5.00

January 1974 17.0/18.0 5.0/d.O 10.0/12.0

Annex 4-2page 5

This table showis that the locational advantage of Morocco over Florida might varybetween Ub,$2 and ub10/12 per ton depending on the level cf freight rates. 'ihissituation therefore enables Morocco to sell rock at higher FOB prices.

11. Phosphate rock may have different levels of utilization values inrelation to its end use and to the type of industrial unit using it. In particular,some European units form captive markets for North African phosphates because oi'the grinding and filtering equipment used. Under a balanced supply situationaverage parity rates, incorporating quality, grade and utilization values aretherefore, in most cases, worked out for each customer. Delivered reference pricesmay be determined for specific consumption areas where leading prices are likelyto be related to the large trade of 70/72 BPL; in particular, Europe, the worldmajor rock importer has played an important role in the formation of world prices.In the long run, future delivered prices of phosphate rock in Europe will dependon: (i) the growth of the demand by types of rock; (ii) the ability of the USproducers to export substantial amounts of rock which irn turn depends to a largeextent on the status of the US domestic market; (iii) the build-up, of the exportsof Spanish Sahara; and (iv) the price policy among the different producers tomaintain high levels of prices.

12. The Bank estimates that the world rock supply and demand are likely tobalance from 1976/1977 onwards, in particular as a result of: (i) renewed interestin investing in phosphate rock mining; and (ii) the coming on stretam of majoradditional facilities in Florida, Morocco and Spanish Sahara. The Bank thereforeprojects rock equilibrium prices to stabilize--by 1976-77--at about 20;, belowthe 1974 price levels and to thereafter increase parallel to the world infla-tion. 1976-77 rock prices are therefore tentatively projected as follows:

Projected World Rock Prices in 1976-77(in current US$/ton)

Grade FAS Morocco FOB Florida

70 BPL 28-30 22-2572 'BPL 30-32 25-2875 BPL 32-35 28-32

Industrial Projects DepartmentFebruary 15, 1974

I

MIOROCCO

iMAROC-PHOSPHORE PROJECT

Phosphate Rock: World Capacityand Prodaction by Main Areas(in million tons of product)

Actual Projection1960 1965 1970 _ 272t 1975 1977

Produc- Capa- Produc- Capa- Produc- Capa- Produc- Capa- Produc- Capa- Produc- Capa-Country tion city tion city tion cit tion city tion C tioni

US 17.8 22.0 26.7 30.0 35.1 41.5 37.7 41.5 42.7 45.6 46.5 50.0

USSR 5.8 5.8 11.5 11.5 17.9 18.0 20.0 21.0 26.2 26.2 29.5 30.0

Morocco 7.5 8.4 9.8 10.9 11.4 12.0 14.5 16.0 21.0 22.0 24.0 25.0

Tunisia 2.1 2.)4 3.0 3.5 3.0 3.5 3.3 3.5 3.9 4.5 4.0 5.0

Spanish Sahara - - - - - - - - 3.7 6.o 7.0 9.0

Australasia 2.6 3.0 3.0 3.5 2.6 4.0 3.0 4.1 4.3 4.5 4.5 6.o

Others 4.o 4.o 6.3 6.3 11.1 11.1 11.5 12.3 13.3 13.3 14.0 17.0

World Total: 39.8 45.6 60.2 65.7 81.1 91.5 90.0 98.4 115.1 122.1 129.5 142.0

Average CapacityUtilization (%) 87 92 89 92 94 91

World Consumption-/ 39.6 62.0 77.9 92.6 115.1 129.5

1/ Preliminary.

2/ From Table 4,

Source: British Sulfur Corporation and International Superphosphates Manufacturers Association.Projections have been made by the Bank.

MOROCCO

MAROC-PHOSPHORE PROJECT

Phosphate Rocks Trade Matrix by Origin and Destination - 1972 (Preliminary)(million tons of product)

Destination3/ Non- Percentage

Nortl Latin West South East Communist Communist Break-Orlgin America America Europe Europe Europe Africa Asia Asia Japan Australasia Total down

USA 2.7 1.7 3.3 1.0 0. 3 - 114 - 2. - 12.5 29

USSR - - 2.1 - 4.l - - - - - 6.2 14

Morocco - 0.4 6. 4 3.7 1.8 - 0.1 0. 8 0. 4 - 13.6 31

Tunisia - 0.2 0.7 0.5 0.8 - - 0.1 - - 2.3 5

Spanish Sahara- - - - - - - - - - - -

Africa (south of Sahara) - - 2.9 0.2 - _ 0.1 - 0.2 3.L 8

Middle East - - 0.3 0.24 0.2 o.6 0.1 0.2 - 1.8 4

Christmas/Nauru - - - - - 0.1 0.1 2.7 2.9 '7

Others 0.1 - 0 .1 - .2 0.2 0. 2 - - 0.8 2

Total: 2.8 2.3 15.8 5.8 7.4 a 2.4 1.3 3.0 2.7 43.5 100

1/ In 1972, Spanish Sahara exported 73,000 tons and made trial shipments to Japan (22,000 tons) and Spain (28,000 tons).

The regions are constituted as follows:Developed Countries Developing Countries

North America: USA and Canada Latin America: Central and South America

West Europe: Geographical Europe less East & South Europe Africa

East Europe: Communist European countries less USSR and Communist Asia: (including People's Republic

Yugoslavia of China) 0

USSR Non-communist Asia: (including the Middle East,

South Europe: Spain, Italy, Yugoslavia, Greece, Turkey excluding Japan)

JapanAustralasia: Australia, New Zealand

Source: British Sulfur Corporation and International Superphosphates Manufacturers Association.

MOROCCO

MAROC-PHOSPHORE PROJECT

PhospbAte Rock: Trade Matrix by Origin and Destination - 1975 (Tentative Forecaat)(million tons of product)

Destination Non PrcntageeNorth Latin 'West South East Communist Communist Break-

Origin America America Europe Europe Europe Africa Asia Asia Japan Australasia Total dova

USA 3.8 2.4 2.1 0.8 - 1.4 - 1.5 - 12.0 22USSR - - 2.1 - 4.3 - - - - - 6.4 12

Morocco - o.4 9.5 3.6 -3.4 o.6 1.0 1. _ 20.0- 37Tunisia - 0.1 0.7 0.8 0.8 -- - - 2.4 4Spanish Sahara - q.2 0.8 1.9 - o 0.2 - 0.3 0.1 3.5 6

Africa (south of Sahara) - - 3.2 0.3 - - - - - - 3.5 6

Midele East _ - - 0.4 0.6 0.1 0.9 0.5 - - 2.5 5Christrwas/Nauru - -- - - - 0.1 3.9 4.0 7

Others - - - - - - - - - - - -

Total: 3.8 3.1 18.4 7.8 9.1 0.1 3.1 1.5 3.4 4.0 54.3 100

Industrial Projects DepartmentNovember 30, 1973

MOROCCO ANNEX 4-2

MAROC-PHOSPHORE PROJECT Table 4

Consumption of Phosphate Rock(in million tons of product)

Actual Projection1960 I65 1970 1971 -1977

Developed Countries

North America 14.2 21.1 24.9 27.7 30.1 36.5 40.2 46West & South Europe 10.7 15.5 18.7 19.8 21.7 24.7 26.9 30.Eastern Europe 1.6 2.9 6.1 6.8 7.4 9.7 11.0 13.USSR 5.0 10.4 12.2 13.8 13.8 18.9 21.6 26cAustralasia 2.1 3.5 3.4 3.2 2.7 4.0 4.3 4.Japan 2.1 2.5 2.9 2.8 3.0 3.2 3.3 3.

Total 35.7 55.9 68.2 T771 T777 9 15.3

Developing Countries

Africa 1.1 1.7 2.8 3.2 3.9 5.1 6.3 8.Latin America 0.5 0.7 1.7 2.1 2.6 3.5 4.3 5.Asia 2.3 3.7 5.2 6.6 7.4 9.5 11.5 15.

Total 3.9 7-1 9.7 1l.9 13TF- 1-T71 a77T 29.

World Total 39.6 62.0 77.9 86.0 92.6 115.1 129.4

Average Growth Rates per annum (per ent)

Developed Countries De oin Countries World

1960-1972 6.8 11.2 7.31960-1965 9.4 9.3 9.41965-1970 4.1 9.7 h.71970-1972 7.4 19.7 9.01970-1980 6.3 11.9 7.11972-1975 7.2 9.2 7.51975-1980 5.3 10.4 6.1

Preliminary

Source: British Sulfur Corporation and IS4A for Actual ConsumptionBank estimates for Projected Consumption

Annex 4-3page 1

MOROCCO

MAROC-PHOSPHORE PROJECT

SULFUR: WORLD SUPPLY, DEAvND AND PRICES

Sources

1. Sulfur sources can be classified in three main categories:(i) elemental sulfur (or brimstone); (ii) sulfur from pyrites (extracted inthe form of sulfuric acid); and (iii) sulfur-in-other forms. Elemental sulfuror brimstone is produced from: the Frasch process through injection of hotwater into the soil and recovery of liquid sulfur; native refined sulfurobtained by conventional ore mining methods; and recovered sulfur from oilrefineries and natural gas plants through desulfurization of sour gas. Pyritesconsist in sulfides of various metals and sulfuric acid is recovered in theprocess. Sulfur-in-other forms mainly comes from sulfur oxydes and sulfuricacid. In 1971, brimstone accounted for 56% of the world supply of sulfur;pyrites for 27%; and sulfur-in-other forms for 17%.

Applications

2. Sulfur is mostly used in the form of sulfuric acid (about 85% of theworld consumption). The remaining 15% is used in a wide variety of chemicalapplications. The fertilizer industry is the largest single consumer of sul-furic acid, utilizing about 50% of the total acid output.

Supply

3. The annual level of world sulfur-in-all forms production is currentlyapproaching 46 million tons with a rapid growth of brimstone production in thewestern world (due to the expansion of recovered sulfur associated with increas-ing exploitation and desulfurizatin of sour oil and natural gas crudes; and,in the communist world, a predominance of non-brimstone forms. North America,Western and Eastern Europe, and the USSR account for over 83% of the world'sproduction. The largest individual producers are the US (24% of the worldtsproduction), Canada (17%), Poland (7%), Japan (6%) and France (%). Brimstoneproduction is even more concentrated: the USA, Canada, Mexico, France and Polandaccount for 81% of the world's production. The major producers of pyrites arethe Western European countries (33% of world's production), and the USSR (31%).

Trade

4. Sulfur is mostly traded in the form of brimstone and pyrites. In1972, brimstone exports amounted to 8.6 million tons from the following sources:

Annex 4-3page 2

World Exports of Brimstone in 1972(million tons)

Canada 2.8Poland 2.5USA 1.8France 1.0Mexico 0.5

World Total: 8.6

The major importers were the USA (1.2 million tons) and the EEC countries (3-4million tons). Pyrite exports amounted to 1.2 million tons of sulfur equivalentin 1972. The main exporters were Spain (0.1 million tons), the USSR (0.5million tons) and Cyprus (0.2 million tons). Practically all the exports wereto Western Europe.

Supply and Demand

5. Following a very tense and tight supply and demand situation through-out the 1960s, an oversupply situation developed in early 1969 and lasted through1972, causing a substantial drop in prices and a continuous build-up of unsoldstocks. This was attributable to: (i) massive growth of production of recoveredsulfur in the West Canada natural gas operations; (ii) increased deliveries ofPolish brimstone to the Western World; (iii) slackening in the demand growth rateafter 1967 and 1968. Sulfur, recovered from sour gas and oil, is a compulsoryby-product of those industries and therefore its production is not affected bythe sulfur market per se, the volume of recovered sulfur resulting from factorsoutside the sulfur industry. However, since the end of 1972 the sulfur industryhas moved into a phase of tight market conditions because of: (i) restraintsimposed on dry sulfur shipments through Vancouver; (ii) a large portion ofrecovered sulfur stocks in Canada cannot be economically moved; (iii) tightersupply/demand in the US during 1972 and 1973; and (iv) high freight rates withexporters refraining from taking shipping space. However in the longer runsupply and demand are expected to balance because of the mounting volume ofcompulsory recovered sulfur. Supply/demand forecasts for the 1973-80 period aresummarized below and indicate that a better balance will prevail by the mid tolate 1970s:

Supply and Demand Forecast of Sulfur-in-all-Form s(million tons)

Available Supply Demand Demand as % of available supply

Actual: 1971 12.6 4L0.8 561972 45.4 44.4 98

Estimate: 1973 47.9 47.0 98Forecasts: 1977 61.1 58.1 95

1980 68.4 66.5 97

Prices:

6. Whereas FOB prices in 1969 were in the $40-50 range, they have dropped toa US$22-26 range in 1972 for Polish and French supplies of liquid sulfur and US andMexican frasch. Mid 1973 FOB prices reached a level of US$30-33 per ton. Pricesincreased further to a US$30-45 range early 1974. Long term equilibrium prices areexpected to be in the US$30-35 range FOB Europe and US$35-40 FOB Gulf Coast.

Industrial Projects DepartmentFebruary 15, 1974

ANIEX 4-4Page 1

MOROCCO

MAR0C-PHOSPHORE PROJECT

INTERMEDIATE PHOSPHATE FERTILIZERS: WORLD TRADE AND PROSPECTS

Capacity and Supply of Phosphoric Acid

1. Phosphoric acid -- a corrosive liquid -- is the main intermediateproduct in the manufacturing of high grade phosphate fertilizers and SodiwnTripolyphosphate (STPP a base product for detergent manufacturing). Thoughmostly used as a captive product in integrated plants it recently became anincreasingly traded commodity. Monoammonium phosphate (MAP) -- a free flowingsolid and semi-finished fertilizer -- has also been increasingly uLtilized as anintermediate :product. MAP is a converted form of phosphoric acid and in manyphosphate fertilizer plants, MAP and acid can be substituted. Together theyare likely to account for a major portion of the bulk of trade for P20s inter-mediates. Economies of scale affect mostly the manufacture of phosphoric acid,and to a much lesser extent the transformation of acid into finished or semi-finished products. For the purpose of this Annex it is statistically satisfactoryto assume that all phosphoric acid used in fertilizer manufacturing is suppliedby the wet acid process.

2. World wet process acid capacity increased more than four fold between1960 (3.6 million TPY P20 r1 )and 1972 (151. million TPY P2 05) with the bulk ofphosphoric acid produced for captive use:

World Wet Phosphoric Acid Capacity(Million tons P2Os)

Actual Forecast1960Y 1970 1972 15,75 1977

North America 2.3 6.o 6.3 8.5 9.0Latin America - 0.7 0.7 C).9 1.1West Europe 0.8 2.5 2.6 3.0 3.0South Europe 0.2 1.0 1.2 1.6 1.6East Europe & USSR - 1.3 1.9 2.8 2.8Africa 0.1 0.4 0.6 1.0 1.2Asia 0.2 1.4 1.6 1.7 2.2Australasia - 0.2 0.2 0).4 0.8

Total: L U2 1a 21.7

On the basis of projects under implementation or firmly committecd, phosphoricacid production capacity is expected to further increase to 19.9 million TPYP205 in 1975 and to 21.7 million TPY P20 in 1977. It has therefore beenpossible -- using estimated capacity utilization ratios -- to estimate the likelyproduction in 1975 and the level of supply in 1977 (Table 1).

