The signing ceremony for the financing of the Sohar fertiliser project in Oman has taken place.


The project comprises a world scale ammonia/urea complex at Sohar in the Sultanate of Oman, with a production capacity of 1.225mn tonnes per year of granular urea. The project is sponsored by the Suhail Bahwan Group, one of Oman’s largest private sector groups. The project company, Sohar International Urea & Chemical Industries (SIUCI), is owned 96% by Sheikh Suhail Bahwan and 2% by each of his sons Ahmed Bahwan and Saad Bahwan. The project is one of the largest private sector greenfield fertiliser projects in the world, and is thought to be the largest industrial investment by an individual in the GCC.


The project will be built by Mitsubishi Heavy Industries of Japan (MHI) under a US$500mn EPC contract entered into with SIUCI on April 20. Gas feedstock will be supplied under a long term contract entered into in February 2005 by Oman’s ministry of oil and gas, and all of the urea will be purchased under a long-term offtake agreement by Transammonia, one of the world’s largest urea traders.


The total project cost is estimated at US$638.1mn and will be financed by US$184.86mn of sponsor equity, US$431.34mn of Japanese export credit and US$21.9mn of pre-completion revenues.


The arranger and facility agent under the export credit is HSBC Tokyo. Some US$216.08mn will be provided by JBIC and US$215.26mn by HSBC Tokyo, with the benefit of an insurance policy from Nexi, the Japanese export credit agency.


The JBIC tranche comprises a US$182.06mn fixed rate loan (based on the OECD’s commercial interest reference rate) and a US$34.02mn floating rate loan. The HSBC tranche is floating rate.


Work under the EPC contract is scheduled to start no later than August 2005. The construction period is 35 months, with completion scheduled for no later than July 2008. The loan is scheduled to be repaid in 21 unequal semi-annual instalments, the first falling due on 27th January 2009, consistent with the OECD’s project finance guidelines. A “cash sweep “mechanism will operate so that SIUCI will prepay, out of available surplus cashflow, up to 15.75% of the loan, which will be applied to eliminate the final repayment instalment and to reduce each of the eight preceding repayment instalments to 5% of the loan.


The offshore security trustee is HSBC Bank USA (based in New York). The offshore account bank is HSBC Bank plc (based in London).


The onshore security trustee and onshore account bank is Bank Muscat. HSBC Bank Middle East (based in Dubai) was appointed as hedging bank co-ordinator.  Financial adviser to the sponsors, since January 2001, was HSBC Bank plc.