Tobolsk is a first for the Russian market in terms of financial modelling. The $1.441 billion back-to-back borrowing places Russian development bank Vnesheconombank (VEB) in between the lenders and the ultimate borrower, with VEB as borrower of a combined ECA/commercial bank pack­age, which is then on-lent to the Sibur-backed special purpose project company Tobolsk Polymer.

The structure made use of VEB’s credit quality to reduce the cost of debt, and avoided the foreign exchange complications of borrowing internationally for a project with a rouble income stream.

The deal was also financed against the backdrop of the 2008-2010 global liquid­i­ty crisis (a corporate facility had been plan­ned until the financial markets melt­down in 2008). According to Pavel An­anienko, head of treasury at Sibur Hold­ing: “By late 2008 Sibur was looking to use alternate financing options for the project because neither corporate finance nor commercial finance were available. Sibur approached VEB to find solutions involving export credit agencies from the countries of the respective foreign equip­ment suppliers. And in April 2009, VEB was given the mandate.”

Adds Ananienko: “On our side, we faced several challenges, not least of which was the fact that the overall project was on a slow burn because of the economic conditions at the time – we had to care­fully time the pace of construction with the pace of the various financing arrangements. In addition, we were asked by VEB to have a more project finance-type struc­ture. This had not originally been the plan, but Sibur’s growing concerns over the level of leverage spawned a prime reason for going into a project financing. And with VEB as a state support institution, and thus representing quasi government risk, we had the opportunity to raise money from abroad at the height of the crisis.”

The financing comprises $1.22 billion of 13.5-year ECA-backed debt split bet­ween a $686.2 million Sace-backed tranche (Sace’s biggest facility to date for VEB), on the back of Technimont EPC content, and a $533.8 million Euler Hermes tranche (Hermes’ largest bank-to-bank offering to date) on the back of Linde-KCA-Dresden EPC content. The Hermes facility signed in January 2010 followed by the Sace tranche in July.

The deal also includes $221 million of 9.5-year uncovered loans from the ECA covered tranche lenders – initial mandated lead arrangers and bookrunners Credit Agricole, Deutsche Bank, ING, Intesa Sanpaolo and Societe Generale, and mandated leads KfW IPEX-Bank and SMBC.

The project is strategically important for Russia and is part of the state development plan for the chemi­cal and petrochemical industry for the period to 2015. Russia aims to boost its self-sufficiency in the petrochemicals sector and the efficiency of its use of natural resources. Consequently, the deal also benefits from tax breaks from the local government of the Tyumen region.

The Tobolosk project will be built in two stages, starting with the construction of a 500,000tpa polypropylene plant ad­jacent to Tobolsk-Neftekhim (another Sibur subsidiary). The polypropylene plant and propane drying unit (510,000tpa pro­pylene) are expected to be completed by the second quarter of 2012 and com­missioned by the end of the third quarter of 2012.

The second phase of the project will see the construction of a 500,000 tpa poly­ethylene plant which is expected to be ready for start up in 2014.

Linde-KCA-Dresden of Germany is engineering the project design, ordering equipment and managing the construction of the polypropylene production unit in a FEED capacity, in conjunction with Tecnimont as engineering, procurement and construction (EPC) contractor.

The 510,000tpa propylene plant will use propane dehydrogenation methodolo­gy based on US company UOP’s Oleflex technology. Polypropylene from the new plant will be feedstock for production of geo-textile canvas and geo-grid for use in a project to build a new railway line linking Salekhard and Nadym.

Construction is underway with major capital equipment scheduled for delivery up to the end of 2011. Germany’s Linde-KCA-Dresden won the EPC contract and will also include UK company INEOS’ technology on the project. Fluor was man­dated in 2007 for the management of the project development. Phase one of the pro­ject is expected to come onstream in 2012 with phase two expected in 2014. 

Status: Signed 21 July 2010
Size: $1.441 billion
Location: Russia
Description: Polypropylene production complex
Sponsor: SIBUR
Borrower and on-lender: Vnesheconombank
Mandated lead arrangers: Credit Agricole, Intesa SanPaolo, Deutsche Bank, ING Bank, KfW IPEX, SMBC
ECAs: Sace, Hermes
Lender legal counsel: Allen & Overy
Project management services: Fluor
Equipment supply: Linde, Technimont
Environmental impact study: Branan Environment