/ The best statistical estimate available for the year 1960;some marginal capacities might have been excluded from these1960 statistics.

ANNEX 4-4Page 2

Demand for Phos3phoric Acid

3. Estimates of the past and future demand for phosphoric acid arederived frcm the percentages (actual and expected) of Phosphate Fertilizers requir-ing phosphoric acid as an intermediate product (Table 1):

Estimated Demand for Phosphoric Acid Attributable to Phosphate Fert-lizers(million tons P205

Actual Forecast1_70 1972 1975 1977 1980

North America 4.2 4.6 5.3 5.8 6.5Latin America 0.4 0.7 1.1 1.3 1.9West Europe 1.8 2.1 2.4 2.8 3.4South Europe 0.6 0.8 1.2 1.3 1.8East Europe & USSR 1.1 1.5 2.3 2.9 4.3Africa 0.3 0.4 0.7 0.9 1.3Asia 1.1 1.7 3.4 3.6 5.1Australasia 0.5 0.7 1.0 1.2 1.6

Total: 10.0 12.5 17.4 19.8 25.9

Between 1970 and 1972 the demand for phosphoric acid grew at an average rate of12.5% per annum. With the above assumptions, demand for phosphoric acid is expect-ed to grow at an average rate of 7.6% per annum between 1972 and 1980. This f"gureis to be compared with the expected consumption growth rate for phosphate ferti-lizers as a whole which is estimated at 6.5% per annum.

Current and Projected Supply/Demand Balance

4. On the basis of the projected supply of acid and demand for P205 derivedfrom acid, the Bank has made a tentative forecast of the acid surplus/deficit situ-ation in the world and by regions for 1975, and of the acid gap for later years1977 and 1980. The results are summarized below after aggregation on a world basisof regional balances:

World" Supply and Demand Position for PhosphoricAcid and Fertilizer Derivatives

(million tons of P205)

Potential Supply Demand 9arplus(Deficit) Supply Gap

1970 9.9 9.2 0.71972 11.7 11.1 0.61975 15.5 1'4.7 0.81977 16.4 17.3 (0.9)1980 16.5 22.2 (5.7)

I/ Excluding Communist Asia and Australasia.

AINEX 4b-4Page 3

On an overall world basis, supply and demand are likely to balance satisfactorily

through 1977; with a change from an expected marginal surplus in 1975 to a modest

gap in supply by 1977 (0.9 million tons P205 by 1977). With the uncertainty

related to the implementation of projects and to the performance of plants, the

best conclusic,n is that the world supply is likely to balance demand through

1977. A noticnal supply gap -- estimated on the basis of capacities presently

announced -- has been estimated for 1980 which clearly indicates, in spite of

high statistical uncertainty, that more acid capacity will have to come on

stream before that date.

5. The situation by region indicates, however, that (Table 2):

(a) Through 1977, there will be a potential supply surplus of phosphoric

acid in North America with potential exports likely to be directed to Latin

Americ),and to the USSR following the recent US/USSR trade agreements. The

13% du';y on acid at the entry of the Comwon Market is likely to limit US exportsto Europe. Assuming that the U.S. maintain an export level of 1.'5 million tons

of P2 05 per year, the actual capacity utilization is likely to be about 75% to80% in 1975. All the other regions are likely to show an import grap from 1975

onwards.

(b) Latin America and Non-Communist Asia which together showed an acid deficitof about 0.5 million tons of P2 05 in 1972 are likely to have a gap in supply of 1.5

million tons of P2 05 in 1977 and of 3 million tons by 1980, if the present consump-

tion trends continue. This gap will be met by some additional local plants butthe level of imports is likely to remain high.

(c) East Europe and the USSR will continue to show a steady deficitin acid and are likely to become the main importing region for P205 intermedi-ates in the medium to long run.

(d) West and South Europe are likely to be approximately self-sufficientthrough 1977 buit might well develop a total import gap of about 1.3 million tons

of P2 05 by 1980.

6. An independent estimate of the world phosphoric acid gap has been

made by the International Finance Corporation (March 1973); the main resultsare summarized below with emphasis on the potential acid gap in West Europe

and l4editerranean countries:

ANNE 4-4Page 4

IFC Estimate of the Acid Sup1l/Demand Gap in West Europe and Mediterraneanin million tons of P205

1977/78Regions 1972/73 1974/75 Best Estimate Range-'

(1) West Europe and Mediterraneana/( (0.2) (0.5) (0.4) (0.6)0.2

(2) (1) + East Europe + WesternHemisphere Zxports-]/ (0.4) (0.8)

0.1

- Essentially Western Europe and all the Mediterranean countries, Yugoslavia,and Albania excepted. ICM I and II and Maroc-Phosphore included in this zone.

The range is for a 50% confidence and depends on implementation of doubtfulprojects and technical success in operating some existing plants at full capacity.

- Excludes Latin America and Asia, major importers but includes Western Hemisphereexports to zone (1).

This estimate is consistent with the Bank estimates. However, the uncertainty,related to the implementation of projects and to the performance of plants havingoperational difficulties, is extremely large. As IFC puts it: "We must bear inmind that there is a strong possibility -- although not quantifiable -- that by1977/78, the balance could also range from a deficit of about 1.9 million tonsto a surplus of 1.5 million tons of P20s per year." If we include Latin Americaand Asia (major deficit areas) in the analysis, the best estimate of the worldgap in supply is likely to reach about 1 to 1.5 million tons P205 by 1977 (ascompared to 0.9 million tons P205 projected by the Bank).

Phosphoric Acid Trade

7. Trade of phosphoric acid on a local or regional scale and exchangeof acid among different units of the same company have taken place for manyyears in Europe and North America. However, the quantities of acid involvedwere usually small and designed to meet short term requirements of finishedfertilizers plants or to compensate for the fall in production in certain units(technical breakdown or maintenance stoppage). However, towards the late 196 0'slarge plantsl/ were set up to supply non-captive acid mostly for export. Oceangoing shipping began in 1969 and specially designed ships were built and termi-nals set up. The main production units of free acid -- totally or partially

Plant size increased from about 30,000 TPY of P205 in the early 1960's toabout 200,000 TPY in the late 196 0's. New plants are now designed for aneven larger capacity (Maroc-Phosphore capacity is 330,000 TPY P205).

ANNEX 4-4Page 5

for export purposes -- are listed in Table 3.

8. The list shows,between 1969 and 1973,a substantial increase incapacity of phosphoric acid for export mostly in developing countries endowedwith rock or sulfur resources. Fertilizantes Fosfatados Mexicanos (FFM ofMexico) is the pioneer firm in manufacturing acid for export on long distances.FFM's plant in Coatzacoalcos -- using local sulfur and rock from the nearbyFlorida mines -- has a capacity of 335,000 TPY P 0 of which about 240,000 TPYare for export as acid solution. FFM has contragt 5 for deliveries-eto Europe(Belgium, Netherlands, Germany) though their terminal in Rotterdam; to Indiathrough its terminal in Madras; to the Philippines and to Brazil. ShahpurChemicals from Iran, Industries Chimiques Maghr6bines (ICM) from Tunisia, AradChemicals from Israel and Fosforico Espanol from Spain are the other mainexport oriented facilities existing at the moment. Other units in Belgium,I'etherlands and Germany export small or marginal quantities of acid. Most ofthese plants (FFM, ICM, Arad notably) had either teething problems during thestart-up phase or faced delays in completion. Actual supply in 1972 and 1973was therefore much below the estimated capacity.

9. As a result of these recent developments in manufacturing acid forsale a phosphoric acid trade emerged progressively and reached about 380,000tons of P 05 in 1972. At this level, the trade represented about 10% of thetotal wor±d trade for finished P205 materials (3.6 million tons P205).With the expected increase in production capacity for free acid, the acid trade,and the share of acid in the total world trade, is likely to grow rapidly inthe near future. The Table below summarizes the 1972 acid trade byo sourcesand destinations:

Phosphoric Acid Trade by Sources and Destinations (1972)(in 000 tons P20s

From Mexico US Belg./Neth. Spain Iran Tuhnisia Others TotalTo

Belg./Neth. 15 10 26 2 - 3 3 59Germany 3 - 60 - - - 1 64France 3 3 56 - - 38 3 103Italy - - - 2 - 5 - 7UK - 10 12 3 - - - '5US 28 - - - - - - 28Brazil 18 4 - 4 - - - 26Colom bia 2 12 - - - - - 14India 20 11 - - 17 - - 48Others - - 5 4 - - - 9

Total Exports: 89 50 159 15 17 46 7 383

Trade relationships between suppliers, consumers and traders are aLso being builtup. Temporary supplies to future producers whose facilities are under construction,swap arrangements among contract holders and new suppliers -- better located to

Annex 4-4page 6

serve a specific market--and contracting of production surpluses are beingmade. For example, Windmill from the Netherlands and APC, FFM and Cofaz,FFM and Shahpur Chemicals have such trade arrangements.

10. A substantial increase in capacity for export is likely to developby 1975-1976 particularly in France (150,000 TPY P20 5)' Spain (100,000 TPY),the US (200,000 TPY), Tunisia (220,000 TPY) and Morocco (260,000 TPY). Thefuture world Acid trade might therefore well reach about 1.7 to 2.0 millionTPY P205 by 1977-78, i.e. 10% of the expected world acid supply and about 50%of the 1972 finished P205 trade. The additional capacity for export and thetrade estimate do not include the quantities of superphosphoric acid to beproduced in Florida for export to the USSR (1 million TPY P205 from 1976)following trade arrangements of April 1973 between the USSR and OccidentalPetroleum from the US involving purchase of acid and supply of Ammonia and Ureaby the USSR, and financing and construction by Occidental of fertilizer unitsin the USSR.

Phosphoric Acid Prices

11. The present phosphoric acid prices result from two series of factors:(i) the price of acid sold under medium to long-term contracts (the major partof the trade) to buyers who have decided to postpone or avoid the constructionof their own acid facilities, is strongly influenced by the expected buyer's(hypothetical) cost of producing phosphoric acid given local conditions andraw material prices, notably rock; (ii) prices resulting from supply/demandconsiderations for smaller quantities. This two-tier pricing system is a re-flection of the small size of the international phosphoric acid market and islikely to remain in existence until the availability of phosphoric acid suppliesis sufficiently large and flexible to precipitate competition for the majorcontract business as well. At the present time, the differential between contractand spot business averages US$15 to $20 per ton of P20s. Practically all theocean going trade of phosphoric acid is under long-term contracts. The followingtable shows recent quotations for phosphoric acid prices:

Recent Quotations of Phosphoric Acid FOB Prices (US Dollars)

PricesLocation Date (per ton Of P205) Remark

1972/early 1973 (pre-US$ devaluation)

Florida/Domestic November 72 101-121 Long-term contractFlorida/Export November 72 140 Medium-term contractFlorida/Export February 73 140-165 SpotRotterdam February 73 128 C&F FFM contractFelgian plants February 73 137-14o SpotHuelva August 72 127-136 Spot

Mid-1973 (post-US$ devaluation)West Europe May 73 155-170 SpotRotterdam September 73 155 C&F Medium-term contract

End 1973US local deliveries October 73 200 Medium-term contract

Early 19744'est Europe ana US Early 1974 250/3u0 Spot.

ANNEX. 4-4Page 7

The terms of long-term contracts are confidential but the main determinantsof the price are: the size of contract; the quality of the acid; the cost ofraw materials.; the cost of labor,and the cost of freight. Common indexes are(i) for phosphiate rock, the price of"75 BPL - Morocco" FAS Casablanca, and(ii) for sulfur, the Sulexco price of liquid sulfur free tankbarge Rotterdam.An escalation formula linking the price of acid to prices of raw materials is,in most cases, included in the contract.

12. Ln the period 1974 to 1976 additions to merchant phosphoric acidand changes to the existing trade size and structure are anticipated.For the majority of acid sales covered by long-term contracts, prices will beadjusted upwards to take account of sharp increases in costs of raw materials.As a result, a net increase of US$60 to 80 per ton of P20t is anticipated from 1973 to1976 so that existing contract delivered prices (Western turope) will be in therange of US$210 to 230 per ton of P205. New contracts are expected to benegotiated at higher 1976 equivalent prices (about US$20 per ton P205). Witha relatively tight market for phosphoric acid expected to extend until 1975,the prevailing US$15 to $20 differential on spot sales is likely to continue.Beyond 1975, with increasing free acid production coming on-stream, the differen-tial between contractual and spot sales is likely to narrow. An indicativelong-term equilibrium price for acid might be about US$230 to 250 'C&F Europe(1976 base).

Mono-Ammoniuxn Phosphate (1MAP)

13. RAP is not yet an internationally traded commodity since only limitedquantities have been available for export and production has been largely captive.MAP has been used successfully as an intermediate for distribution within asingle count.y by Kemira Oy in Finland and by Fosforico Espahol in Spain provid-ing feed for a number of small off-site granulating plants. Fosforico also madethe first trans-Atlantic shipment of MAP in 1972 (to Brazil). RAP, using phos-phoric acid as major input, is a solid intermediate fertilizer which combinesa number of advantages: (i) high P205 content (55%); (ii) cheap transport coston a per ton of P2 0y basis 1/; (iii) highly suitable for blending; and (iv) con-tains nitrogen nutrient (11%). These qualities make MAP also particularly suitablefor developing countries. Experts agree that large quantities of MAP will beincreasingly traded in the future as export-oriented plants are completed. MAPmight well become one of the most attractive ways of moving P205 from the rockmine to fertilizer producers. It will supplement DAP which has had great popu-larity for nearly ten years and substitute for TSP which, though having a highP205 content, encounters some difficulties in blending with certain nitrogenousfertilizers (particularly urea) and therefore is of less interest as an inter-mediate. Prospects are favorable for large-scale export oriented MAP unitslocated close to raw material sources. Ideal locations are the US Gulf Coast,1north AfricEL -- given availability of rock, ammonia and nearby slulfur sources --and some regions in the Middle East. Compared to acid, MAP will probablyemerge as the most favorable product for long shipping distances while acid

1/Freight per ton of contained P205 is one-half of that of phosphoric acidand two-thirds of that of phosphate rock and therefore particularly suitedfor long distance transport.

Annex 4-4page 8

will have advantages for use in specific processes or for specific fertilizerformulae. Medium to long-term equilibrium prices of MAP will be closely linkedto acid prices but with a likely mark-up because of lower investment costsinvolved in transport and handling. Late 1973 prices are in the region ofUS$120-150 FOB Gulf Coast and Europe (on direct or DAP equivalent basis). Dueto sharp increases in rock, ammonia and acid prices, early 19Th prices reachedUS$160-200 FOB plants. It is expected that trend prices will stabilize atabout US$150-180 in the mid to late 1970s, FOB US and European plants.

