India-based Shree Basaveshwar Sugars Limited (SBSL) has signed an agreement to build a SR1.5-billion ($400 million) sugar refinery in Jazan Industrial City in southern Saudi Arabia, a report said.

The project will be located on an area of 200,000 sq m of land and will feature loading and unloading facilities and about 400 skilled and semi-skilled workers, added the report in Gulf Base.

“The finished product of refined sugar will meet the needs of the local market and be exported to the nearby counties, if necessary,” Dilip Desai, executive director of SBSL, was quoted as saying in the report.

The raw sugar refinery project will be established with the cooperation of Gammon Group, which is developing the SR75-billion ($20 billion) Jazan Industrial City, he added, noting that the project will be ready for commercial production in 18 months.

Desai explained that the cost of the project will include price 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 per cent in gross profit and 12 to 14 per cent in net profit with a debt service coverage ratio of about 2.5 to 2.7 and break-even analysis of 65 to 70 per cent,” Desai said.

The entire project for a plant having a production capacity of 3,500 TCD (tonnes crushed per day) including cogeneration and distillery unit would require an investment of SR235 million ($62.6 million), the report said.

The payback period is around four to 4.5 years and the initial rate of return is 28 per cent, Desai was quoted as saying.

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 ($33 million) after taxes, the report said, highlighting that the Saudi government offers loans worth 75 per cent of the project cost for companies investing in the Jazan city.