Project Financing Saudi Ethylene & Polyethylene Co. (SEPC) Emad Khalifa Al-Haji GM Finance and...
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Transcript of Project Financing Saudi Ethylene & Polyethylene Co. (SEPC) Emad Khalifa Al-Haji GM Finance and...
Project FinancingSaudi Ethylene & Polyethylene Co. (SEPC)
Emad Khalifa Al-HajiGM Finance and Business Planning
Tasnee Jubail Complex
GCC Project Financing Meeting
2
Tasnee Introduction Tasnee is a Saudi Joint Stock Company established
in Year the 1985.
Managing a diversified investment of more than
SR33 billion in various business sectors, with total
turnover of SR11 billion as of Y2009.
In the year 2000, decided to ‘Construct and Own’
Petrochemical Plants in Al-Jubail Ind. City.
First investment, PDH and Polypropylene Plants of
450 KTA Capacity each, completed in Y 2004.
PP expansion to 720KTA was completed in Y2009 to
be one on the largest PP producer in the region.
Second Project investment was an Integrated
Ethylene & Polyethylene Plants with total
production capacity exceed 2.1 million TA.
3
Project Sponsors
Saudi Ethylene & Polyethylene Company - SEPC
Tasnee 45.34 %Sahara 24.41 %GOSI 5.25 %
Saudi Shareholders
Foreign Shareholder
Lyodellbasell25 %
4
Project Overview
Ethylene PlantEthylene Plant
Polyethylene UnitHDPE
Polyethylene UnitHDPE
Polyethylene UnitLDPE
Polyethylene UnitLDPE
Linde
Technology
Basell
ACP Technology
Basell
Lupotech Technology
Saudi AramcoEthane Propane
Ethylene
HDPE
400 KTA
LDPE
400 KTA
Propylene
285 KTA
Ethylene
200 KTA
Ethylene
5
Intended Products - HDPE
Film Grade
Pressure PipeGrade
Blow MouldingSmall
Blow MouldingMedium
Blow MouldingLarge
SMALL BLOW MOULDINGApplication in small container, Packaging
FILM GRADEApplication in carrier and Garment bags
PIPE GRADE Application in drinking water pipes, sewage and gas transportation lines.
6
CableInsulationGrade Heavy DutyFilm
Hygienic Film
High ClarityFilm
GP
Intended Products - LDPE
• Food packaging.• Laboratory containers. • Computer components.• Medicine field.• Dispensing bottles.• Plastic bags.
7
Investment Advantage in Gulf Region
Availability of Oil & Gas resources and related industries, has created great business opportunities.
Strong government commitment to derisively the NDG income resources.
Distinguished geographic location closer to the East & Fareast and European markets.
Booming Project Finance Industry has resulted in competent and competitive financing resources.
Steady growth in Global Market Demand on the basic and primary industrial materials.
Established regulatory laws that helped to attract Private Investors (Local and Foreign).
8
Investment Advantages in Saudi Arabia
Strong government support by providing feedstock and Utilities at attractive prices, government loans, customs and Taxes waivers etc.
Creation of Industrial cities with strong infrastructure foundation for manufacturing and supporting industries.
Sufficient Power and Industrial Water Requirements.
Availability of experienced resources.
Largest Project Financing Market in the Middle East.
Steady evolution of the legal framework by the Government has facilitated to attract more foreign investments.
9
Investor Investor in Saudi in Saudi ArabiaArabia
Investor Investor in Saudi in Saudi ArabiaArabia
Industrial Cities Infrastructure
Feedstock & Utilities Cost
Advantageous
Availability of Government & Commercial
Loans
Evolving of Government
Investment Laws
Experienced resources
Investment Advantages in Saudi Arabia
10
SEPC Project Financing Alternatives Ongoing Industrial Boom has stretched the financing capacity of
Commercial Banks in the Region.
Project Sponsors have evaluating other commercial funding options such as Export Credit Agencies (ECA) , which are more economical.
Creation of complex Financing Structure, where different financing tranches are linked together.
Common Term Agreement (CTA) concept would be helpful in compiling different Loan agreements terms and condition in one agreement.
Disadvantage of multi-sourced financing is the complexity of the terms and conditions.
11
SEPC Financing Structure
30%
13%16%
41%Equity
SIDF Debt
PIF Debt
Banks and ECAs
Estimated Project Cost is USD 2.5 Billion
12
Sources of Government Loans
Saudi Industrial Development Fund is providing loans to industrial investment along with technical, administrative, financial and marketing advices and it is affiliated to Ministry of Finance.
PIF established to provide financing to commercial projects which are strategic for the development of the national economy and it is affiliated to Ministry of Finance
SIDF grants short/medium term loans up to SR 600 Million for each project and charges no interest, but fees for administrative expenses.
PIF grants Long term loans up to $400 Million and following the commercial banks loan structure but with attractive rates.
Total government loans obtained was $720 Million.
13
Sources of Commercial Banks and ECA Loans Commercial Banks: Leading foreign and local banks were participating in
SEPC financing structure, total Commercial loans received were $457 Million including working capital.
o Saudi British /HSBC/SAMBA Financial Group/ Saudi Fransio Calyon, London / Societe Generale, France/West LB, London/ Royal
Bank of Scotland. ECA’s: private or semi-governmental bodies that extends credit to local
suppliers and provide necessary Guarantee (buyer receives good or service in advance and makes payment later, as well as provide insurance for export. Total ECA’s loans received were $730 Million.
o HERMES (Germany), SACE (Italy), KEXIM/KEIC (South Korea). Project Information Memorandum was issued to Potential Lenders in
September 2005, and Loan Agreements were signed in June 2006. Bridge loan were arranged until Financial closure was achieved in Dec
2006 before the depletion of equity money.
14
Success Factors
Promoting safety culture.
Strong Sponsors commitment from both owners and partners side.
Early identification of project scope.
Experienced EPC Contractors.
Setting dependant project organization IMT with experienced and
diversified team.
Successful loan bridging strategy.
Strong Financing Structure, and timely completion of financial closure.
Early preparation for plant operation activities. Project completion on schedule and within budget.
15
Best Deal Award for SEPC Financing SEPC’s Financing has been
awarded ‘Best Deal of the Year 2006’ by Project Finance International, a leading publication in Project Financing
The Award is for Petrochemical Sector in Europe, Middle East and Africa
SEPC won the award ahead of the projects sponsored by Dow Chemical, Saudi Aramco, SABIC, Kuwait Petroleum, Oman Oil Company and LG Group
16
Tasnee Main Ranking
11stst Industrialization Joint-Stock Wholly Owned by Private Sector 1985
1313thth Largest Saudi Company
22ndnd Largest Global Producer of Titanium Dioxide
22ndnd Largest Saudi Industrial & Petrochemical Company
11stst Saudi Company of The Year 2008
11stst
TopTopProject Finance Award 2006
Best Work Environment in Saudi Petrochemicals 2008 & 2009
17
Global Impact / challenges of project Financing Some of the major factors that impact the project financing are:
World wild recession and the impact of the financial crisis.
The exposure of local banks overseas assets to the financial crisis (subprime mortgage ) has limited the banks financing capabilities.
Bank adoption of stringent lending policies has limited banks growth.
Drop in oil prices limited the government spending which has resulted
in slowing the domestic growth.
Drop in demand for the basis building and manufacturing materials has resulted in major prices turn down and limited growth opportunity.
Changes in Project Economics
Thank You!