The Oman Oil Refineries and Petroleum Corporation (Orpic) completed the financing of its greenfield $6.5 billion Liwa Plastics petrochemical complex in early March 2016. The financing features a large group of international and local lenders alongside export credit agencies (ECAs) from countries throughout Europe and Asia.

The Liwa Plastics complex includes the refinery, aromatics plant, steam cracker and downstream polypropylene and polyethylene plants at the Sohar Industrial Port Area, next to the Sohar refinery and petrochemicals plant. The project will produce one million tonnes per year (tpy) of plastics, ultimately increasing Orpic’s polypropylene and polyethylene production to 1.4 million tpy.

Liwa forms part of Oman’s wider strategy to boost downstream industrial capacity and follows on from Orpic’s $2.8 billion financing of the Sohar refinery expansion in 2014, which will provide higher quality feedstock to Liwa Plastics. Commissioning of the project is expected to be completed in 2020.

Orpic signed on $3.8 billion of debt on 2 March with the deal expected to close imminently. Liwa Plastics’ financing has a debt-to-equity ratio of 60:40, requiring equity of $2.5 billion.

Commercial lenders join the club

SMBC led the syndication of a club loan, inviting more than twenty banks to take part in September 2015. The deal was joined by 19 international and regional commercial banks providing $1.42 billion in uncovered debt with a tenor of 15 years, as IJGlobal exclusively revealed in February 2016.

Commercial banks on the deal included:

• Arab Banking Corporation
• Bank Dhofar
• Bank Muscat
• BNP Paribas
• Cassa Depositi e Prestiti
• Credit Agricole Corporate & Investment Bank (CACIB)
• Crédit Industriel et Commercial
• Export Development Bank of Canada
• HSBC
• ING Bank
• JP Morgan Chase Bank
• KFW IPEX
• Korea Development Bank
• MUFG
• National Commercial Bank (Al Alhi)
• Natixis
• SMBC
• Societe Generale
• UniCredit Bank

Oman’s Ministry of Finance is providing a full debt service undertaking for the project whilst it is being constructed, reducing the debt pricing during that period to between 200-250bp over Libor. After construction, pricing for the debt will be approximately 250bp over Libor, as previously reported by IJGlobal.

The financing features step-ups and cash sweeps though the exact structure has not been disclosed. The deal has an “all-in” price of around 300bps over Libor once upfront fees, and pre- and post-construction pricing is taken into account, two sources said.

ECA involvement

A total of six ECA’s representing Italy (SACE), the Netherlands (Atradius Dutch State Business), Korea (K-Exim and K-Sure), the United Kingdom (UKEF) and Germany (Euler Hermes) took part to provide a total of $2.38 billion in debt, with Italy’s SACE providing the lion’s share.

The identities of the ECAs on the deal was partially reliant on the nationalities of the companies who would win the engineering, procurement and construction (EPC) contracts. Individual ECA contributions – a mix of self-funded and covered commercial debt – included:

• SACE – $840 million
• Atradius DSB – $586 million
• K-EXIM – $360 million, of which $252 million is self-funded
• K-Sure – $300 million
• Euler Hermes – $137 million
• UKEF – $157 million

UKEF and SACE also provided an undisclosed amount of self-funded debt within their tranches, a source at one of the ECAs commented. The ECA debt has a tenor of 16 years but includes a cash sweep that aims to complete repayment within 15 years.

EPC tender

Orpic prequalified contractors for the four EPC packages in February 2015 and in October and November 2015 awarded four consortia $4.5 billion in EPC contracts. The winners included:

• Italian firm Tecnimont delivering the polymer unit, a contract worth $895 million.
• A consortium of Korean firms GS Engineering & Construction alongside Mitsui delivering the $700 million natural gas liquids package.
• Indian firm Punj Lloyd delivering the NGL pipeline, a contract worth $105 million.
• Dutch firm CB&I’s joint venture with Taiwanese company CTCI Corporation was awarded the steam cracker contract – the largest package on the project with a value of about $2.8 billion.

The EPC contracts were signed in mid-December 2015.

Omani opportunities

The Liwa Plastics deal represents the largest project financing ever achieved in Oman, Orpic chief executive officer Musab Al Mahruqi said in a statement. Completion of the deal came in spite of depressed oil prices, an environment that in tandem with higher EPC costs caused QP and Shell to cancel their $6.4 billion Al Karaana petrochemicals project in Qatar in early 2015.

Liwa’s successful financing illustrates that international lenders still have a good appetite for the region even as a number of the Gulf Cooperation Council countries have recently had their ratings cut.

Completion could bode well for Oman’s pipeline of projects in other sectors. Itochu and Engie signed financing and water purchase agreements for the $300 million Barka independent water producer project the day after Liwa, and requests for proposals for another two desalination plants – the Sharqiyah and Salalah – are due to be released soon.

Oman is also in the process of developing a public private partnership law, picking a consortium of PWC, Eversheds, and Mott MacDonald to support the process, IJGlobal revealed earlier this year. A first draft of the law is expected in April 2016 with potential projects to be procured in the wastewater, heath and housing sectors.

Deal advisers

SMBC and Allen & Overy were financial and legal advisers to Orpic, respectively. White & Case was legal adviser to the lenders.