The Yansab complex, which will be built on the Red Sea coast in the industrial city of Yanbu by Sabic (Saudi Basic Industries Corporation), is ECGD’s first civil deal in Saudi Arabia. Its support is on behalf of two UK exporters.
The first is Foster Wheeler Energy of Reading, acting as the overall programme management contractor for the project, including preparation of front-end engineering design, bid analysis and award recommendations for engineering, procurement and construction (EPC) contractors, and working in an integrated team with Yansab to manage the EPC phase.
Fluor of Camberley will design, engineer, procure and plan the construction of the utilities and offsite facilities, pipelines, and port storage, and will also provide training for engineers, operators and maintenance personnel. Fluor is the exporter of record for certain UK eligible goods and services, effectively documenting and capturing necessary UK spend for this key transaction.
“We were extremely pleased to participate in this important export order,” says David Seaton, president of Fluor Corp’s energy and chemicals business group. “The order was facilitated by the availability of a suitable credit package provided by ECGD. We see ECGD’s support as continuing to play an important role in this type of business, with its involvement providing overseas buyers with the kind of reassurance they need to commit to long-term complex mega-projects such as Yansab.”
Sabic’s corporate financing manager, Mohammad AI-Ghamdi, adds: “The ECAs played a vital role in supporting the international bank participation by being extremely flexible and putting in place a highly innovative financing structure successfully and quickly. ECGD played a particularly important role in finding solutions to challenges the project presented.”
The Yansab complex, which is due to start production in mid 2008, will contain the world’s biggest ethane ‘cracker’ and will be one of the world’s largest petrochemical complexes. It will comprise a series of linked plants, producing 1.7mn tonnes of ethylene and propylene and 2.3mn tonnes of derivative polymers and chemicals per year. Sabic will market these offtake products – primarily to buyers in the Far East and the Indian sub-continent.
The Yansab project is the largest ever greenfield project financing in Saudi Arabia. Despite this, participation in the bank financing tranche was considerably oversubscribed. ABN Amro acted as mandated lead arranger, syndicating the deal to a well diversified group of local/regional and international banks.
Nadine Budgen of ABN AMRO structured loans department says: “Any landmark, innovative transaction like this often brings increased demands on the ECAs involved, and the fact that ECGD worked tirelessly to meet these demands on Yansab is testament to the hard work, co-operation, flexiblility and expertise of its underwriters. The financial structure agreed by ECGD included an extremely complex security package.”
ECGD is providing US$150mn of support alongside Sace (the Italian ECA), which is providing US$550mn of support.
The innovative financing contains the largest Islamic financing tranche (US$850mn) in any multisourced project financing to date. The Saudi Public Investment Fund is also providing some US$1bn of finance, with total debt amounting to US$3.5bn.
Yansab itself is a Saudi joint stock company and following a public subscription process Saudi citizens own 35% of the company. The IPO was described as the largest of its kind in the Saudi market, where half of eligible local nationals have participated in the IPO.
The financing structure is innovative – for any market – and ECGD says it is very pleased that the commitment, vision and cooperation demonstrated by all parties enabled such a large-scale financing to be put in place so successfully and so quickly.
Yansab will directly provide 1,500 local jobs, but it will also help the development of key secondary and tertiary associated industries in Saudi Arabia as part of the national strategic drive to diversify the oil-centred economy .
AI-Ghamdi says: “Saudi Arabia welcomes the expertise UK companies and financial institutions bring to these projects. Recent developments in our economy further emphasise the opportunities available to UK exporters in other sectors, such as construction, telecoms, agriculture, power, education and water. I look forward to seeing future projects create more links between our two countries.”
Further Sabic petrochemical ‘mega-projects’ are planned and ECGD hopes that the ground-breaking financing structures developed on Yansab will prove an invaluable framework for these new deals and assist UK exporters to win further business.
British exporters have a strong, long-standing relationship with Saudi Arabia and with some US$600bn of total investments projected by 2025 (across all industrial sectors), UK companies will be wanting to keep a close eye on the unprecedented level and range of Saudi Arabian opportunities.
Hydrocarbons form the backbone of these new opportunities. All industrial sectors are benefiting from sustained high oil prices (eg, power, construction, water, telecoms, agriculture, education, etc). With, for example, WTO membership, the streamlining of investment regulations and an ongoing privatisation programme, ECGD says it is very pleased that the Saudi authorities have welcomed the involvement of UK companies.