Saudi Arabia: Saudi Kayan's US$10bn project
The financing of Saudi Kayan's US$10 billion petrochemical plant in Jubail Industrial City - touted to be the world's largest integrated petrochemical project - signed on 30 May 2008.
Noted for the diverse financing sources employed - comprising export credit agency, local, regional, international and Islamic debt - the US$6 billion debt financing is testimony to the increasing sophistication of the Saudi project finance market.
The Saudi Kayan Petrochemical Company's six million tonne per annum plant is slated to go online in October 2010 when it should produce 1.4mtpa of ethylene and 2.6mtpa of completed products, including polyethylene, polypropylene, ethylene glycol, polycarbonates and amines [Projects Database], which is reported to be at least US$20 billion, even a conservative debt-equity ratio of 60:40 leaves US$12 billion of debt to raise. Even with an aggressive financing plan with US$3bn in clean debt, you still need to raise US$9 billion through other means of financing. So even taking into account the Public Investment Fund and Saudi Industrial Development Fund and whatever sukuks you want to raise you still have US$3 to 5 billion to secure - either through ECAs or new actors on the market.
"Obviously the Islamic market is becoming key. But there is also a source of liquidity which for the time being remains untapped - the sovereign wealth funds. Perhaps future project financings will manage to attract investment from them."
The project at a glance
| Project Name | Saudi Kayan Petrochemical Project |
| Location | Saudi Arabia |
| Description |
Construction of a 6mtpa petrochemical complex located in Al Jubail Industrial City, Saudi Arabia. Products will include ethylene, propylene, polypropylene, ethylene glycol and butane-1. Downstream products will include aminoethanols, aminomethyls, dimethylformamide, choline chloride, dimethylethanol, dimethylethanolamine, ethoxylates, phenol, cumene and polycarbonate |
| Sponsors |
Saudi Kayan Petrochemical Company:
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| EPC Contractor |
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| Total Project Value | US$10 billion |
| Total equity | US$4 billion |
| Senior debt breakdown |
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| Senior debt pricing |
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| Debt:equity ratio | 60:40 |
| Export credit agency support |
US$1.5 billion ECA-covered tranche divided equally between:
Korea Eximbank (Kexim) underwrote a US$500 million direct loan |
| Initial mandated lead arrangers |
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| Mandated lead arrangers |
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| Legal Adviser to sponsor | Clifford Chance and Al-Jadaan & Partners |
| Financial Adviser to sponsor | BNP Paribas, Samba and Arab Banking Corporation (ABC) |
| Legal adviser to banks | Allen & Overy |
| Date of financial close | Slated for August 2008 |
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