Saudi sets petrochemical template

In April 2008, a US$5.13bn project financing package was closed in support of petrochemical firm Saudi Polymers’ NCP project in the industrial city of Al-Jubail in Saudi Arabia.

The deal is noteworthy as it is the first US Ex-Im-backed limited-recourse project financing in Saudi Arabia and the largest petrochemicals project financing in the Middle East supported by US Ex-Im.

Despite challenging market conditions, financial close was still achieved in less than three months from the start of documentation. Given the market liquidity constraints, along with the major capex requirements of Saudi Arabia’s petrochemical and energy projects, it is thought that this transaction will serve as a template for future deals.

“The NCP sponsors, Chevron Phillips Chemical and Sabic, established a challenging timeline for reaching financial close. Meeting this timeline, given the novel issues attendant to limited-recourse project finance in Saudi Arabia, required intensive co-operation among the sponsors, US-Exim, BNP Paribas as US Ex-Im agent and the lenders,” comments Raj Daryanani at BNP Paribas.

The facility features a number of tranches. The equity portion is US$1.538bn. The remaining debt portion incorporated a US$1.88bn commercial facility which attracted a total of 20 participating banks.

There is also the landmark US$590mn US Ex-Im-backed facility arranged by BBVA, BNP Paribas, Calyon and RBS.

This tranche represents a unique achievement for lead arranger BBVA, as the bank had never previously closed a project finance transaction in the Middle East as an arranger with a commitment over US$100mn.

There were a further two tranches consisting of a US$800mn loan from Saudi’s Public Investment Fund, and a US$320mn facility from the Saudi Industrial Development Fund.

Project sponsors are Arabian Chevron Phillips Petrochemical Company (ACP) and Saudi Industrial Investment Group (SIIG). Engineering, procurement and construction (EPC) contracts were signed with Daelim Industrial and JGC Corporation.

Saudi Polymers Company is a new limited liability company incorporated in Saudi Arabia to carry out the NCP project. Saudi Polymers is 50% owned by ACP and 50% by SIIG. Ultimately, Saudi Polymers will be 35% owned by ACP, and 65% by the National Petrochemical Company (Petrochem), a new joint stock company incorporated in Saudi Arabia.

The NCP project involves the construction and operation of an integrated petrochemicals complex at Al-Jubail, an industrial city on the Persian Gulf. It will be the third petrochemical complex built by Chevron Phillips and SIOG at Al-Jubail.

Once the plant is complete it will include an olefins cracker, and will produce ethylene, propylene, polyethylene, polystyrene and 1-hexene. Commercial production is scheduled to begin in September 2011.

Deal Information

Borrower: Saudi Polymers Company
Amount: US$5.13bn (total project costs); US$590mn (US Ex-Im tranche)
Mandated lead arrangers: BBVA; BNP Paribas; Calyon; RBS (US Ex-Im tranche)
Law firms: Allen & Overy (borrower); Clifford Chance (lenders and ECA)
Tenor: 16 years
Date signed: April 2008