Industrial Projects DepartmentFebruary 15, 1974

ANNEX 4-4MOROCCO Tabl.e 1

lUAROC-PHOSPHORE PROJECT

PHOSPHORIC ACID: WORLD SUPPLY Ah-D DEMAND ESTIMATESBY SELECTED REGIONSA/

(in Million tons of P2 05)

Actual Pro;ected

1970 1972 1975 1977 19T0

North AmericaDemand for phosphate fertilizers 4.7 5.0 5.6 6.1 6.8

Percentage utilizing phosphoric acid 90 92 95 95 95

Demand for phosphoric acid for fertilizers 4.2 4.6 5.3 5.8 6.5

Capacity of phosphoric acid plants 6.0 6.3 8.5 9.0 9.0

Capacity utilization 85 90 90 90 90

Supply of phosphoric acid 5.1 5.7 7.7 8.1 8.1

Surplus (Deficit) of acid 1.4 1.1 2.4 2.3 1.6

Latin Amer:LcaDemand for phosphate fertilizers 1.0 1.3 1.7 2.0 2.7

Percentage utilizing phosphoric acid 45 53 65 67 70

Demand for phosphoric acid for fertilizers 0.5 0.7 1.1 1.3 1.9

Capacity of phosphoric acid plants 0.7 0.7 0.9 1.1 1.2

Capacity utilization 50 50 50 50 50

Supply of phosphoric acid 0.3 0.3 0.4 0.6 o.6

Surplus (Deficit) of acid (0.2) (0.4) (0.7) (0.7) (1.3)

West EuropeDemand for phosphate fertilizers 4.3 4.5 4.9 5.2 5.6

Percentage utilizing phosphoric acid 42 46 50 54 60

Demand for phosphoric acid for fertilizers 1.8 2.1 2.4 2.8 3-4

Capacity of phosphoric acid plants 2.5 2.6 3.0 3.0 3.0

Capacity utilization 90 90 90 90 90

Supply of phosphoric acid 2.2 2.3 2.7 2.7 2.7

Surplus (Deficit) of acid 0.4 0.2 0.3 (0.1) (0.7)

South EurcpeDemand for phosphate fertilizers 1.4 1.5 1.8 2.0 2.5

Percentage utilizing phosphoric acid 45 53 65 67 70

Demand for phosphoric acid for fertilizers o.6 0.8 1 .2 1.3 1.8

Capacity of phosphoric acid plants 1.0 1.2 1.6 1.6 1.6

Capacity utilization 70 70 70 70 70

Supply of phosphoric acid 0.7 0.9 1.1 1.1 1.1

Surplus (Deficit) of acid 0.1 0.1 (0.1) (0.2) (0.7)

East Europe and USSRDemand for phosphate fertilizers 5.1 5.8 7.3 8.5 10.7Percentage utilizing phosphoric acid 21 25 31 34 40

Demand for phosphoric acid for fertilizers 1 .1 1 .5 2.3 2.9 4.3

Capacity of phosphoric acid plants 1.3 1.9 2.8 2.8 2.8

Capacity utilization 6C 60 60 60 60

Supply of phosphoric acid 0.8 1.1 1.7 1.7 1.7

Surplus (Deficit) of acid (0.3) (0.3) (o.6) (1.2) (2.6)

AfricaDemand for phosphate fertilizers o.6 0.8 1.1 1.4 1.9Percentage utilizing phosphoric acid 45 53 65 67 70

Demand for phosphoric acid for fertilizers 0.3 0.4 0.7 0.9 1.3

Capacity of phosphoric acid plants 0.4 o.6 1.0 1.2 1.2

Capacity utilization 80 80 80 80 80

Supply of phosphoric acid 0.4 0.4 0.8 1.0 1.0

Surplus (Deficit) of acid 0.1 0.0 0.1 0.1 (0.3)

Non-Communmist Asia (including Japan)Deamand for phosphate fertilizers 1.7 2.1 2.7 3.2 4.3

Percentage utilizing phosphoric acid 45 53 65 67 70

Demand for phosphoric acid for fertilizers 0.8 1.1 1.8 2.1 3.0

Capacity of phosphoric acid plants 1.4 1i6 1.7 2.2 2.2

Capacity utilization 60 60 60 6C 60

Supply of phosphoric acid 0.8 1.0 1.0 1.3 1.3

Surplus (Deficit) of acid 0.0 (0.1) (0.7) (0-8) (1-7)

/ Discrepancies in totals due to roundingsa - .. 9-;+; h .Riilf'r Cornoration. ISHA and Bank Estimates.

iViOROCCO

ivAROC-PHOSPHORE PROJECT

PHOSPHORIC ACID: WORLD SUPPLY ANiD DEMAND ESTMIATESJ1 BY REGIONS(in million tons P205)

1972 1975 1977 1980Supply Demand Surplus Supply Demand Surplus Supply Demand Surplus Supply Demand Gap

(Deficit) (Deficit) (Deficit)

North America 5.7 41.6 1.1 7.7 5.3 2.4 6.1 5.8 2.3 8.1 6.5 1.6

Latin America 3.3 J.7 (O.1 ) o.4 1.1 (0.7) 0.6 1.3 (0-7) 0.6 1.9 (1-3)

West Europe 2.3 2.1 0.2 2.7 2.4 D.3 2.7 2.8 (0.1) 2.7 3.4 (0-7)

South Europe 0.8 0.1 1.1 1.2 (0-1) 1.1 1.3 (0.2) 1.1 1.8 (0-7)

East Europe & USSz 1.1 1.5 (0.3) 1.7 2.3 (0.6) 1.7 2.9 (1.2) 1.7 4.3 (2.6)

Africa2/ O. 4 u.0.0 0.8 0.7 0.1 1.0 0.9 0.1 1.0 1.3 (0.3)

bNon-Communist Asia 1.0) 1.1 (0.1) 1.0 1.8 (0-7) 1.3 2.1 (0.8) 1.3 3.0 (1.7)

TOTAL: 11.7 11.1 U.6 15.5 14.7 0.7 16.4 17.3 (0.9) 16.5 22.2 (5-7)

j The gap can be in the form, of ohosphoric acid or of derivatives of phosphoric acid which thereforerepresents a gap in manufactured acid itself. Discrepancies in totals are due to roundings.

2/ North Africa exports acid to Europe and the rest of Africa imports acid. The net sum of the twois not a meaningful trade figure for this region.

j Excluding Communist Asia ana Australasia.

Industrial Projects DepartmentNovember 30, 1973

MAROC-PHOSPHORM PROJECT

Large Non-Integrated Sales Oriented Phosphoric Acid Units(in 000 tons of P205)

Country Company Location Year on Capacity Export Potential Remarksstream Actual Forecast 19 195/76

(1975-76)

Mexico FFM Coatzacoalcos 1969 335 335 240 240 no expansion fore-seen

Iran Shahpur Chem. Bandar Shahpur 1971 16o 320 95 95

Israel Arad Chem. Arad 1971 165 165 20 0/80 (plant might beclosed because ofdifficulties

Tunisia ICM Gab6s 1972 i15 220 110 220 (Expansion under(construction

Algeria Sonatrach Annaba 1972 165 165 - 30 second unit delayed

Lebanon Lebanon Chem. Beyrouth 1970 ? ? 30 30

Spain Fosforico Huelva 1972 200 300 100 200 part as MAP

Belgium Rupel Velvoorde 1970 150 150 120 120

Netherlands (Windmill Vlaardiihgen 1970 130 130 30 30(UMF Pernis 1969 150 150 60 60

Sweden Boliden Halsinborg 1973 100 100 80 80

US (Texas Gulf - - - 170 - -

ITC Lakeland 197 7 - 540 - 180Agrico 19h74 - 400 - -

Conserv Nichols 1974 - 200 - 200 mostly as M4APFreeport Chem. Convent 1973 135 135 - -Farmland Lakeland 1973 210 210 - -

Morocco Maroc-Phosphore Safi 1975 - 330 - 260

France (APC Rouen 1975 - 200 - 80

(Cofaz Le Havre 1975 - 200 - 60

TOTAL: 885 1885/1965

Industrial Projects Department 6 3

November 30, 1(.73H (DCD X

rmnex 5-1page 1

MOROCCO

MAROC-PHOSPHORE PROJECT

TRANSPORT OF PHOSPHORIC ACID

1. A new company Marphocean--with an initial share capital of DH 4million--has been formed to purchase and operate three specialized ships for thetransport of acid from Safi to the delivery points. Marphocean is owned by theMoroccan national shipping company COMANAVki (45%); by OCP (25%); and by theFrench ship engineering firm Gazocean (30%). Marphocean will enter into a longterm time chartetr agreement with the Maroc-Phosphore Company for the leasing ofthe ships and into an operations contract with COMANAV for their management andcurrent operations. A protocol has been signed between the three parties in May1973. It defines the activities of the company, the respective role of the threeparties and the basis for the calculation of the charter rates.

2. COMANILV, originally the Compagnie Franco-Cherifienne de Navigationcreated ir 1i' 7'1,, is 96% State-owned. Its fleet consists of 11 ships and it hasa leading role i'n ship chartering and sea transport for Moroccan goods. Itemploys about 700 people. Gazocean is one of the world's leading firms in theshipping of liquefied or pressurized gasses and specialty chemicals. Its subsi-diary Technigaz has long experience in ship engineering particularly for liquefiednatural gas (LNG) and liquefied petroleum gas (LPG).

3. OCP and Gazocean have planned to purchase three new specialized self-unloading ocean-going ships: two 10,500 and one 20,000 dwt capacity ships.The ships will be equipped with rubber-lined tanks. Offers were received, late1973, from 6 shipyards] for the construction of the two 10,500 dwt ships. Acontract has been awarded, late December 1973, to Ateliers et Chantiers du Havre(ACH) for the construction of the first 10,500 dwt ship. 3 second cont:ract toconstruct an identical ship has also been awarded to ACH.2 The contractual con-struction period is 24 months from the date of contract signature to the date ofship delivery; the first two ships are, therefore, expected to be operational inJanuary and March 1976 respectively. Their availability cannot suffer any delaysand ship construction is likely to mark the critical path for the overall project.Tender documents for the third 20,000 dwt ship have been issued and offers areexpected by April 1974. The ship is expected to be delivered in December 1976.The preparation of tender documents, the evaluation of bids and the supervisionof ships' construction by Gazocean is part of a signed Technical Assistancecontract between Gazocean and Marphocean.

4. A fiim financing plan for the Marphocean company has not yet beenfinalized. A 75/25 debt/equity ratio and loan financing from the French Govern-ment were originally contemplated. A new financing plan has, however, been

1/ Compagnie Marocaine de Navigation.

j Six shipyards were prequalified after consultation of 18 shipyards.Among the 6 shipyards, 3 were from France (Ateliers et Chantiers du Havre,Dubigeon Normandie, Constructions Navales et Industrielles de la ME^diter-rannee), 1 from UK (Robb Caledon), 1 from Germany (Oramstein und Copel)and 1 from Finland (Nystats Varve).

/ In March 1974.

Annex 5-1page 2

conceived following difficulties in obtaining loan financing from France: thelocal development bank BNDE would provide most of the debt financing with anOCP back up for advance payments and guarantee of project completion.

5. Gazocean has an obligation--stipulated in the protocol--to charteror arrange for shipping facilities should the ship construction program bedelayed. However, the present world fleet of specialized ships for phosphoricacid transport consist only of a limited number of small ships or of ships thatbelong to OCPss compe itors and will most likely not be available for shippingMaroc-Phosphore acidY. Gazocean and MP have, therefore, studied all possiblesolutions to ensure a timely disposal of acid production and an adequateexecution of plant acceptance tests during the first months of operations, in-cluding increasing the MAP production and selling acid to Maroc-Chimie. Pre-liminary results indicate that: it is necessary to produce and sell the maximumquantities of MAP; the first ship should be available (as scheduled) in January1976; acid sales should probably be concentrated, during the first 6 months ofoperations, on delivery zones for which the ship rotations are below 10 days;the second ship should be available (as scheduled) no later than March 1976; thethird ship should be commissioned as early as possible.

6. Table 1 shows the estimated ship investment costs andtime charter raets for the three ships. On the basis of the daily charter rate andof the estimated rotation time,the following average freight rates have beencalculated for selected routes.

Estimated Average Freight Rates

Delivery Point Rotation Time Freight Cost (in US$ per ton of P205)(days) 10,500 dwt 20,000 dwt

Szczecin 13.5 23.1 19.0Rouen 11.0 17.4 15.5Santos 26.0 43.0 36.7Rotterdam 11.5 19.0 16.i

7. Table 2 shows a list of available acid terminals in the world. For thepurpose of the project, CIECH is building a terminal of a capacity of 20,000 tonsof solution at Szczecin for which Gazocean and MP have provided necessary specifi-cations and information. Fertisul and Luchsinger terminals in Santos and Rio Grandedo Sul will be used to the extent possible but some extension might be needed.BASF is planning to use the existing FFM terminal in Rotterdam; if satisfactoryrental arrangements cannot be made, BASF will build its own terminal at Antwerp. JThe small French buyers are planning to use the APC terminal in Rouen. IFFCOalreacdy possesses a terminal at Kandla. Swap trading arrangements are also beingdiscussed between OCP/MP and several other suppliers (notably APC, Bandar ShahpurChemical) to save on transport and terminalling costs.

1/ FF1 possesses 4 ships (3 ships with stainless steel-lined tanks of a capacityof about 24,000 dwt and 1 ship with rubber-lined tanks with a capacity of38,000 dwt). ICM possesses 1 small ship (4,500 dwt) and has ordered a largerone (10,500 dwi).

j OCP might also consider setting up a terminal in Rotterdam if salesthrough Rotterdam increase

Industrial Projects DepartmentApril 15, 1974

Annex 5-.Table 1

MOROCCO

MAROC-PHOSPHORE PROJECT

SHIP INVESTMENT COSTS AND CHARTER RATES(in 000 US$)

10,500 dwtInvestments

Engineering 160Lump sum price 11,300Interest during construction 500Pre-operating expenses 300

Total: 12,260

Charter Rate

Financial charges (10.96%)2/ 1,340Crew 200Insurance and Maintenance (5%) 61oOverbeads 60

Ti^ne-charter (per year)Ži 2,210

Time-charter (per day) 6.5

Time-charter per ton per day in US$ 0.62Various operating charges.2/ 0.27

Total freight rate in US$ per ton per day 0.89

a/ Based on BNDE financial plan

g/ Ship operating 340 days per year

j Average fuel and port charges per day based on planned rotations.

Industrial Projects DepartmentApril 15, 1974

Annex 5-l,Table 2

MOROCCO

MAROC-PHOSPHORE PROJECT

LIST OF PHOSPHORIC ACID TE&MINAIS

Location

Export Terminals Terminal Owner Number of Tanks Total Capacity( Ms

USA Tampa GATX 3 13, 500Mexico Coatzacoalcos FFM 4 42,500Tunisia Gabes ICM 2 11,000Iran Bandar Shahpur SHAHPIJR Chemical 3 25,500Israel Ashdod ARAD Chemical 2 10,0U0

Distribution Terminals and Consumers Tanks

USA New Orleans J. T. Chemical 30,000Colombia Cartagena Abocol

Barranquilla Monomeros 1 4,000Brazil Rio Grande Fertisul 2 18,000

Santos Tankol 1 L/ 9,000Australia Brisbane 3 27,000India M4adras 3 30,000

Kandla IFFCO - -Goa Zuari 1 10,000

Turkey Iskenderun Gubre Fabrikalari 1,800France Port la Nouvelle ICM and others 1 6,800

La Pallice COFAZ 4 6,oooDonges Gardiloire 2 8,000

Netherlands Rotterdam F VPakhoed 3 27,000BoliderVWindmill 1 1 5,000

UK Immingham ACC/Immingham Storage 1 12,000

i pillow tanks

Industrial Projects DepartmentApril 15, 1974

ANNX 6-1Page! 1

MOROCCO

MAROC-PHOSPHORE PROJECT

BIDDING PROCEDURE AND SELECTION OF THE CONSORTIUM

A. Pre-qualLfication Procedure

1. In July 1971, a Pre-qualification advertisement was placed intechnical journals and newspapers in a sufficient number of coun-tries toassure a world-wide distribution. The advertisement briefly described thefacilities--on the basis of a 1000 TPD P205 capacity with a possible expansionto the full 1500 TPD P2 05 project capacity-- to be constructed and invitedfirms interested in forming consortia of contractors to execute the projectto apply to 0CP for Pre-qualification Conditions. Over 20 responses werereceived.

