Nanjing
China Infrastructure Development Award 2002
Nanjing Ethylene Complex
BASF-YPC and Sinopec jointly sponsor the $3 billion Nanjing ethylene complex deal, one of a slew of petrochemical projects closing in the region. Similarly, the financing is between international banks and domestic lenders and brings in a small ECA tranche. This is a landmark deal: bankers refer to it as a milestone import substitution project in China.
The debt financing of about $1.45 billion is not yet formally complete, but it will be roughly half dollar- and half renminbi-denominated, with the international portion coming from Citibank and HVB and the renminbi tranche coming from Citibank, Industrial Commercial Bank of China, Agricultural Bank of China, China Construction Bank, Bank of Communications and Bank of China.
The domestic tranche is RMB5.5 million (about $660 million) with $150 million 95% covered by ECA Hermes. The international term loan amounts to $460 million (with a tenor of about 12 years) with a one year working capital of $44.5 million: this makes up the international debt portion. In RMB local currency, there is the aforementioned RMB amount for 16 years and another RMB734 million VAT facility ($88.5 million) for 5 years with a one year working capital of RMB369 million ($44.5 million). The twelve-year loan will be repaid in 24 semi-annual installments. All the RMB loans will have the lowest floating PBOC base.
Market risk was a main consideration when putting the deal together. Says one banker working on the deal: ?When the deal was being put together, the market risk was not known, so we had to do much due diligence for projecting economies. The 50/50 debt to equity ratio helped banks in this regard. Another consideration was getting complicated construction contracts right as there are many separate projects. There is an inter-creditor arrangement because of the small ECA tranche ? it's a case of not getting outvoted on all points.
?Sponsors gave limited completion guarantees to banks, a process which was very complicated ? deliberately specific to all parties' aims.? Another source close to the deal said: ?This project financing combines innovative aspects of sponsor completion support and operational flexibility in the financial structure.?
The project comprises the construction of 600, 0000 t/p/y ethylene cracker plant with eight downstream plants, a power station and utility plants. The complex is scheduled to be up and running by 2006.
Nanjing Ethylene Complex
Status: Underwritten, awaiting ECA approval
Location: Nanjing, China
Size: $3 billion
Sponsors: BASF-YPC and Sinopec
Debt: $1.45 billion
Arrangers: Citibank, Hypovereinsbank, Agricultural Bank of China, Industrial and Commercial Bank of China, Bank of China, China Construction Bank, Bank of Communications
Financial advisor: Citibank
Technical advisor: Jacobs Consulting
Lawyers to the sponsors: Shearman & Sterling, Jingtian Gongcheng
Lawyers to the lenders: Clifford Chance, Jung Yi.
Insurance advisor to the sponsors: Marsh
Insurance advisor to the lenders: Alexander Forbes
Contractors: Stone & Webster, Fluor Daniel
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Nanjing Ethylene Complex
BASF-YPC and Sinopec jointly sponsor the $3 billion Nanjing ethylene complex deal, one of a slew of petrochemical projects closing in the region. Similarly, the financing is between international banks and domestic lenders and brings in a small ECA tranche. This is a landmark deal: bankers refer to it as a milestone import substitution project in China.
The debt financing of about $1.45 billion is not yet formally complete, but it will be roughly half dollar- and half renminbi-denominated, with the international portion coming from Citibank and HVB and the renminbi tranche coming from Citibank, Industrial Commercial Bank of China, Agricultural Bank of China, China Construction Bank, Bank of Communications and Bank of China.
The domestic tranche is RMB5.5 million (about $660 million) with $150 million 95% covered by ECA Hermes. The international term loan amounts to $460 million (with a tenor of about 12 years) with a one year working capital of $44.5 million: this makes up the international debt portion. In RMB local currency, there is the aforementioned RMB amount for 16 years and another RMB734 million VAT facility ($88.5 million) for 5 years with a one year working capital of RMB369 million ($44.5 million). The twelve-year loan will be repaid in 24 semi-annual installments. All the RMB loans will have the lowest floating PBOC base.
Market risk was a main consideration when putting the deal together. Says one banker working on the deal: ?When the deal was being put together, the market risk was not known, so we had to do much due diligence for projecting economies. The 50/50 debt to equity ratio helped banks in this regard. Another consideration was getting complicated construction contracts right as there are many separate projects. There is an inter-creditor arrangement because of the small ECA tranche ? it's a case of not getting outvoted on all points.
?Sponsors gave limited completion guarantees to banks, a process which was very complicated ? deliberately specific to all parties' aims.? Another source close to the deal said: ?This project financing combines innovative aspects of sponsor completion support and operational flexibility in the financial structure.?
The project comprises the construction of 600, 0000 t/p/y ethylene cracker plant with eight downstream plants, a power station and utility plants. The complex is scheduled to be up and running by 2006.
Nanjing Ethylene Complex
Status: Underwritten, awaiting ECA approval
Location: Nanjing, China
Size: $3 billion
Sponsors: BASF-YPC and Sinopec
Debt: $1.45 billion
Arrangers: Citibank, Hypovereinsbank, Agricultural Bank of China, Industrial and Commercial Bank of China, Bank of China, China Construction Bank, Bank of Communications
Financial advisor: Citibank
Technical advisor: Jacobs Consulting
Lawyers to the sponsors: Shearman & Sterling, Jingtian Gongcheng
Lawyers to the lenders: Clifford Chance, Jung Yi.
Insurance advisor to the sponsors: Marsh
Insurance advisor to the lenders: Alexander Forbes
Contractors: Stone & Webster, Fluor Daniel
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