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Saudi Polyolefins Company (SPC) PDH & Polypropylene Plant, Al Jubail Industrial City Kingdom of Saudi Arabia
An example of a successful project & partnership leveraging all financing options/ support
Presented by:
Eng. Ibrahim U. Al-Duhaish
Vice President, Projects
TASNEE ABU DHABI, UAE | 12-15 MAY 2013
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Project Promoter/ Developer – Tasnee
• Tasnee ,a Saudi Company established in 1985 with share holding by prominent local business entities and Investments in variety of Industrial Projects.
• Tasnee decided to enter in the field of Petrochemicals in the year 1999 as the Saudi Government opened up the Petrochemicals field for the Private sector participation.
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Project Envisaged
• Two Integrated Petrochemical Plants with associated
Utility and support Facilities
• Propane Dehydrogenation Plant (PDH Plant ) to
produce 455 ktpa of Propylene (Largest in the World
at its time)
• Polypropylene Plant (PP Plant ) to produce 450 ktpa
of Polypropylene
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Project Rationale & Challenges
Rationale
• Feedstock for the Plant is Propane
• In Saudi Arabia, domestic consumers of Propane are granted a 30% discount
• Polypropylene prospects of high growth demand
Challenges
• 3 M( Money, Manpower & Material) - Financial , Manpower and Feed stock /Raw Material Resources
• Identifying Appropriate Technology Provider and Partner
• Site Location
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Governmental Support Entities
• Saudi Aramco
• Saudi Elect. Company
• Saudi Royal Commission(RC) for Jubail & Yanbu
• Saudi Industrial Development Fund, SIDF
• Saudi Economic Offset Program/ Ministry of Defence
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Raw Materials and Utilities Resources
• Feed Stock Propane : from Saudi Aramco
• Fuel Gas Methane : from Saudi Aramco
• Electricity : from Saudi Elect. Company
• Cooling & Potable Water : from Royal Commission
• Steam : Captive Production
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Project Land at Jubail Industrial City- Saudi Arabia
• Jubail Industrial City: The Largest
Petrochemical Complex in the World
• Royal Commission (RC) , a
Government Body operating the
Industrial Facility, provides
infrastructure facilities
• RC has leased a Land to TASNEE
measuring 971,000 SQ M at a Prime
Location
• Site has access to well developed
port facilities in Jubail and nearby
Dammam
Jubail Industrial City
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Saudi Polyolefins Company
“Bird’s Eye View” of the Project Site
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Saudi Economic Offset Program / British Offset
• The Saudi British Economic Offset Programme is a unique initiative between the Governments of Saudi Arabia and the United Kingdom, administered by the British Offset Office/ Saudi MOD, whose sole objective is to support the development of the industrial base of Saudi Arabia
• It facilitates the transfer of technology into the Kingdom through joint ventures and licensing deals between Saudi and foreign companies and also provides up to half of the equity investment of the foreign partner through long term low cost non-recourse loans
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JV Partner - Basell
• Formed in year 2000 – JV of BASF and SHELL
• World’s largest Polypropylene Producer
• One of the largest in Polyolefins
• More than 63 Production Facilities in various
Countries
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Formation of SPC
Saudi Polyolefins Company
NPIC Basell
TASNEE OTHERS BASF SHELL
25%75%
51% 49% 50%50%
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Responsibilities of Partners
TASNEE
• To operate and Maintain the plant
• To provide Administrative, Operational and other related Services for the functioning of the Plant
• To market 100 ktpa of PP
Basell
• To provide Technology and Technical support
• To market 350 ktpa of PP
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Project Financing
Project Cost USD 525 Million (SR 2 Billion)
Commercial Loan, 50% Equity,
30%
SIDF Loan , 20%
SR 600 Million
SR 400 Million
SR 1,000 Million
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Equity
• USD 160 Million ( Tasnee -- USD 120 Million and Basell -- USD 40 Million )
• Provision of USD 9 Million as a standby equity in the event of cost overrun
• Equity to be fully spent before draw down from bank Facility
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Basell/ British Offset
US$160million (30%) was in the form of equity from the
sponsors, of which US$40million was committed by Basell, the
foreign partner.
• Non-recourse Equity loan US$20million was granted by British
Offset to Basell equity through Saudi British Bank (“SABB”).
• Corporate Guarantees for US$20million commercial loan was
granted by British Offset to the remaining Basell equity
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• SIDF provides funding to projects up to 50% of project cost with a cap of USD 106.7 Million
• Repayment, on bi-annual basis. To start after two years of Commercial Operation
• Project cost, as per SIDF definition, excludes certain costs such as financing costs
• Payment from SIDF is 50% of actual eligible expenditure
• SIDF charges no interest on loan, but charges a fixed amount for administrative charges retained from the first disbursement
Saudi Industrial Development Fund, SIDF
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SIDF Debt …..contd.
• Also bi-annual fee of 1% of loan amount is charged for Admin expenses
• SIDF has following security from the borrowers
First mortgage over fixed assets
Assignment of EPC contracts and Technology Rights Agreements
Assignment of Insurances
Guarantees from Partner’s shareholders
• As the security to SIDF is substantially more than loan amount, a Residual Rights Agreement has been signed by SIDF, Lenders and Borrowers
• SIDF also puts restrictions on payment of dividend.