2. Copies of Pre-qualification Conditicns dated Auguist 1, 1971 weresent to all who had applied. This document described in considerable detailthte facilities to be installed, products to be made, raw materials availableE3rd basic conditions surrounding the work. The document also listed thecriteria that would be used in evaluating the responses. The Pre-QualificationConditions had previously been discussed with and had concurrence of the Bank.A total of 14 responses was received before the deadline of October 15, 1972,of which 13 were considered responsive. The firms that responded and thestructure of the consortia constituted is shown in Table 1.

3. Evaluation of the responses was made in accordance with criteriaprepared by OP with the assistance of Topsoe and transmitted to the biddersbefore submission of bids. The Bank reviewed and had no objection to, theshort list---prepared by OCP and Topsoe-- of five pre-qualified consortiato be invited to bid on the execution of the project, but made three tech-nical reservations. The short list proposed by OCP and agreed by the Bankis shown below in alphabetical order.

Short List of Consortia to be Invited tc Submit Priced Proposals

Consortium Sulfuric Acid Phosphoric Acid MAPLeader (Contractor) Process Process Process

Badger Co. (U.S.) Monsanto Gulf Design SwiftMitsui (Japan) Monsanto Prayon SaiSpie-Batignolles (France) Monsanto Dorr-Oliver FisonsSybetra (Belgium) Polimex Prayon FisonsUhde (Germany) Polimex Nissan Fisons

4. Technical reservations were made by the Bank covering: the GulfDesign phoQshoric acid process offered by Badger; the Polimex sulfuric acidprocess offered by Sybetra and Uhde and the qualifications of the Polimex-Cekop firm from Poland, and the Nissan phosphoric acid process offered by

ANNEX 6-1Page 2

Uhde. A Bank mission, therefore, visited plants employing these processesand sulfuric acid units constructed by Polimex.

a. The Gulf Design process was operating on a large scale for the firsttime at a plant in Florida, but was experiencing some equipment difficulties.OCP and the Bank agreed that this process would be finally considered if thesedifficulties were overcome and if capacity operation and suitable efficiencieswould have been attained by the time bids were to be evaluated.

b. The Polimex process had been built in a number of large plants inEastern Europe based mainly on pyrite as a raw material and recently in a 1,000TPD plant in the Federal Republic of Germany based on sulfur as a raw material.l/After observation of the operation and construction of Polimex plants and visit toPolimex headquarters in Poland, it appeared that the risk of using this processwas acceptable and Polimex's qualifications adequate.

c. The Nissan process had been employed in a number of plants up to 300TPD P205 capacity but never in a plant of 500 TPD as required in this project.However, several designs for 500 TPD plants had been prepared and, in view ofprevious success in scaling up small plants to larger units, the risk involvedin using thi; process appeared acceptable.

In view of the above, and after review of qualifications of all other consortiamembers, the Bank accepted the inclusion of the Badger, Sybetra and Uhde propo-sals in the short list of consortia to be invited to submit bids. However,Badger voluntarily withdrew from competition-- before evaluation of technicalbids.

2/B. Invitations to Bid-

5. As announced in the Pre-qualification Conditions, bids were invitedand evaluated in three phases:

a. Tender documents were issued to the contractors of the five pre-qualifiedconsortia on February 9, 1972 with an invitation to submit within 90 days anunpriced technical proposal for executing the project, with an estimate of timerequired to execute the project, and a proposed formula to cover costs escala-tion or de-escalation.

b. The technical proposals received were studied by OCP and Topsoe anda list of auestions were drawn up for each proposal asking for clarificationsor adjustments to make all proposals as nearly comparable as possible, butgiving due regard to the differences in the several processes proposed.Representatives of each contractor (consortium leader) were invited to Rabaton successive days for a one-day discussion of the adjusted technical offers.

c. After all technical offers had been adjusted, priced proposals wereinvited.

1/ Polimex currently has about 15 plants under construction and, on the basisof the performance of this 1,000 TPD unit the owner from Wkst Germany hasordered a second unit of the same size and same design.

2/ For a capacity of 1,000 TPD P205 with potential expansion to the full1500 TPD P205 project capacity.

Annex 6-1page 3

6. Each step of the bidding procedure was reviewed in advance by theBank, including: the text of the advertisement, the list of publications, thepre-qualification conditions, the tender documents, the questions for harmon-ization of technical offers and the invitation for priced offers. Technicalproposal before and after harmonization and priced offers were also reviewedby the Bank. Finally, the Bank is satisfied that bidding procedures actuallyfollowed conformed to Bank international competitive bidding procedures asconceived for and adapted to the present special case of a lump sum contracL.

C. Evaluation of Bids

7. Topsoe and OCP devised a scoring system acceptable to the Hankaccording to which the lump sum price was adjusted for the following factors:(i) the proposed payment schedule; (ii) the guaranteed completion date ann theguaranteed length of the start-up period; (iii) the proportion of the tctalprice to be paid in Dirhams; and (iv) the possibility of a delay in the comple-tion due to possible shortcomings in the bidders' professional capabilities anaiexperience. Operating costs were based on the guaranteed consumption figuresand the maintenance costs were checked and agreed upon during the technicaldiscussions prior to the submission of priced offers. Thus, no judgement factor6-were required for these figures. The unit prices for labor, utilities, rawmaterials, and chemicals specified in the tender documents were used in calcula-ting operating costs.

8. In the tender documents, penalties had been set for shortcomings inall of the performance criteria and these penalties had been accepted by allbidders. It was therefore possible to arrive at monetary values by applyingattained score to the previously stated penalty. Prices were placed on thesame currency basis by converting them all into Dirhams at exchange ratesannounced in the call for priced offers.

9. The stream of expenses including the phased lump sum cost thusadjusted and the annual operating costs during the first 12 years of operationwas discounted to the date of start-up, supposed to take place 3 months afterthe guaranteed completion date (mechanical reception). The cumulative dis-counted valuie of this stream gave the ranking of the bids in monetary tenns.The consortium headed by Uhde offered the lowest evaluated price. OCP andTUhde completed negotiations (for facilities corresponding to a capacity of1000 TPD P2 05) of a first plant contract in June 1973. See Annex 6-2.

D. The Expansion to the Full 1000 TPD Pp05 Project Capacity

10. Following favorable market developments and to take advantage of anunchanged priced offer based on the same processes and engineering, OCP decided(early 1974) to contract immediately the additional facilities and offsitesnecessary to reach the full 1500 TPD P205 project capacity (including two linesof MAP). COP completed negotiations (April 1974) with Uhde of a seccnd plantcontract to carry out these additional facilities. See Annex 6-2.

Industrial Pr jects DepartmentApril 30, 197h

ANhEX 6-1Table 1

MAROC PHOSPHORE PROJECT

CONSORTIA SUB4ITTING QUALIFICATIOW PROPOSALS

SULFURIC ACID PHOSPHORIC ACID MAPCONSORTIUM LEADER(Alphabetical) Process Engineering Process Engineering Process Engineering

1. Badger Monsanto Gulf Design Gulf Design Gulf Design Swift Gulf Design

2. Ensa Monsanto Sim-Chem Prayon Coppee-Rust Fisons Foster Wheeler

Polimex Polimex Kellogg-Lopker Kellogg Fisons Foster Wheeler

Chemiebau Salzgitter Dorr-Oliver Dorr Oliver Fisons Foster Wheeler

3. Gexa Polimex Polimex Dorr Oliver SNAM/Auxini Swift Dorr Oliver/Snam Aux.

Monsanto DeNora Dorr Oliver SNAM/Auxini Fisons Power Gas

4. Hoechst-Uhde Stauffer Hoechst-Uhde Nissan Uhde Swift Hoechst-Uhide

5. Italconsult Chemico Siry Chamon Prayon Siry Chamon Fisons F. Wheeler/Sir y Ch

6. Mannesmann Dorr Oliver Dorr Oliver Dorr Oliver Dorr Oliver Swift Dorr Oliver

Polimex Polimex Dorr Oliver Dorr Oliver Fisons Lurgi

7. Mitsubishi Lurgi Mitsubishi Fisons Lurgi/Mitsubishi Fisons Lurgi

Lurgi Mitsubishi Dorr Oliver Mitsubishi Fisons Lurgi

8. Mitsui Monsanto Mitsui Prayon Mitsui Swift/UI Kurimoto

9. Societe Gen. DIEaterprises Monsanto Heurty Prayon Speichim/Wellian Fisons Power Gas

Power Gas

10. Spie-Batignolles Monsanto o Dorr Oliver Struthers Wells Fisons Power Gas&tfIgnolles

Monsanto 9ie- Struthers Struthers Wells Fisons Power GasBatignolles Wells

11. Sybetra Polimex Polimex Prayon Coppee-Rust Fisons Lurgi

12. Thyssen Kuhlmann/ Pechiney/ Power Gas/Krebs Krebs St. Gobain Krebs Fisons Krebs

13. Uhde/Siemens Polimex Polimex Nissan Uhde Fisons Lurgi

Stauffer Hoechst/Uhde Nissan Uhde Fisons Lurgi

14. Fertilizer Corp. ofIndia None Specified None Specified None Specified

Industrial Projects DepartmentNovember 15, 1973

ANNEX 6-2Page 1

MOROCCO

MAROC-PHOSPHORE PROJECT

-±E CONSOR¶IIUM ORGANIZATION AND THE PLANT CONSTRUCTION CONTRACT

Crganization of the Consortium

1. The rmembers of the consor-tium that has been awarded the plant construc-t"on contracts are all well known and capable European firms.

a. Friedrich Uhde GmbH (Uhde) from Germany, the consortium leader, is amember of the Farbewerke-Hoechst group, and has long experience in the designand construction of ammonia, nitric acid, phosphoric acid, urea and complex.rertilizer plants. Uhde will coordinate the overall engineering and the civilworks, engineer and build the phosphoric acid unit, construct the MAP plant,and design arid construct the offsites and auxiliaries.

b. Siemens A.G. (Siernens) from Germany is one of the largest electricalequipment comqanies in the world. Siemens will perform the electrical work;it has collaborated with Uhde many times in supplying the electrical facili-ties for chemical plants, including fertilizer plants.

c. Polimex-Cekop (Polimex) from Poland, widely known in Eastern Europe,is engaged in the building materials, chemicals, food, sugar and wood indus-tries and has built several sulfuric acid plants of both large and smallcapacity in East and West Europe. Polimex will provide the sulfuric acidprocess and engineer and build the sulfuric acid unit.

d. Lurgi Gesellschaft fur Chemie und Huttenwesen GmbH (Lurgi) fromGermany has a world-wide reputation for building metallurgical, chemical andfertilizer plants, and was one of the contractors for the existing Maroc-Chimnieplant. Lurgi will engineer and procure the MAP unit to be built by Uhde.

e. Nissan from Japan will provide the hemihydrate phosphoric acid processand Fisons from the U.K. the MAP process.

B. The Plant Contracts and the Construction Schedules

2. The tender documents contained a draft contract spelling out inconsiderable detail the main technical and financial terms and, -therefore,provided a good basis for preparation of the final plant contract. CCP andUhde completed negotiations in June 1973 of the first plant contract (corres-ponding to a capacity of 1000 TPD of P2O5 and including two sulfuric acid,two phosphoric acid and one MAP trains and related offsites) and this contractwas executed and made effective on June 29, 1973. This contract guarantees,subject to penalty/bonus clauses discussed below, that mechanical completionwill occur 27 months after the effective date of the contract) i.e., on October 1,1975. Provisional acceptance will take place within a period of 6 months after

ANNEX 6-2Page 2

mechanical eompletion and final acceptance 12 months later (with not lessthan 6 months after provisional acceptance) if there are no hidden defectsor unsuitable eouipment. OCP and Uhde completed negotiations (April 1974)on a second plant construction contract to carry out the needed additionalfacilities to reach the full 1500 TPD P2 05 project capacity; these facili-ties inclade a third sulfuric and a third phosphoric acid trains, a secondMAP train and related offsites. The additional trains are identical to thosealready contracted. This second contract guarantees mechanical completion ofthe additional facilities 10 months (i.e., on August 1, 1976) after mechanicalcompletion of the facilities included in the first contract.

3. The contracts include lump sum prices with payments in DH (localcosts), in clearing dollars for the Polimex part as per the terms of a sub-contract between Uhde and Polimex, and in DM for the remaining balance offoreign exchange. The lump sum prices for the sulfuric acid, phosphoric acidand MAP trains are identical in the first and second contracts. The lump sumprices for the offsites were established on the same terms and only vary pro rata.Agreed payment schedules in the three currencies are also included in the con-tracts and payments are specified at intervals and in amounts proportional toexpected cash outlays and work done. The Polimex lump sum prices are firm forthe duration of project execution. The DH and DM portions will be adjustedup or down over time according to an agreed formula included in and identicalfor both contracts and to be applied 14 months after signature of the contractsfor the DM portion and 18 months after such signature for the DH portion.

C. Acceptance Tests

4. After the facilities will have been declared mechanically complete byUhde and accepted as such (mechanical completions are expected to be October1975 for the first two trains and August 1976 for the third train), they willbe placed in operation and there will be two series of acceptance tests corres-ponding to provisions in the first and second contracts. After initial adjust-ments and after the units have operated for at least a month at not less than70% of guaranteed capacity, yielding products which meet all quality specifica-tions, a full test run may begin. The test runs will last 168 consecutivehours (7 full days), during which time the facilities, and each of them, areto produce products meeting all quality specifications and at the guaranteedrate of production while not exceeding guaranteed consumption of raw materials,utilities and supplies. If the test runs successfully meet all guarantees, MPwill issue to Uhde certificates of provisional acceptance. Final acceptance-- in each case-- will be given 12 months later if no hidden defects developand if no equipment is found unsuitable because of excessive corrosion orexcessive repairs with not less than 6 months after provisional acceptances.

D. Contractor's Obligations and Oaarantees

If any of the facilities fail to meet capacity or quality guarantees,Uhde has unlimited liability to correct the defects. If any hidden defectsdevelop or if any eauipment is found unsuitable, Uhde likewise has unlimitedliability to correct this defect and a new 12-month period of liability commences

ANNEX 6-2Page 3

for any item replaced or repaired. For other shortcomings, such as for rawmaterials and utilities consumption, various penalties are assessed unlessthe shortfall exceeds a certain specified maximum, in which case Uhde aga-nhas unlimited liability to make a satisfactory correction. Additionally, thereare penalties for failure to meet the completion dates and start-up and dura-tion of test runs; penalties cannot exceed 6% of the lump sum price. Totalpenalties for failure to meet raw materials, utilities consumption anddelivery dates cannot exceed 10% of the lump sum price. When all guaranteeshave been met or have been satisfied by the penalties provided, and all partsof the plant have been in successful operation for 12 months, MP will thenissue a certificate of final acceptance and Uhde is freed of further liability.

