Photo of Amr Basset, Fertiglobe.

Amr Basset

Group Treasurer

Established in 2019, Fertiglobe is the world’s largest export-focused nitrogen fertiliser platform and the largest producer in MENA with a combined co-production capacity of 6.5 million tons of urea and merchant ammonia. Headquartered in Abu Dhabi, Fertiglobe is a strategic partnership between OCI NV and ADNOC.

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Multi-bank cash concentration solution works for Fertiglobe in the UAE and beyond

The challenge

In 2020, Fertiglobe began looking for a global bank to support its treasury transformation journey. With multiple banking relationships throughout the region, an important objective for the company was to centralise the cash balances of operating and trading entities into a single primary bank account each day. As part of the firm’s growth strategy, its primary goals were to: streamline and automate operations with a single global channel; improve self-funding and interest rate optimisation and gain greater visibility and control over liquidity.

The solution

Based on OCI NV’s more than ten-year relationship with HSBC, Fertiglobe chose the bank as their global banking partner. The bank recommended its liquidity management solution to help optimise liquidity and working capital management by eliminating idle cash balances to minimise the use of working capital facilities between several of Fertiglobe’s production and trading entities. This involved implementing the market’s first multi-bank cash concentration scheme, which automates cross-bank funds transfers globally, regionally, and domestically.

Using the SWIFT network, the solution pulls and returns funds under the cash concentration structure automatically each day, including those with accounts at Fertiglobe’s chosen bank as well as third-party banks, ultimately centralising funds to the main holding account.

Best practice and innovation

With this structure, Fertiglobe has successfully automated various daily activities to concentrate funds into the master account:

• Their third-party bank sends daily MT940/MT942 SWIFT messages on the cash concentration structure header account, which indicates whether accounts are in credit or debit.
• Upon receipt of MT940/MT942 messages, the multi-bank cash concentration scheme calculates a sweep amount based on whether accounts are in shortfall or surplus.
• A surplus balance in a third-party account triggers a ‘request for transfer’ SWIFT MT101 message, which is sent to the third-party bank to pull balances (USD-zero balance account (ZBA) and AED-target balance account (TBA) into Fertiglobe’s master/lead account (AED and USD).
• Funds are distributed back to the source account the following day – swept back to Fertigobe’s operating accounts or via a reverse sweep to the third-party bank via a SWIFT MT103 message.
• Interest earned by each participating entity is also reconciled in the solution.

This is supported by a daily overdraft group limit that allows payment processing at the subsidiary level before reverse sweeps are processed.

Key benefits

• Cost savings.
• Process efficiencies.
• Manual intervention reduced.

With this automated liquidity structure Fertiglobe has successfully achieved its objectives. By centralising liquidity into a single account, the firm can manage liquidity more efficiently with more visibility and control. This includes:

1. Minimising idle balances with daily cash concentration.
2. Lowering the cost of borrowing by self-funding and eliminating the need to use overdraft facilities.
3. Reducing time and resources needed to manage liquidity in multiple accounts and oversee borrowing/overdraft facilities.

By adopting this innovative and automated technology, Fertiglobe’s treasury team took on a complex project. This involved a great deal of engagement and coordination to ensure systems and cut-off times were aligned across the board. This included a detailed set-up and integration plan between Fertiglobe’s ERP and its third-party banking partner with HSBC’s banking system.

“Looking forward, this solution can easily be scaled to add other international and local third-party banks as needed. Based on its success we are considering establishing the same liquidity structure in Egypt, one of our largest markets, as well as all other markets in which we have a presence,” concludes Amr Basset, Group Treasurer.