Financing For $20Bn Sadara Petrochemical Project Moving Ahead
The financing for the $20bn Sadara 3mn tons/year integrated petrochemical project is progressing and the next phase of the funding is expected to kick off at the end of this month when the preliminary information memorandum (PIM) is sent out to banks, MEES understands. Sadara sponsors Saudi Aramco and the US’s Dow Chemical had first focused their attentions on the portion of the financing being provided by export credit agencies (ECAs) and the last meetings were wrapped up with them in April. With a 65:35 debt/equity split Sadara will need to raise around $13bn of debt. While the final breakdown of the financing is likely to shift somewhat, ECAs are expected to provide a large portion of the funding for Sadara, both in the form of direct loans and cover. Since the global credit crunch constrained international banks ECAs have provided considerable amounts of funding for projects, and they are vital for multi-billion dollar financings.
However, banks will be asked to provide the underlying funding for the ECA-covered amounts, and will also contribute uncovered loans. While Saudi and international banks will be approached, with considerable liquidity in the kingdom’s banking sector, it is likely that domestic lenders will contribute a sizeable chunk of the funding. The financing process for Sadara kicked off with the approach to export credit agencies (ECAs) just after the final investment decision was announced on 25 July last year. They include the Export-Import Bank of the US (Exim), the UK’s Export Credits Guarantee Department (ECGD), France’s Coface, Germany’s Euler-Hermes, Japanese ECAs (Japanese Bank for International Cooperation – JBIC – and NEXI) and Korean ECAs (Kexim and K-Sure), MEES understands (MEES, 8 August). Saudi institutional lenders the Public Investment Fund (PIF) and the Saudi Industrial Development Fund (SIDF) will also contribute to the project.
Due to its size, the Sadara project will need to source financing from further pools, which could include bonds and sukuk, although this will depend on prevailing market conditions. After the project financing is completed, Sadara will also do an initial public offering (IPO) in Saudi Arabia. Sadara is the largest chemical facility ever built in one phase and will be made up of 26 units with production including polyurethanes (isocyanates, polyether polyols), propylene oxide, propylene glycol, elastomers, linear low density polyethylene, low density polyethylene, glycol ethers and amines. At the heart of the project is a dual-feed cracker which will produce 1.5mn t/y of ethylene and 400,000 t/y of propylene. The first production units are expected to come on line in the second half of 2015.
Copyright MEES 2012.