6. Additionally, the Technical Advisor (Topsoe) is also penalized--as per the terms of the Technical Advisor contract with OCP-- for (i) failureof products to meet specifications; (ii) failure of facilities to meet capacityguarantees; cr (iii) for excessive consumption of raw materials or utilities.These penalties may amount to 20% of Topsoe's fees or roughly $200,000. Hence,Topsoe has considerable incentive to monitor the project execution carefully.

E. Likely Ef'fects of Guarantees

7. The result of the foregoing obligations is that the facilities willprobably be somewhat overdesigned as no contractor could afford the maximumpenalties and liabilities provided in the contract. IWhile this may haveresulted in somewhat higher investment costs, it is likely that the IN? projectwill benefit from some built-in excess capacity on which the prof'it margin willquickly pay'off the added cost.

Industrial Projects DepartmentApril 30, 19'74

Annex 6-3page 1I

MOXOCCO

I4AROC-PHOSPHORE PROJECT

INDUSTRIAL TESTS

1. In agreement with the contract, Uhde was required to conduct acommercial scale test with Youssoufia rock in a Nissan phosphoric acid processplant of a size and sophistication similar' to the plant proposed for the pro-ject. This test, utilizing some 20,000 tons of Youssoufia rock and extendingover a period of several weeks was conducted in the 300 TPD P205 plant of the"Societe Chimique du iupel" at Sauvegarde, Belgium. Based on a conservativedesign and laboratory tests it had been predicted that this plant, whichnormally uses a mixture of Khouribga and Florida rock, would achieve a capacityof 260 TPD whaen operated on Youssoufia rock. Surprisingly, the plant consis-tently produced over 300 TPD and reached a maximum of 337 TPD. The acid pro-duced meets all quality specifications.

2. Furthermore, the sludge obtained during the clarification step hasbeen recycled to the front end of the plant with no deleterious effect onoperations. This has eliminated an expensive sludge disposal system foreseenas a probable necessity. The yield of finished 54% P205 solution was higherthan forecast and Uhde consequently has agreed to guarantee a higher efficiencyin the use cf rock, reducing predicted consumption by some 10,000 TPY of rock.

3. Z,ie test was conducted by Uhde and was monitored by experiencedpersonnel fiom Topsoe and OCP. A quantity of the 54% acid produLced during thetest was shipped to Avonmouth, England, and was used in the manufacture ofMAP in a plant using the Fisons process. There also a satisfactory product wasmanufactured. The Uhde report on the tests at the Rupel and Avonmouth olantswas reviewedi by OCP, Topsoe and the Bank. There appears to be no doubt thatthe Nissan and Fisons processes are acceptable.

Industrial Projects DepartmentNovember 1$, 1973

MOROCCOMAROC PHOSPHORE PROJECT

TENTATIVE PROJECT SCHEDULE

1973 1974 1975 1976

JF MIA MlJ J A S UIN u j F rMIA M' J J"A IOMfliFIAIIlIIIND JIIIIIlIISIOINID

PROJECT EXECUTION

CONTRACT NEGOTIATIONSCONTRACT SIGNATURE 4CONTRACT EFFECTIVENESSINDUSTRIAL TESTSPROJECT EXECUTION

ENGINEERINGXPCE

I u-ATO HROUEMENTr

INFRASTRUCTURE

B - Basic Specs, issuedT - Tender document issued

O - Ordering startedW - Work startedA - Completion date World Bank - 8137(2R)

REV 15CAPR1974O

MOROCCOMAROC PHOSPHORE ANNEx 6-5

PROVISIONAL ORGANIZATION Page 1

FOR PROJECT EXECUTION

GOVERNMENTOF MOROCCO

COMANAV GAZOCEAN GENERAL MGR.

M.K. LAMRANI

r COMMERCIAL ADMINISTRATIVE Pl_ANNING ANDMARPHOCEAN MANAGER AND FINANCIAL DEVELOPMENT

D. COHEN MANAGER DMCLAGRIN

ICOOROINAT IN TECH. SUP. & COORD. |

PROJECT TECHNICAL SUPPORT TEAM OF ENGRS Z

L COORDINATION _ Sr AHAMIERI COORDINATION PROJHAECTS |

MANAGER FOR PHOSACIDI 18

\ K PROJECT L__.PJ INFRASTRUCTURE

O _ _ _ _ TEAM r ~~~~~~~~AGENCIES

'1~~~~~~~~~~~~~~~~1

1~~~~~~~~~~~~~~~~~1

TECH. ADVISER TECH. ADVISERHOME OFFICE RESIDENT +TOPSOE A/S TEAM

M. PEDERSEN N.KLUDT

GEN. CONTRACTOR GEN. CONTRACTORF. UHDE, GMBH RESIDENTHOME OFFICE MANAGERDR. DRILLER DR, WITZEL

EECTRICAL PHOS.ACID,MAP. PIME

INSTALLATIONS OFF-SITES SULFURIC ACID| | | ~~AUXILIARIES| |_J

World Bank-8497RFV FFR 1974

ANNEX 6-5Page 2

MOROCCOMAROC PHOSPHORE

MAIN FUNCTIONS FOR PROJECT EXECUTION

I_______ _ PROJECT 1MANAGER

PROJECT TEAM

REPRESENT MAROC

PHOSPHORE IN DEALINGS l

TECHNICAL ADVISER WITH CONSORTIUM AND CONSORTIUM

(TOPSOEI ALL OTHER EXTERNAL LEADERAGENCIES IUHDE)

ASSIST PROJECT TEAM COORDINATE ACTIVITIESAS FOLLOWS OF CONSORTIUM WITH ACT AS ENGINEERING AND

* PREPARE FEASI8ILITY ALL OTHER EXTERNAL CONSTRUCTION MANAGER

STUOY AGENCIES IX THRU. SUB-CONTRACTORS T

* DEVELOP DESIGN DATA ASSIST CONSORTIUM IN Z ENGINEER NGCPRCE' DESIGN, D FDEALINGS WITH LOCAL, ENGINEERING PROCUREMENT < U U

* PREPARE INVITATIONS FOR PROVINCIAL AND NATIONAL F- T AND CONSTRUCTION OFDPRE-OUALIFICATION OF GOVERNMENT AGENCESENTIRE PROJECT. D

CONSORTIA AND METHODS E a.X

OF EVALUATING RESPONSES SCRUTINIZE AND APPROVE t O Y OUSSOUCT ANALL PLANS AND IDESIGNS 0 INDUSTRIAL TEST OF

* EVALUATING RESPONSES ~~REVIEWV AND APPROVE <F4-'X MODIFY DESIGN OF PROS.

* PREPARE TENDER DOCU- ORDERS C IL BY INDUSTRIAL TESTMENTS FOR WORK OF -

CONSORTIUM AND METHOD REVIEW PROGRESS r BE RESPONSIBLOF EVALUATING PROPOSALS SCHEDULES AND REPORTS D COMPLETING ENTIRE

AND INITIATE CORRECTIVE _ PROJECT ON TIME* EVALUATE PROPOSALS AND ACTION IF NEEDED

RECOMMEND AWARD BE RESPONSIBLE FORREVIEW ALL PROGRESS TESTING. START-UP AND

e ASSIST AS REQUESTED SCHEDULES AND REPORTS INITIAL OPERATION THRU

iN NEGOTIATING FINAL OF GOVERNMENT AGENCIES SUCCESSFUL ACCEPTANCE

CONTRACTCHREWIHIFATSS

* MONITOR INDUSTRIAL TEST STRUCTURE WORK ANDOF YOUSSOUFIA ROCK INITIATE CORRECTIVE PROVIDE COMPETENT

ACTION IF NEEDED EXPATRIATE PERSONNEL

ASSIST IN SCRUTINIZING & PREPARE AND SUBMIT TO FOR THESE DUTIES

APPROVING CONTRACTORS' BANK MONTHLY PROGRESS ARRANGE FOR TRAINING

DESIGNS AND SPECIFICATIONS REPORT MAROC PHOSPFORE_ __ ~~~~~~~~~~~~~~PERSONNEL FOR OPERATING

ASSIST IN MONITORING WORK MONITOR ALL PHASES OF PLANTS

OF CONTRACTORS AND MAKING THE PROJECT . _

APPROPRIATE RECOMMENDA GIVE OVERALL IMPETUS UNSUITABLE EQUIPMENT

TIONS TO PROJECT DURING A PERIOD OF

REVIEW CONSORTIUM'S 12 MONTHS AFTER START-UP

PROGRESS REPORTS ANDMAKE APPRORIATE RE-MENDATIONS

ASSIST IN PREPARATION OFMONTHLY PROGRESS RE- * COMPLETEDPORT TO BANK

ASSIST PROJECT TEAM INCOMMISSIONING ANDTESTING FACILITIES

ASSIST IN RECRUIIINGAND TRAINING STAFFFOR OPERATING PLANT

ASSIST PROJECT TEAMIN ALL OTHER TECHNICALASPECTS OF ITS WORK

World Bank-8135(R)

REV 5 FEB 1974

MOROCCOMAROC - PHOSPHORE

ORGANIZATION CHART FOR THE PROJECT TEAM

MANAGERNT TRANSPORTATION

PRODUCTION AINTENANCE NVESTIGATION SECUITY PSONLURCHASING FANILSALE'S AND

EPRMNDEEPARTMEN T DPARTMN EATETDPRMENT RTMENTMN DEPARTMENT MARKETIN

DEPUTYDEPARTM

INVESTIGATIONS A~~~~DMINISTRATION IACL

MANAGER~~~~~~~~~~~~~~~~~~~~~~~~AAYI

FRESH WAPTE DIVISION l 1 AND ON ROL l 1 DIVISION l 1 Dn

ELECTRI~~~ ~ ~ ~~ AL AN

POVV R PLANT ~~~~~~~~~~~~~~~~~~~~CCOUNTINGDIVISION DIV N

PLANNIIONG OP l STANDARDS RECORDS

|PROJ. EXECUTION || DIVISION DIVISION

U SECRETARIAT STORES

-'-R'~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0

DIVISECRAIA

| CIVIL | Wor~~~~~~~~~~~~~~~~~~~~~~~~~~V.ld B-1, 8136 tC4

WORtKS C",

DIVISION

SERTRA

MAROC PHOSPHORETENTATIVE ORGANIZATION CHART

FOR THE MP COMPANY

SA A0 EhS AVNFIARE 1

N

C ISIS~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~MNG

ACCOUNTANTS~~~~~~~~~~~~~~~~~A AS3TAT

I AEVIO SUPE RVSO SUPERSI_rSECERR SUPERV YISOR S2 IVIO SRlVRA UFEI SUECRVISORYSPRIOVRS

|~~~~~~~~ ~ LEGAL ~ L I TRINN | TIAN

|~ ~ ~ ~ ~~~~~ SUPERVISOR 2 SUFERVISORI,R

I NDUSTELATINS L RND EALT I PLLAPRRDTTRO IFPLANTR POPT ST

|uEDREMENR r DRE PEN VISO SHIFT FOEENG4 SF FOREME A STRIEE RFAE AD EF OEE OE OEE SLE FOEE 4 CHEMIST S

7.,I, L1, T 'NG~~~~~~~~~~~~~~~~~~~L TYISTS 2I

SHAOIFT |- | lER 4 TYINST MCI |O OPERATORSIS ATTEDANT -D PERODUCTRS I OPERATORS 1D SPECREAVR 2 TCN3 PLUS 25 CALLEDESUPT IC E A

MICRONICSAR O ELECTRIC AURLRES A SVLF.R CACD PHOC ACID & RECE- VEL |

LAOR RS 12ATsA -11 supI LOADINSo SIG HIO

1 UILIIE I SI RS I HU EI SA INSRUEN - -- F' | ]I RCA] EF II SIPN LN| SUPERVISO F I UEVSR IISUPERVISOR SUPERVISDR I UERVISOR .D1FSAN| O IER I'l | IUFVSO UPRF I IT SUPERVFO HMS EEVN NETGTO

| MECHANICAL DEPT | ELECTRICAL EPT | NSTRUMENT DEPT. | TILITIES DEPT || STOHES | | .PLNT ENGR S 1 | F-7IY DEPT SUL, AC'.eT PHDS ACIDDEPT|- MAPDEPT. E ETAL |rSPRETV GAATIO; PREEN 4 IN A PDREMEN 4 | |EHFfT FOREMEN 4||SHIFT FOREMEN A STDREKEEPER I | GLSMN4 1I- G1 5 ,||SHFFOEN IIHFTORMN 4|SIT D N4||CEITS S|| pLANT IICHIPM ENGRS 3 | MCHAEN CS410 ||ELECTIRIC ANS 20 | H 0 |OPERTRS a | TEDNSR 1IRL D ELPEF IC | ER S |b DOADER9 9 S AMPLERS 4 ||S. IT FOEMEN S B

60 1 28 24 | | 2 |3 14 13 52 31TOTAL STAID 40 REV E AF O94 R|

RIV 150ApM 1974

TENTATIVE MANNING TABLE - A

T ~~~~~~97 941975FUNCTION NO. NAME J 73 J O|M ID J IF I M AIM D J F MIAI J

MAROC PHOSPHORE PROJECT TEAM

PROJECT MANAGER S. M'HAMEDI _

MECHANICAL COMPLETION

DEPUTY PROJECT MANAGER 1 F. M. BOUAYEDRTART COMMERCIAL OPERATION--

DEPARTMENT HEADS FPROVISIONAL ACCEPTANCE-PRODUCTION 1

MAINTENANCE 1

PLANT INVESTIGATION 1 _

PERSONNEL 1 BELMAACHI

PURCHASING 1

FINANCIAL 1TRANSPORT. SALES. PORT & OFF-SITES 1

DIVISION CHIEFS

PHOS' ACID & MAP 3 * _.

SULFURIC ACID 2 ___ _

PLANNING 1 __

z

MECHANICAL 2 _

ELECTRICAL & POWER 2 -_

INSTRUMENT 1 _- =O

STANDARDS1

STORES 1 - - -_-

CIVIL WORKS 1 -_ -_ - - -

INVESTIGATIONS I

PROCESS 1 ._

LABORATORY 1 - - - -

RECORDS 1m - m~

ADMINISTRATION & TRAINING

LEGAL 1 T-_ _ - _-MEDICAL - uSE SAFI HOSPITAL & DOCTOR

HEALTH AND WELFARE .1......-

ACCOUNTING 1 | = =

SUB-TOTAL 30

World Bank - 8162(2R)

REV 15 APR 1974

MOROCCOMAROC PHOSPHORE

TENTATIVE MANNING TABLE - B

FUNCTION NAME 1973 1974 1975 1976

I INITIALSJA 3 N IiFrM J]A[ S N 2D J |FM|A|M| J J|A| SOND J| F|M|A|M| J A s _TECHNICAL ADVISER (TOPSOE AIS) MECHANICAL COMPLETiON-

HOME OFFICE . START COMMERCIAL OPERATION-PROVISIONAL ACCEPTANCE-

PROJECT MANAGER MP I - - -

PROCESS ENGINEER GCRC _ (MANUALS)

.. .. JL _ * t . , JL

RG __ (MANUALS)

MECHANICAL ENGINEER BKR

JDJ MM= (SPARE PARTS)

MECHANICAL INSPECTOR EJ

ELECTRICAL ENGINEER JGS

INSTRUMENT ENGINEER KF

FINANCIAL EXPERT

RESIDENT IN MOROCCO

RESIDENT MANAGER NK _ __

CIVIL ENGINEER SA _ .

