Prince Turki bin Mohammed bin Nasser, chief promoter of Jazan Industrial City, has signed an agreement with Shree Basaveshwar Sugars Ltd. (SBSL) of India to establish an SR1.5 billion ($400 million) sugar refinery project in the new industrial city located south of the Kingdom.
Dilip Desai, executive director of SBSL, signed the agreement on behalf of M.B. Patil, president of the company, who is currently the minister of water resources in the government of Karnataka. The project will be completed for commercial production in 18 months.
The signing ceremony in Jazan was attended by Sheikh Rafik Mohammed, chairman of Gammon Group, which is developing the SR75 billion new industrial city, which will have various manufacturing projects required by the Kingdom, including pharmaceuticals and food industries.
The sugar refinery project will require 200,000 square meters of land, loading and unloading facilities and about 400 skilled and semiskilled workers. The Saudi government offers loans worth 75 percent of the project cost for companies investing in the Jazan city.
Speaking to Arab News after the signing ceremony, Desai emphasized his company's plan to set up a sophisticated and highly energy efficient Raw Sugar Refinery Project in the Kingdom with active cooperation of Gammon and other agencies.
"The finished product of refined sugar will meet the needs of the local market and be exported to the nearby counties if necessary," he said. While designing the plant, the project team will take all the care and caution necessary to make it environmental friendly, he added.
Speaking about the company's entrepreneurs, Desai said they are highly experienced in various fields spanning education, industry, multispecialty hospitals, agriculture, administration and social work. "Their vast and rich experience will be utilized in the new venture to make it a big success," he added.
He said the cost of the project will include prices of land, equipment, buildings, steel structures, essential services, laboratories, workshops, warehouses for storing raw materials and finished materials, liquid storage tanks and molasses tanks.
"The financial workings of the project give a projected figure of about 25 to 28 percent in gross profit and 12 to 14 percent in net profit with a debt service coverage ratio of about 2.5 to 2.7 and break even analysis of 65 to 70 percent," Desai said.
The entire project for a plant having a production capacity of 3,500 TCD including cogeneration and distillery unit would require an investment of SR235 million. The payback period is around 4 to 4.5 years and the initial rate of return is 28 percent, Desai explained.
Calculated on a 10 year basis, all the three units (sugar, power and distillery) put together, the plant earns an average annual profit of SR124 million after deducting taxes.
Gammon chief Mohammed said there are good prospects for a sugar refinery in Jazan, adding that its products could be marketed inside the Kingdom and neighboring countries.