SABIC’s Jubail United Petrochemical Company Secures $1.154Bn

VOL. XLV

No 2

14 January 2002

SAUDI ARABIA

SABIC’s Jubail United Petrochemical Company Secures $1.154Bn

The Jubail United Petrochemical Company (JUPC), a wholly-owned subsidiary of Saudi Basic Industries Corporation, has secured a $1.154bn loan from a consortium of international and regional banks for the construction of a new petrochemical plant. The thirteen-bank consortium is comprised of Riyad Bank, Saudi Fransi Bank, National Commercial Bank, Arab National Bank, Saudi Investment Bank, Saudi British Bank, Saudi American Bank, Gulf International Bank, Saudi Hollandi, Arab Banking Corporation, Apicorp, Mizuho (IBJ) and Sumitomo Mitsui. The total project cost is estimated at $2.2bn, of which $400mn will come from the Public Investment Fund with the balance drawn from SABIC’s equity.

The transaction carries a tenor of 10 years and is said to have been “adequately priced, consistent with market conditions.” MEES understands that it is around 1% which bankers describe as very favorable for SABIC given that this is a start up project, the loan carries a longer tenor than standard SABIC financings, and there is no international joint venture partner. Aggressive Saudi appetite for the deal meant that what was pitched as a syndication became effectively a club deal with no further sell down. It has also been used to explain the limited participation of international banks. “Saudi banks were so hungry that they didn’t leave much for the region or international banks,” one source said, noting that the kingdom has seen very little project finance in the past twelve months and yet has accumluated high levels of liquidity. Strong domestic appetite has also led to large take and hold positions with a single institution subscribing to $150mn.

Gulf International Bank (GIB) served as the financial advisor to SABIC on the transaction. At the time of signing, press reports cited SABIC’s managing director Muhammad al-Mady as praising the performance of the banks involved who had met a very tight deadline of 28 days since the date of launch “despite difficult market conditions.” The deal is expected to close some time in the spring with an official signing. GIB announced on 21 March that it had been appointed as independent financial adviser to JUPC (MEES, 3 April 2001).

JUPC’s new complex is scheduled to come on stream in the second half of 2004 (MEES, 4 December, 2001). The capacity of the complex will be 1mn tons/year of ethylene, 460,000 t/y of ethylene glycol (EG), 400,000 t/y of high density polyethylene (HDPE) and 100,000 t/y of linear alpha olefins (LAO). Last December, JUPC issued a letter of intent to appoint Fluor Daniel Arabia as the program services contractors for the plant. SABIC reported a net profit of SR3.63bn ($967mn) for 2000, compared to SR1.71bn ($455mn) the previous year, an increase of 113%, which the company Chairman Hashim al-Yamani attributed to an improvement in petrochemical prices and the company’s improved overall performance resulting from efficient programs being implemented (MEES, 19 February).