MECHANICAL ENGINEER BKR - - M

PRAD . . .

ELECTRICAL ENGINEER PK -

INSTRUMENT ENGINEER .

PROCESS ENGINEER - -

PLANNING ENGINEER JNI

SECR ETAR I AT _ -

ARCH IV IST _ -

SECURITY EXPERT .

_____ .__ _ _ _ _ . __ , ~ . _

World Bank - 8164(2R)* on the basis of arrangements set up for the first two lines. REV 15 APR 1974

0'-.

ANNEX 6-7Page 3

MOROCCOMAROC PHOSPHORE

TENTATIVE MANNING TABLE -C

1973 1974 1975 1976FUNCTION - J |A S ND N D i rI D |J| F | MA|M J | J|A| 0 3 N D J I FIMA 1MAI J A

MECHANICAL COMPLETION-

START COMMERCIAL OPERATIONSHIFT FOREMEN | PROVISIONAL ACCEPT NCE-*F

PHOS. ACID 4 _ kk m1 _ _m "I ;MAP 4 'limit.l ==mXm _-_mSULFURIC ACID & SULFIJR 8 iUiaEI I -___ __ - -SHIP & RECEIVE-PLANT 6 - .

PORT 6MECHANICAL 4 iium ii1111-ELECTRiCAL & POWER 8 Bill, 1i .'INSTRUMENT ,4 _111 IIi 1I __LABORATORY 5 mIi mu.._ - i

49

DAY FOREMEN

MECHANICAL 4 ii.,. imui -ELECTRICAL & POWER 4 liii limi .STOREKEEPER 1 y - -

SECURITY 1 -r10

SKILLED LABOR & TECHNICIANS

PHOS. ACID 16 imuuuimmuimMAP 4 umimmumiZSULFURIC ACID & SULrUR 12 m1 [Ia 1uiII-4m. ._MECHANICS 40 .ELECTRICAL & POWER 28 .-.-INSTRUMENTATION 20 mmii mmmi.STORE 10 _ ,DRAFTSMEN 4 - -LABORATORY 4 11 i_

138 .0UNSKILLED LABOR

PHOS. ACID 23 -U_MAP 6 _SULFURIC ACID & SULFUR 30 _iLABORATORY 4 . .-MECHANICAL 18 i

UTILITIES 8 .SHIP & RECEIVE-PLA\iT 15

PORT 25 -_SECURITY & FIRE 12 -__

141SECRETARIAL & CLERICAL

PLANT MGR. 1 _.FINANCIAL 8PERSONNEL 8 t1) (2) - 8) _ __.

PLANNING 4 - _ | | | _TRANSPORT. & MKTG. 5 | *.

PLANT ENGR. 2 | | - - ._PRODUCTION 6UPT. 3 - -I _MAINTENANCE SUPT. 1 _

32

SUB-TOTAL 370

GRAND TOT'AL 400 |

TRAININIG IN MAROC CHIMIE

im TRAINING IN AN OPERATING PLANT WolId Bank - 8163(2R)

mm FOLLOWI CONSTRUCTION REV 15APR 1974

TOTAL WORK FORCE WILL BE ADJUSTED AS

FOUND NECESSARY AFTER PLANT IS IN OPERATION

ANNEX 7-1Page 1

MOROCCOMAROC-PHOSPHORE PROJECT

CAPITAL COST ESTIMATES (AT END 1973-PRICES)

(In million DH) (In million JS$) Percent

Local Foreign!' Total Local ForeigYLI Total of Total

igineering Services and Licenses - 26.3 26.3 - 6.0 6.0 3.9

jildings and Civil Works 44.9 4 6 49.5 10.1 1.1 11.2 7.2

luipment, Machinery and Materials 5.6 233:7 3 239.3 1.3 52.8 54.1 34.8reight and Insurance 3.2 10.4 13.6 0.7 2.4 3.1 2.0quipment Inspection - 2.2 2.2 - 0.5 0.5 0.3

rection 32.8 15.3 48.1 7.4 3.4 10.8 6.9onstruction Supervision 3.5 12.7 16.2 0.8 2.9 3.7 2.4

ndustrial Tests 0.0 2.5 2.5 0.0 0.6 0.6 0.4tart-Up Supervision 0.9 4.5 5.4 0.2 1.0 1.2 0.8

raining (Ohde Contract) 0.3 1.5 1.8 0.1 0.3 0.4 0.3

TOTAL TURNKEY CONTRACI' 3/ 91.2 313.7 404.9 20.6 71.0- 91.6 59.0

pare Parts - 21.1 21.1 - 4.8 4.8 3.1axes and Registration Fee 4/ 17.5 - 17.5 4.0 - 4.0 2.6

nfrastructure 5/ 16.5 - 16.5 3.7 - 3.7 2.4

re-Operational ExpensesGeneral Project Superv:Lsion 6/ 10.2 1.7 11.9 2.3 0.4 2.7 1.7Training l/ 4.6 1.1 5.7 1.0 0.3 1.3 0.8

Start-Up Expenses 1.8 2.7 4.5 0.4 0.6 1.0 0.6

SUB-TOTAL 141.8 340.3 482.1 32.0 77.1 109.1 70.2

,ontingenciesPrice Escalation 7/ 13.6 61.3 74.9 3.1 13.8 16.9 10.8

Miscellaneous _/ 5.5 21.7 27.2 1.3 4.8 6.1 4.0

SUB-TOTAL 160.9 423.3 584.2 36.4 95.7 132.1 85.0

qorking Capital 72.9 - 72.9 16.5 - 16.5 10.6

TOTAL CAPITAL COST 91 233.8 423.3 657.1 52.9 95.7 148.6 95.6

Interest During Construction 11.2 19.1 30.3 2.5 4.4 6.9 4.4

TOTAL FINANCING REQUIRED 2. 245.0 442.4 687.4 55.4 100.1 155.5 100.0

1/ Including the clearing dollars share of foreign exchange costs.

2/ FOB value.

3/ As signed with Uhde-Siemens-Polimex Consortium.

41 Taxes include Taxe Speciale, Taxe d'acconage and Droit de Timbre, on value of importedequipment. Registration fee amounts to 1.5% fo equity capital.

5/ Portion not included in Turnkey-Contract.

6/ Costs incurred by OCP and the Maroc-Phosphore Company during the project execution phase (including

the cost of the Technical Advisor's services).

7/ Based on the Contract Escalation Formula. The amount of escalation is calculated on the basis of price indexes forcomponents (manpower, steel, copper, an&cement) derived from those prevailing from October 1972 to March 1974 and

extended, as appropriate, over the period specified in the contracts.

8/ Provision for miscellaneous contingencies above Turnkey Contract cost of about 5% on local and 7% on

foreign exchange costs.

9/ Total capital cost and financing required at start-up at 1976 prices.

Industrial Projects DepartmentApril 15, 1974

MOROCCOMAROC-PHOSPHORE PROJECT

INTEREST DURING CONSTRUCTION I'(in million DH)

I.B.R.D. KfW BNDE CommitmentInterest Interest Interest Fee Total

Local Foreign Local Foreign Local Foreign Foreign Local Foreign Total

July-September 1974 0.1 0.7 0.5 0.1 0.2 0.6 0.4 0.8 1.8 2.6

October-December 1974 0.3 1.2 0.7 0.2 0.2 0.6 0.3 1.2 2.3 3.5

January-March 1975 0.4 1.7 1.0 0.3 0.2 0.6 0.3 1.6 2.9 4.5

April-June 1975 0.6 2.5 1.4 0.4 0.2 0.6 0.2 2.2 3.7 5.9

July-September 1975 0.7 2.8 1.6 0.5 0.2 0.6 0.1 2.5 4.0 6.5

October-December 1975 2/ 0.9 3.2 1.8 0.6 0.2 0.6 0.0 2.9 4.4 7.3

TOTAL 3.0 12.1 7.0 2.1 1.2 3.6 1.3 11.2 19.1 30.3

1/ Assumed terms of loans:Guarantee Commitment

Interest Fee Fee Life Grace

IBRD 7-1/4% 1-314% 3/4% 14 years 4 years

KfW 2% 7% 1/4% 14 years 4 years

BNDE 9% - 314% 14 years 4 years

2/ Interest after December 31, 1975 is charged to operations.

m Industrial Projects DepartmentApril 15, 1974

MOROCCO

MAROC-PHOSPHORE PROJECT

Convertible Foreign Exchange Retroactive FinancingUntil Expected Date of Board Presentation (June 197b)

Exchange Rate US$ 1 DM 2.80

Total Disbursement (Turnkey Contract) Financing (Cumulative) in million US$ equivalentin million US$ equivalent Total

Month Date In million DM Monthly (Cumulative;4/ BNDE Bank & KfW Bank (6%) fW (35%)

July, 73 29 6.o 2.2 2.2 2.2 -

September, 29 6.o 2.1 4.3 4.3 -

October, 29 0.1 - 4.3 4.3 -

November, 29 - - 4.3 h.3 -

December, 29 11.3 4.0 8.3 8.0 0.3 0.2 0.1

January, 74 29 - - 8.3 8.0 0.3 0.2 0.1

February, 28 2.3 0.8 9.2 8.0 1.2 0.8 o.4

March, 29 4.5 1.6 10.8 8.o 2.8 1.8 1.0

April, 29 5.7 2.1 12.8 8.0 4.8 3.1 1.7

May, 29 - - 12.8 8.0 4.8 3.1 1.7

35.9 12.8

/ Including payment on date shown. It

Industrial Projects Department lApril 15, 1974

MOROCCO

MAROC-PHOSPHORE PROJECTPHASING OF EXPENDITURES DURING CONSTROCTION

(in million DH)

July-September 1973 October-December 1973 January-March 1974 April-June 1974 July-September 1974 October-December 1974 January-March 1975Local Fureign Total Local Foreign Total Local Foreign Total Local Foreign Total Local Foreign Total Local Foreign Total Local Foreign Total

Turnkey Cootract

Payments 4.2 24.5 28.7 4.2 20.6 24.8 2,1 13.2 15.3 15.0 40.3 55.3 6.7 40.6 47.3 14.6 36.3 50.9 9.2 37.7 46.9

Project Infrastructure - - - 2.2 - 2.2 1.5 - 1.5 3.3 - 3.3 3.0 - 3.0 1.5 - 1.5 2.0 - 2.0

Spare Parts - - - - - - - 0.6 0.6 - - - - - - - - - - 5.6 5.6

Pre-Operating Expensesand Taxes - - - 0.3 0.1 0.4 7.3 0.5 7.8 7.4 0.4 7.8 4.1 0.5 4.6

Contingency & Escalation - - - - - - - - - 0.1 0.3 0.4 0.1 0.3 0.4 4.6 15.0 19.6 0.6 40.8 41.4

Working Capital - - - - - - - - - - - - - - - - - - _ _ -

Interest DuringConstruction - - - - - - - - - - - - 0.8 1.8 2.6 1.2 2.3 3.5 1.6 2.9 4.5

'OTAL FINANCING REQUIRED 4.2 24.5 28.7 6.4 20.6 27.0 3.6 1358 17.4 18.7 40.7 59.4 17.9 43.2 61.1 29.3 54.0 83.3 17.5 87.5 105.0

April-Jose 1975 July-September 1975 October-December 1975 January-March 1976 April-June 1976 July-September 1976 TOTALLocal Foreign Total Local Foreign Total Local Foreign Total Local Foreign Total Local Foreign Total Local Foreign Total Local Foreign Total

Turnkey Contract

Payments 11.3 30.2 41.5 7.0 16.0 23.0 10,0 35.2 45.2 3.2 7.4 10.6 1.0 1.0 2.0 2.7 10.7 13.4 91.2 313.7 404.9

Project Infrastructure 1.5 - 1.5 0.5 - 0.5 1.0 - 1.0 - - - - - - - - - 16.5 - 16.3

Spare Parts - - - - - - - 13.4 13.4 - - - - 1.5 1.5 - - 21.1 21.1

Pre-Operating Expensesand Taxes 4.1 0.3 4.4 5.8 1.4 7.2 2.5 1.5 4.0 0.9 0.3 1.2 1.7 0.5 2.2 - - - 34.1 5.5 39.6

Contingency & Escalation 9.5 2.9 12.4 0.4 1.5 1.9 0.7 21.6 22.3 3.0 0.3 3.3 0.1 0.3 0.4 - - - 19.1 83.0 102.1

Working Capital - - - - - - 52.9 - 52.9 - - - 20.0 - 20.0 - - - 72.9 - 72.9

Interest DuringConstr.ction 2.2 3.7 5.9 2.5 4.0 6.5 2.9 4.4 7.3 - - - - - - - - - 11.2 19.1 30.3

'OTAL FINANCING REQUIRED 28.6 37.1 65.7 16.2 22.9 39.1 70,0 76.1 146.1 7.1 8.0 15.1 22.8 3.3 26.1 2.7 10.7 13.4 245.0 442.4 687.4

ndustrial Projects Department.pril 15, 1974

ANNEX 7-3

MOROCCOMAROC-PHOSPHORE PROJECT

WORKING CAPITAL ESTIMATES(in million DH)

19751/ 1976 1977 TotalInventory

Phosphate Rock: (2 days) 1.1 - - 1.1Sulfur (45 days) 8.8 - - 8.8Ammonia (8 days) 0.6 - - O.6Sulfuric and phosphoric acid in process,consumables 3.0 - - 3.0

Phosphoric Acid (20 days production) 10.6 10.6 - 21.2MAP (30,000 tons) 5.9 5.9 - 11.8

30.0 16.5 - 46.5

Accounts receivables (40 days) - 31.9 20.2 52.1

Cash 5.0 - - 5.0

ss

Accounts Payable (1 month) - 21.5 9.2 30.7

rmanent Working Capital Required 35.0 26.9 11.0 72.9

1975 requirements will be financed directly through working capital provided for inthe capital costs estimates. The finished products for stocks in 1975 result fromthe production during the commissioning period.