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Bank Facility
• Bank Funding comprises of USD 259 Million :: Project Tranche
USD 21 Million :: Standby Tranche
• Repayment to start after one year of commercial operation, in quarterly installments for 6 years
• Two Off-take Collection Accounts ( for USD & Euro receipts ) are established with security accounts bank in London. Revenues from Basell Marketing Agreement will be paid into these accounts.
• In SPC’s operating accounts in Saudi Arabia accounts, the Lenders will not have security interests.
• Prepayments to SIDF are linked to prepayments to Lenders
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Bank Facility …..contd.
• Lenders have following securities from the borrowers
Assignment of Residual Rights
First charges over Off-take Collection Accounts and Debt Service Reserve Accounts and provisions as per ESRA (Equity Subordination & Retention Agreement)
Assignment of proceeds in relation to certain contracts
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Project Risk Mitigation during Execution
• Completion Risk (Time & Cost)
Cost overrun was reduced by awarding LSTK EPC Contract
• Technology Risk
Selected proven technologies for both the plants (PDH & PP)
• Operating Risk
Tasnee recruited several personnel of experience in similar plants from various parts of the world.
Developed a comprehensive training program with the licensors
• Feedstock Risk
SPC’s requirement of Propane, supplied by Saudi Aramco, is a small portion of Saudi Aramco’s overall production
• Market Risk
Market risk over ruled since PP has been one of the fastest growing polymers and the demand has been growing at rapid rate
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Plant Overview
PDH Plant
PP Plant
ABB
Catofin Technology
NTH
Novolen Technology
Propylene
Polypropylene ( 450 KTA, 2004)/ (730 KTA, 2009)
(Marketing by Basell & Tasnee)
ARAMCO
Propane
Tasnee
Plant Operations
Royal Commission
Land
Marafiq / SEC
Utilities
Propylene
From Cracker Plant /
(2009)
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Achievements
• Project Completion was within Time frame & Budget
• First Full Year (2005) Plant Production exceeded the
Design Capacity of 450,000 T
• Products well received by the Customers
• Received Integrated Certification for ISO 9001/ISO
14001/OHSAS 18001
• Initial Equity recovered within a short span of 2- 3
years
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SPC the Success story in a nutshell
Jun 2001
JV Signed
Mar 2002
Start of
Construction
Feb 2004
First
Production
Aug 2005
ISO 9001
ISO 14001
OHSAS 18001
Certified
441 KTA
445 KTA
2001 2002 2003 2006 2007 2005 2004
Sep 2001
Company
Formation
485 KTA
Jul 2004
Start of Comm.
Production
191 KTA
Sep 2003
SAP Go Live
720 KTA
Oct 2001
Ground
work Dec 2003
Plant
Pre-Commissioning
Jun 2003
Received Power
2008
483 KTA
2009
480 KTA
2010
671 KTA
2011
655 KTA
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Propylene from PDH Plant
R 1 R 2 R 3
180 KTA 270 KTA
Line 1 Line 2
R 4
Propylene from Cracker Plant
400 KTA Homopolymers, Impact Copolymers & Random
Copolymers
320 KTA Homopolymers
New Reactor added
Existing Set-up
PP Plant: Expansion Scheme
Project Feed Stock Prices –an overview
0.00
200.00
400.00
600.00
800.00
1000.00
1200.00
2004 2005 2006 2007 2008 2009 2010 2011 2012
USD
/MT
NapthaUSD / MT
PropaneUSD / MT
25
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1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Revenue 212 222 224 250 903 1535 2854 3241 7227 10037 10863 15989 19649 17921
Net Profit 30.5 33.8 43 54 136 317 370 693 661 601 519 1473 2441 1763
0
500
1000
1500
2000
2500
3000
0
5000
10000
15000
20000
25000
Net
Pro
fit
in M
M S
AR
Rev
en
ue
in M
M S
AR
• SAUDI POLYOLEFINES COMPANY FORMED
IN PARTNERSHIP WITH BASELL 2001
• TASNEE PETROCHEMICALS
MARKETING FORMED 2001
TASNEE ACQUIRED 66% OF
CRISTAL SHARE 2003
START-UP OF PDH/PP
PROJECT 2004
TASNEE AQUARIED
TASNEE PET. 2006
ACQUISTION OF
LYONDELL BY
CRISTAL 2007
CRACKER STARTUP 2008
PE PLANT STRATUP
2009
TASNEE
PETROCHEMICALS
FORMED 2000
TASNEE Performance
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Project Strengths
• Strong Sponsors
• Low Completion Risks
• Low Technology Risk
• Strong Economics
• Strong Financing Structure
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Conclusion
Highlights of Financing are: …..
• Competitive Raw Material Pricing
• Sound Financial Structure
• Committed Marketing
• Equity 30 %, Debt 70 %
• Debt Repayment in 3 Years of Commercial Operations
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Saudi Polyolefins Company (SPC)
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