A consortium has provided US$3.2bn in project finance for a petrochemical complex in Mexico.
As reported by GTR in June, the finance will be used to construct the Etileno XXI facility in Veracruz, which will be operated by the Brazilian-Mexican joint venture Braskem Idesa and which will have the capacity to produce 1 million tonnes of high and low-density polyethylene per year. It is predicted to become the “most modern petrochemical facility in the Americas”.
The finance comes from a combination of 10 private banks, three development banks, two export credit agencies and two multilateral agencies. The commercial banks’ contributions come under either the guarantee of Sace, or under B-loans of the International Finance Corporation (IFC) and the Inter-American Development Bank (IDB).
Rafael Cervantes, vice-president of export agency finance for Sumitomo Mitsui Banking Corporation (SMBC – the sole financial advisor), tells GTR that the transaction is “a huge deal for everybody involved”. He explains: “This is the first time the private sector has been allowed to invest in the petrochemicals industry in Mexico – all the other attempts failed miserably. It’s also by far the biggest investment by a Brazilian company in Mexico, as well as being the largest project financing to have taken place in Mexico.”
Cleantho Leite, commercial, institutional relations and business development director for Braskem Idesa, reveals to GTR that the tenor of the finance is 17 years (three years for construction, 14 years repayment period). While unable to confirm the pricing, he says that it was “quite competitive, within our expectations”. Braskem will not be seeking further debt financing for the project – the remaining US$1.3bn will come in the form of equity.
The breakdown of the financing is as follows:
Brazilian Development Bank (US$623mn, direct loan), Nafin (US$280mn, direct loan), Bancomext (US$120mn, direct loan), Export Development Canada (US$300, direct loan), IFC (US$285mn, A-loan), IDB (US$285mn, A-loan), SMBC (US$200mn, IFC and IDB B-loan and Sace-guaranteed), HSBC (US$200mn, IFC and IDB B-loan and Sace-guaranteed), KfW (US$150mn, Sace-guaranteed), Banco do Brasil (US$140mn, IFC and IDB B-loan), Bank of Tokyo-Mitsubishi UFJ (US$140mn, IFC and IDB B-loan), Korea Development Bank (US$140mn, IFC and IDB B-loan), BBVA (US$100mn, SACE guaranteed), Intesa Sanpaolo (US$100mn, Sace-guaranteed), Santander (US$100mn, Sace-guaranteed),Mizuho (US$30mn, Sace-guaranteed).
The overall aim of the facility is to supply Mexican companies with polyethylene, replacing up to US$2bn of polyethylene imports used for industrial and commercial purposes in Mexico every year.
Construction started in October 2011, with the second phase beginning in November 2012. The loans will fund detailed engineering, equipment procurement and civil and electromechanical construction. The second phase is due to be completed in 2015.
Braskem’s Leite tells GTR that there are various reasons why the company was able to attract such a volume of finance from such a breadth of investors, including the “very positive economic projections for the project”, and the fact that “there are suppliers from all over the world involved in this project, attracting development banks from their countries of origin”.