.dustrial Projects Departmentril 15, 1974

MOROCCOMAROC-PHOSPHORE PROJECT

FINANCING PLAN - EQUITY SUBSCRIPTION AND LOAN WITHDRAWAL SCHEDULE

(in million DH)

Capital Costs Financial PlanForeign Equity Loans

Clearing Convertible Clearing ConvertibleLocal Currency Currency Total Local Currency _Currency Total IBRD KfW BNDE Total

July- September 1973 4.2 5.6 18.9 28.7 4.2 5.6 18.9 28.7 - - - _

October - December 1973 6.4 2.8 17.8 27.0 6.4 2.8 17.8 27.0 - - - -

January - March 1974 3.6 2.9 10.9 17.4 3.6 2.9 10.9 17.4 - - - -

April - June 1974 18.7 7.0 33.7 59.4 18.7 7.0 33.7 59.4 - - - -

July - September 1974 17.9 5.8 37.4 61.1 17.9 5.8 (79.9)1/ ( 56.2) 53.4 28.6 35.3 117.3

October - December 1974 29.3 4.3 49.7 83.3 29.3 4.3 1.3 34.9 31.6 16.8 - 48.4

January - March 1975 17.5 5.7 81.8 105.0 17.5 5.7 1.5 24.7 52.3 28.0 - 80.3

April - June 1975 28.6 2.2 34.9 65.7 28.6 2.2 1.4 32.2 21.8 11.7 - 33.5

July - September 1975 16.2 1.4 21.5 39.1 16.2 1.4 2.5 20.1 12.4 6.6 - 19.0

October - December 1975 70.0 4.0 72.1 146.1 70.0 4.0 2.6 76.6 45.1 24.4 - 69.5

January - March 1976 7.1 1.5 6.5 15.1 7.1 1.5 0.3 8.9 4.0 2.2 - 6.2

April - June 1976 22.8 1.8 1.5 26.1 22.8 1.8 0.9 25.5 0.4 0.2 - 0.6

July - September 1976 2.7 10.7 - 13.4 2.7 10.7 - 13.4 - - - -

245.0 55.7 386.7 687.4 245.0 55.7 11.9 312.6 221.0 118.5 35.3 374.8

In US$ Equivalent 55.4 12.6 87.5 155.5 55.4 12.6 2.7 70.7 50.0 26.8 8.0 84.8

1/ Due to retroactive financing until effectiveness of loans; advance payments will be made by OCP.

Industrial Projects DepartmentApril 15, 1974

ANNEX 8-1

MOROCCOMAROC-PHOSPEIORE PROJECT

Operating Costs Estimates (at Full Capacity) 1/(at 1976 prices)

Unit CostAnnual Cif or Fob Total Reimbursable Non Reimbursable

iUnit Quantities (excl. reimbursable Taxes) (excl. reimusable Taxes) Taxes- TaxesD million PO./year million DR/yr. million DH/yr.

Production

Phosphoric Acid 000 T of P2 05 371.3 $/T 210.0DH/T 928.2

MAP 11-55-0 000 T of Product 225.8 $/T 150.0DH/T 663.0

Raw Material

Phosphate Rock 2/ 000 T of Product 1,622.8 115.8/T 187.9 26.2 -

Sulphur 481.1 141.8/T 64.9 13.9 3.5

Amjonia 30.8 486.2/T 15.0 6.6 1.2Sub-Total 267.8 46.7 4.7

Utilities

Water (Port) 000 s3

30.0 0.85/m3

0.0

Water (Plant) 5,000.0 0.027/m3

0.1

Fuel Oil T 2,080.0 240/1T 0.5

Elect. Purchased at Plant (000 Kwh 23,000 0.096/rwh 2.2

Elect. Purchased at Port 1,000 0.17/Kwh 0.23.0

Chemicals

Various Various 8.7 2.8 0.5

Transport and Handling- 8.0 0.2 -

Fixed Charges

PersonnelManagement/Supervisory 4.4 - -

Skilled 4.1 - -

Unskilled 1.6 - -

Maintenance Materials- 25.0 - 5.8

Insurance-/ 2.7 - -

Marketing 0.8 - -

Research 1.0 - -

headquarters 1.0 - -

Local TaxesY6 8.4 - 8.4

Sub-Total 49.5 - 14.2Expert Tax (0.511) 2.5 - 2.5

TOTAL COSTS 339.0 49.7 21.9

1/ Total Phosphoric Acid plaint capacity will be 1,500T/day of P 2 05 or 495,OOOT/year. The MAP capacity will be able tL convert 670¶day of P 2 05 intoMAP; but on a yearly average only 25% or 375T/day of the P205 produced as Acid will be converted into MAP. Taxes are shown separately sincesome taxes on operating snaterials are reimbursed.

2/ Price em mine DR 110.0/tonand transport DH 5.8/ton

DH 115.8/ton3/ Inland Transport and Har.dling of Raw Materials and Finished Products. 4/ CIF Price 15.5

+ escalation of 247. 3.719.2

+ 307, non-reimabursableimport duties 5.8

25.0_/ 0.5% of plant value.ElPcalTaxes-Year 1 2 3 4 5 6-12

Patents… … … … … …- - 2.8Urban Tax - - - 3.5 3.5 3.5Municipal Tax 2.1 2.1 2.1 2.1 2.1 2.1

2.1 2.1 2.1 5.6 5.6 8.4

Industrial Projects DepartUentApril 15, 1974

MOROCCOMAROC-PHOSPHORE PROJECT

Projected Income Statements (at 1976 Prices)(in million DH)

6 monthsFiscal Years Endina December 31 19761= 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988

ProductionCapacity Utilization in % 65 85 95 100 100 100 100 100 100 100 100 100 100Phosphoric Acid in tons of P205 194,400 315,560 352,690 371,250 371,250 371,250 371,250 371,250 371,250 371,250 371,250 371,250 185,625MAP in tons 118,220 193,230 214,490 225,780 225,780 225,780 225,780 225,780 225,780 225,780 225,780 225,780 112,890

Sales VolumePhosphoric Acid in tons of P205 183,400 315,560 352,690 371,250 371,250 371,250 371,250 371,250 371,250 371,250 371,250 371,250 185,625MAP in tons 103,220 193,230 214,490 225,780 225,780 225,780 225,780 225,780 225,780 225,780 225,780 225,780 112,890

Sales RevenuePhosphoric Acid at $210/ton t 170 293 327 345 345 345 345 345 345 345 345 345 173MAP at $150/ton 68 128 142 150 150 150 150 150 150 150 150 150 75Other Revenues 11 2 3 3 3 3 3 3 3 3 3 3 2

249 423 472 498 498 498 498 498 498 498 498 498 250Changes in Stock 17 - - - - - - - - - - - -

Variable CostsPhosphate Rock 99 160 179 188 188 188 188 188 188 188 188 188 94Sulphur 34 55 62 65 65 65 65 65 65 65 65 65 32Ammonia 8 13 14 15 15 15 15 15 15 15 15 15 8Utilities and Chemicals 6 10 11 12 12 12 12 12 12 12 12 12 6FPreight and Handling 4 7 8 8 8 8 8 8 8 8 8 8 4

t 151 245 274 288 288 288 288 288 288 288 288 288 144

pperating CostsPersonnel 10 10 10 10 10 10 10 10 10 10 10 10 5Maintenance Materials 25 25 25 25 25 25 25 25 25 25 25 25 12Insurance 3 3 3 3 3 3 3 3 3 3 3 3 2Marketing and Research 2 2 2 2 2 2 2 2 2 2 2 2 1Headquarters 1 1 1 1 1 1 1 1 1 1 1 1 1Export and Local Taxes 5 5 5 8 8 11 11 11 11 11 11 11 5

46 46 46 49 49 52 52 52 52 52 52 52 26)perating Profit 69 132 152 161 161 158 158 158 158 158 158 158 79Less: Interest on Long-Term Debt 34 34 33 31 28 25 22 19 15 12 8 4 1Depreciation 45 49 49 49 49 49 49 49 49 49 49 49 31

iet Income Before Taxes (10) 49 70 81 84 84 87 90 94 97 101 105 47Taxes on Income _ - - - - - - - - - 48 50 22

{et Income After Taxes (10) 49 70 81 84 84 87 90 94 97 53 55 25

J One third of production facilities will start commercial operations only in August, 1976.

:ndustrial Projects Department,pril 15, 1974

MOROCCO

MAROC-PHOSPHORE PROJECT

PROJECTED CASH FLOW STATEMENTS(in million DH)

6 monthsiscal Years Ending December 31 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988

OllRCES

Net Income before Interest on Long-Term Debt and Taxes on income - - - 24 83 103 112 112 109 109 109 109 109 109 109 55

Depreciation - - - 45 49 49 49 49 49 49 49 49 49 49 49 24

Subtotal - _ _ 69 132 152 161 161 158 158 158 158 158 158 158 79

Increase in Accounts Payable - - - 22 9 - - - - - - - - - - -

Long-Term Debt:-IBRD - 85 132 4 - - - - - - - - - - - -

-KfW - 45 70 3 -

- B N D E - 3 5 - - - - _ - - - - - - - - -

Subtotal - 165 202 7 -Equity 56 56 154 48 - - - - - - - - - - _ _

TOTAL 56 221 356 146 141 152 161 161 158 158 158 158 158 158 158 79

PPLICATIONS

Receivables - - - 32 20 - - - - - - - - - - -Tax Advances - - - 46 4 -Inventories - - 30 17 - - - - - - - - - - - -

Fixed Assets 56 221 303 35 2 2 2 2 2 2 2 2 2 2 2 2

Interest on Long-Term Debt:-IBRD - - - 20 20 20 19 17 15 14 12 10 8 5 3 1

-KfW - - - 11 11 10 9 9 8 6 5 4 3 2 1 0

-BNDE - - - 3 3 3 3 2 2 2 2 1 1 1 0 0

Subtotal _ - _ 34 34 33 31 28 25 22 19 15 12 8 4 1

Repayment Long-Term Debt:-IBRD - - - - - 8 16 17 19 20 22 23 25 27 29 15

-KfW - - - - - 6 12 12 12 12 12 12 12 12 12 6

-BNDE 1 3 3 3 3 3 4 4 4 4 2

Subtotal - - - - - 15 31 32 34 35 37 39 41 43 45 23

Taxes on Income - - - - - - - - - - - - - 48 50 22

TOTAL 56 221 333 164 60 50 64 62 61 59 58 56 55 101 101 48= = _ = =_ _ _ =

Annual Cash Generation - - 23 (18) 8i 102 97 99 97 99 100 102 103 57 57 31

Accumulated Cash - - 23 5 86 188 285 384 481 580 680 782 885 942 999 1,030

Debt Service Coverage - - - 2.0 3.9 3.2 2.6 2.7 2.7 2.8 2.8 2.9 3.0 3.1 3.2 3.3

0,

adustrial Projects Department

?ril 15, 1974

MOROCCOMAROC-PHOSPHORE PROJECT

PROJECTED BALANCE SHEETS(in million DH)

Fiscal Years Ending December 31 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988

ASSETS

Current Assets

Cash 23 5 5 5 5 5 5 5 5 5 5 5 5 5Receivables - 32 52 52 52 52 52 52 52 52 52 52 52 52Tax Advances - 46 50 50 50 50 50 50 50 50 50 50 50 50Inventories 30 47 47 47 47 47 47 47 47 47 47 47 47 47

Subtotal 53 130 154 154 154 154 154 154 154 154 154 154 154 154

Surplus Cash Accumulated - - 81 183 280 379 476 575 675 777 880 937 994 1,025

Fixed Assets

Gross Fixed Assets 580 615 617 619 621 623 625 627 629 631 633 635 637 639Depreciation - 45 94 143 192 241 290 339 388 437 486 535 584 615

Net Fixed Assets 580 570 523 476 429 382 335 288 241 194 147 100 53 24

TOTAL 633 700 758 813 863 915 965 1,017 1,070 1,125 1,181 1,191 1,201 1,203

LIABILITIES AND CAPITAL

Current Liabilities

Accounts Payable - 22 31 31 31 31 31 31 31 31 31 31 31 31Current Portion of Long-Term Debt - - 15 31 32 34 35 37 39 41 43 45 23 -

Subtotal - 22 46 62 63 65 66 68 70 72 74 76 54 31

Long-Term Debt

IBRD 217 221 221 213 197 180 161 141 119 96 71 44 15 -KfW 116 119 119 113 101 89 77 65 54 42 30 18 6 -BNDE 35 35 35 34 31 28 25 22 18 14 10 6 2 -

Subtotal 368 375 375 360 329 297 263 228 191 152 111 68 23 -Less: Current Portion - - 15 31 32 34 35 37 39 41 43 45 23 -

Subtotal 368 375 360 329 297 263 228 191 152 111 68 23 - -

Capital

Equity 265 313 313 313 313 313 313 313 313 313 313 313 313 313Retained Earnings (Losses) - ( 10) 39 109 190 274 358 445 535 629 726 779 834 859

Subtotal 265 303 352 422 503 587 671 758 848 942 1,039 1,092 1,147 1,172

TOTAL 633 700 758 813 863 915 965 1,017 1,070 1,125 1,181 1,191 1,201 1,203 00

Current Ratio - 6.0 3.3 2.5 2.4 2.4 2.3 2.3 2.2 2.1 2.1 2.0 2.9 5.0Net Long-Term Debt/Equity Ratio 58:42 55:45 51:49 44:56 37:63 31:69 25:75 20:80 15:85 11:89 6:94 2:98 - -

Industrial Projects DepartmentApril 15, 1974

MROCCOMAROC-PHOSPHORE PROJECT

SCHEDULE OF REPAYMENTS AND INTEREST ON LOW-TERM DEBT(in million DH)

I.B.R.D. KfW BNDE TotalOutstanding Repayments Outstanding Repayments Outstanding OutstandingAmount February/ Amount June/ Amount Amount

Year End of Year August Interest End of year December Interest End of year Repayments Interest End of Year Repayments Interest

1976 221.0 - 19.9 118.5 - 10.7 35.3 - 3.2 374.9 _ 33.8

1977 221.0 - 19.9 118.5 - 10.7 35.3 - 3.2 374.9 - 33.8

1978 213.3 7.7 19.5 112.6 5.9 10.4 33.7 1.6 3.1 359.6 15.3 33.0

1979 197.0 16.3 18.5 100.8 11.8 9.6 30.7 3.0 2.9 328.5 31.1 31.0

1980 179.6 17.4 16.9 88.9 11.9 8.5 27.6 3.1 2.6 296.1 32.4 28.0

1981 160.9 18.7 15.3 77.1 11.8 7.5 24.5 3.1 2.3 262.5 33.6 25.1

1982 140.8 20.1 13.6 65.2 11.9 6.4 21.2 3.3 2.1 227.2 35.3 22.1

1983 119.2 21.6 11.7 53.4 11.8 5.3 17.8 3.4 1.8 190.4 36.8 18.8

1984 95.9 23.3 9.7 41.5 11.9 4.3 14.2 3.6 1.4 151.6 38.8 15.4

1985 70.9 25.0 7.5 29.7 11.8 3.2 10.4 3.8 1.1 111.0 40.6 11.8

1986 44.1 26.8 5.2 17.8 11.9 2.1 6.4 4.0 0.8 68.3 42.7 8.1

1987 15.1 29.0 2.7 5.9 11.9 1.1 2.1 4.3 0.4 23.1 45.2 4.2

1988 - 15.1 0.7 - 5.9 0.3 - 2.1 0.1 - 23.1 1.1

Industrial Projects DepartmentApril 15, 1974

MOROCCOMAROC - PHOSPHORE PROJECT

FINANCIAL BREAK-EVEN CHART

100

80

z 6C 0 PROFIT BREAK-EVEN PRODUCTION0

CASH BREAK-EVEN PRODUCTION wm~ w

tL 1L11 1 r 4 0 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.. _

20

1976 1978 1980 1982 1984 1986 1988

FISCAL YEARS ENDING DECEMBER 31

World Bank-8113 (2RX

Industrial Projects DepartmentApril 15, 1974

M1ROCCO

MAROC-PHOSPHORE PROJECT

FINANCIAL RETURN CALCULATIONS(in million DH)

1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988

Revenues - - - 249 423 472 498 498 498 498 498 498 498 498 498 250

Costs

Capital Costs 56 209 286 33 2 2 2 2 2 2 2 2 2 2 2 ( 58)

Working Capital - - 53 20 - - - - - - - - - - - ( 73)

Operating Costs - - - 180 291 320 337 337 340 340 340 340 340 340 340 170

Taxes on Income - - - - - - - - - - - - - 48 50 22

56 209 339 233 293 322 339 339 342 342 342 342 342 390 392 61

Net Benefits ( 56) (209) (339) 16 130 150 159 159 156 156 156 156 156 108 106 189F c R o t ( r e i_1

Financial Rate of Return (after taxes on income): 16.97

Financial Rate of Return (before taxes on income): 17.4%~

Industrial Projects DepartmentApril 15, 1974

e 1

(D

ANNEX 8-7Page 2

MOROCCO

MAROC-PHOSPHORE PROJECT

FINANCIAL RATES OF RETURN AND SENSITIVITY ANALYISI /

Financial Rate of Return

Base Return

(US$210 per ton of P205 for acid and US$150/ton of MAP) 16.9%

Sensitivity Analysis using Base Return

Revenuesup 5% 20.0%up 10% 22.8%down 5% 13.8%down 10% 11.2%

Phosphate Rock Price(Base price US$2 =.O/ton delivered plant)up US$2 15.2%down US$2 18.6%

Sulphur Price(Base price US$32/ton C&F Safi)up US$8 14.7%

Investment Costs

up 10% 15.3%

.~ ~~53

1/ Rates of Return are after taxes on income. Since the project isexport oriented, it benefits from a 10 year income tax holiday;therefore there is only a 0.5% difference in the rate of returnbefore and after taxes for the base case.

Industrial Projects DepartmentApril 15, 1974

MOROCCOMAROC - PHOSPHORE PROJECT

FINANCIAL RETURN SENSITIVITIES (AFTER TAXES)TO DIFFERENT PRICES

251

20

z

0

-10% -5% +5% +10%(US$189.00) (US$199.50) BASE PRICE (US$220.50) (US$231.00)

(PHOSPHORIC ACID US $210 per ton of P2 0 5 fob)

CHANGE OF PRICE iOF PHOSPHATE ROCK (US$30.20) (US$28.20) (US$24.20) US$22.20) tRLUSED AS RAW MATERIAL BASE PRICE Oq

(PHOSPHATE ROCK US$26.20 per ton DELIVERED PLANT)

World Bank-8112 12R)Industrial Projects DepartmentApril 15, 1974

MOROCCOMAROC-PHOSPHORE PROJECT

Economic Rate of Return: Investment Costs(million DH)

Items Market Prices Accounting Total AppliedValue of Local Economic Ratio to

Lvcal Foreign Total Expenditures Cost Local Cost (%)

Engineering Services and Licenses - 26.3 26.3 - 26.3 -Building and Civil Works 44.9 4.6 49.5 40.4 45.0 90Equipment, Machinery and Materials 5.6 233.7 239.3 2.9 236.6 93Freight and Insurance 3.2 10.4 13.6 2.5 12.9 a/Inspection of Equipment - 2.2 2.2 - 2.2 -Erection 32.8 15.3 48.1 29.3 44.6 89.5Construction Supervision 3.5 12.7 16.2 2.6 15.3 75Industrial Tests 0.0 2.5 2.5 0.0 2.5 -Start-up Supervision 0.9 4.5 5.4 0.7 5.2 75

Total Installed Plant Cost 90.9 312.2 403.1 78.4 390.6

Project Infrastructure 16.5 - 16.5 13.9 13.9 84Spare Parts - 21.1 21.1 - 21.1 -Taxes and Registration Fee 17.5 - 17.5 - - -General Project Supervision 10.2 1.7 11.9 9.2 10.9 90Training 4.9 2.6 7.5 3.4 6.0 70Start-up Expenses 1.8 2.7 4.5 1.5 4.2 85Price Escalation 13.6 61.3 74.9 9.8b/ 71.1 72Miscellaneous Contingency 5.5 21.7 27.2 4.l.I/ 25.8 75Interest during Construction 11.2 19.1 30.3 - - -

Total Project Cost 172.1 442.4 614.5 120.3 543.6

a/ 81% for local transport and 50% for insurance.b/ Based on the average of total installed plant cost nipis taxes and registration fees.c/ Based on the average for all items above.

Industrial Projects Department dApril 15, 1974 m

MOROCCO ANNEX 9-1NAROC-PHOSPHORE PROJECT page 2

CALCULATION OF THE PART OF DIRHAM EXPENSES ENTERINGINTO THE ECONOMIC COST

Breakdown of Percentage applicableLocal Costs in % for Economic Costi./

1. Buildings and Civil Wbrks:- Cement 30% 30%- Reinforcing bars 15% 15%- Scaffolding 10% 10%- Skilled labor 15% 15%- Unskilled labor 20% 15%- Profit and supervision 10% 5%

100 75%

2. Local Manufactured Equipment- Materials 60% 60%- Scilled labor 12% 12%- Unskilled labor 8% 6%- Profit and supervision 20% 15%

100o 93%

3. Local Transport of Equipment- Use of equipment (repair,depreciation,etc)35% 30%- Fuel 15% 13%- Skilled labor 15% 15%- Unskilled labor 20% 15%- Profit and supervision 15% 8%

1,00 B1%

41. Erection- Use of equipment 30% 30%- Consumables 10% 10%- Utilities 5% 2%- Skilled labor 30% 30%- Unskilled labor 10% 7.5%- Profit and supervision 15% 1 o

100 -89.5%(Profit and supervision under (1) to (4) refer to the local subcontractors)

5. Construction Supervision- Local clerical assistance 20% 15%- Housing 20% 10%- Local consumption of foreign super-

visory personnel 60% 50%100 Ts

6. Start-up Supervision- As for (5) 75%

7. General Project SupervisionCovers local costs incurred by OCP and local expenditures of Foreign Supervisory

Personnel (Topsoe)

1/ The socio-economic indicators were derived on the basis of: (i) broad estimatesprepared and direct enquiries made by Topsoe for cost components for major itemslike building and civil works or erection; (ii) general discussions with Govern-ment Agencies on shadow prices for key activities in Morocco; and (iii) reviewof some itemized accounts for specific activities like railroad transport and utilities.

Industrial Projects DepartmentApril 15, 1974

MAROC-PHOSPHORE PROJECT

Economic Rate of Return: Basic Case Operating Costs (1976 Prices)

One Year Operating Costs at 1007. Capacity

Market Prices World Prices

Annual Unit Price Total Cost in Unit Price or Factor Total Cost in

Quantities in DH million DH/yr Ratio in DH or % million DH/yr

1. Raw MaLerialsPhosphate Rock (ex-Mine) 1,622,800 tons 110.0/ton 178.5 110.0 DH per ton 178.5

Rock transport 1,622,800 tons 6.0/ton 9.7 81% 7.9

Sulfur 481,100 tons 141.8/ton a/ 68.2 95% 64.7

Ammonia 30,800 tons 486.2/ton a/ 15.0 92% 13.8

Sub-total: 271.4 264.9

2. UtilitiesWater (plant) 5,000,000 m

3 0 027/mr3 0.1 - _

Water (port) 30,000 m3 0.85 /m3 0.0 b

Fuel Oil 2,080 tons 240/ton 0.5 85%7 0.4

Electricity (plant) 23,000,000 kwh 0.096/kwh 2.2 85%7 1.9

Electricity (port) 1,000,000 kwh 0.17 /kwh 0.2 85% 0.1

3. ChemicalsTotal imported (various) - - 8.2 100. 8.2

4. Transport and Handling c

Sub-total: - - 8.0 - 6.5

5. Fixed ChargesPersonnel - Management 4.4 100% 4.4

- Skilled 4.1 1007. 4.1

- Unskilled 1.6 757. 1.2

Maintenance materials 25.0 - 19.34

Insurance 2.7 507. 1.4

Marketing 0.8 1007 0.8

Research 1.0 100% 1.0

Headquarters 1.0 80% 0.8

Sub-total: 40.6 33.0

6. Export Tax - -

T.Lrol T-ax

GRAND TOTAL: 331.2 315.0

a/ Including port charges.b/ See footnote Annex 9-1 page 2.c/ See Annex 9-2 page 2. m

d/ Excluding 30% duties and TPS on spare parts, which are included in the cost at market prices. xI',

Industrial Projects DepartmentApril 15, 1974

ANNEX 9-2Page 2

MOROCCOMAROC-PHOSPHORE PROJECT

ECONOMIC RATE OF RETURN: TRANSPORT AND HANDLING(in 000 DH)

Market Cost Factor-/ Economic Cost

Port Fees (Acconage)Sulfur 481,100 t at 3.60 DH/t 1,732.0 80% 1,385.6Acid 687,600 t at 0.01 DH/t 6.9 - -

MAP 225,800 t at 0.01 DH/t 2.3 - -

Transport ONCFSulfur 481,100 t at 2.005 DH/t 964.6 81% 781.3Acid 687,600 t at 2.271 DH/t 1,561.5 81% 1,264.8MAP 225,800 t at 2.005 DH/t 452.7 81% 366.7

Transport Amnonia30,800 t at 15 DH/t 462.0 80% 369.6

Transit MAP )225,900 t at 7 DH/t )

)) 2,146.1 80% 1,716.9

Loading of MAP225,900 t at 2.5 DH/t )

7,328.1 5,884.9

Price Escalationk' 732.8 588.5

TOTAL 8,060.9 6,473.4

a/ See footnote Annex 9-1 page 2.

b/ Tc convert 1973 to 1976 prices.

Industrial Projects DepartmentApril 15, 1974

MIUKA(.WMAROC-PHOSPHORE PROJECT

Calculation of the Economic Rate of Return (1976 Prices)(in million DR)

July to Jan. toDec.1973 1974 1975 1976 1977 1978 1979 1980-87 June 1988 ERR

Social BenefitsAcid Sales at US$210.0/ton of P205 170 293 327 345 345 173MAP Sales at US$150.0/ton 68 128 142 150 150 75Other P.evenues 11 2 3 3 3 2Recovery Working Capital - - - - 70

Total Benefits: 249 423 472 498 498 320

Social CostsFixed Investment Cost 52 195 266 31 (54)Working Capital1 / 51 19Operating Costs

-variable costs2/ 145 235 262 276 276 138-transport and handling 3 6 6 6 6 3-fixed cost 33 33 33 33 33 17

Total Costs: 52 195 317 231 274 301 315 315 158

Net Social Benefits and ERRScrap value estimated at 54.0 million DH (52) (195) (317) 18 149 171 183 183 216 21.2%

l/ Working capital assumed to have same usage breakdown as operating costs.2/ Assumes rock economic price at DH 110.00/ton ex-Mine (or US$24.90/ton) and Sulfur price at US$32/ton C&F Safi.

Economic Rate of Return: Sensitivity Analysis

Net Social Benefits under different assumptions1. Acid Sales at US$220.5/ton of P20s and

MAP sales at US$157.5/ton (equivalentto 5% increase). (52) (195) (317) 30 170 195 208 208 229 24.1%

2. Acid Sales at US$199.5/ton of P205 andMAP sales at US$142.5/ton (equivalentto 5% decrease). (52) (195) (317) 6 128 147 158 158 203 18.2%

3. Acid Sales at US$189.0/ton of P205 andMAP sales at US$135.0/ton (equivalentLo iO% decrcase). (52) (195) (317) (6) 107 123 133 133 190 14.9%

4. Phosphate Rock at DR 103.4/ton (US$23.40/ton) (52) (195) (317) 24 158 181 194 194 221 22.5%

5. Sulfur at US$40/ton C&F Safi (52) (195) (317) 9 135 155 167 167 208 19.2%

Industrial Projects DepartmentApril 15, 1974

TANGIER

Asiah

MOROCCO

MAROC PHOSPHORE PROJECT / Kscr ElKebi35r

PORTS, RAILROADS AND PHOSPHATE ROCK DEPOSITS / kArb.usa

4. Ports | RAB a

Railroods Skhit

Phosphate Rock Deposits C 'in Se'ba

Bouskouro

a o ~~~~~~/ } ~~~~Noucxsseur\ a / ~~~~Sidi El A'idi KRasE IAin AvwAmor5

0 50 100 150 200 Ouu d Zem

I I I s i i | I | / Mechra Ben Abbou KHOURIBGA

KILOMETERS e Re t

SAFI

YOUSSOUFtA Benguerir/AREA SHOWN IN NSET

MARRAKECH

PROJECT WORK SHOWN IN RED The b-andar-es showA- thits map do sof!

OTHER NEW WORK SHOWN IN GREEN /op!,p -vdorse-m-t or a-cepta,,-e hr the

C ~~~~~~~~~~~~~~Wsrld Ba-k asodft-affi1iat,,

O /ii

SPAIN)\.d,fet--;rn-itan |

W \ Oceatn ( )';

, AR S;AFI Haste Reservoir ~ ~~ore~osos:c~ro 30~ Atlatic MjA L G E R I A

v 4 Ft,@,j-- -~~~~~ ~ ~~~~~~~~~~~30 ' \<

/9 ̂ \,i ~~~~~~~S Mborekbou Guedra J i >

MAROC M A LI NI G E R .CHAD_

PHOSPHORE aute

4 ,

IBRD 10727R

35° 100 TANGIER 5° The bouddaies shown on this map do not FEBRUARY 1974

imply endorsement or acceptance bv theWorld Bank and its affiliates.

A tl/anti/c RA

CAABLANCA ,0'

Ocean

PROJECTAE /

1 ARRAKECH 0 vz

/ ~~ j. 8 \03°-o 30'-~~~~~

C) ci7

0' UNLOADING SHED

SAHARA 5 S.'

7 GARE HAUTE /

/ /-> t.(Q

MOROCCO

MAROC-PHOSPHORE PROJECT /' /GENERAL LAYOUT /

STORAGE

I ----- i-Railroads

Conveyors h\

- - - Plant Boundaries /

Roacls /(/---------- Provisions for Expansion

Map is not drown to scale except inset.

Project shown in red

Sidings by ON.C.F shown in green

__ z0

i MAROC -FllOSPHORE F LIRATION l

ANC P.JMPING| I

OF RAW WATER|

i To SAFE PUMPING STATIONS A c/ n tic O c e a n

MOROCCOMAROC -PHOSPHORE PROJECT

PORT OF SAFI

OSPH R C STORAGE AND HANDLING FACILITIES

CON VEYORS---f-RAILROADS

\TRY CIZANEPROJEC SHOWN IN RED

ISOm. EHADDTTONAL PHOSPHATE oERTH MMMRA NR SAccess Channel to - t0.00 M.rnimu. (NOt inctvded in p,ciect I GRAJtN SILO VBASIN 2 24 4 / T..At RA t{

0 C., ~ ~ xf140 A

AGAISIE ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.'IHIG P R

0 I~~~~~~~~~~~~~~~~~~~~~~~AI

POR T UF sAL) oP hA I

tua NGX,11V

0, TANCEC A R

CAALAWA RABAT OFES I I 20 30 40 P AHAR AAARRAKCH

MT R r

SAHARA 1i WfPMd AP Rkd ft #fdffl .

_