Project FinancingSaudi Ethylene & Polyethylene Co. (SEPC)

Emad Khalifa Al-HajiGM Finance and Business Planning

Tasnee Jubail Complex

GCC Project Financing Meeting

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Tasnee Introduction Tasnee is a Saudi Joint Stock Company established

in Year the 1985.

Managing a diversified investment of more than

SR33 billion in various business sectors, with total

turnover of SR11 billion as of Y2009.

In the year 2000, decided to ‘Construct and Own’

Petrochemical Plants in Al-Jubail Ind. City.

First investment, PDH and Polypropylene Plants of

450 KTA Capacity each, completed in Y 2004.

PP expansion to 720KTA was completed in Y2009 to

be one on the largest PP producer in the region.

Second Project investment was an Integrated

Ethylene & Polyethylene Plants with total

production capacity exceed 2.1 million TA.

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Project Sponsors

Saudi Ethylene & Polyethylene Company - SEPC

Tasnee 45.34 %Sahara 24.41 %GOSI 5.25 %

Saudi Shareholders

Foreign Shareholder

Lyodellbasell25 %

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Project Overview

Ethylene PlantEthylene Plant

Polyethylene UnitHDPE

Polyethylene UnitHDPE

Polyethylene UnitLDPE

Polyethylene UnitLDPE

Linde

Technology

Basell

ACP Technology

Basell

Lupotech Technology

Saudi AramcoEthane Propane

Ethylene

HDPE

400 KTA

LDPE

400 KTA

Propylene

285 KTA

Ethylene

200 KTA

Ethylene

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Intended Products - HDPE

Film Grade

Pressure PipeGrade

Blow MouldingSmall

Blow MouldingMedium

Blow MouldingLarge

SMALL BLOW MOULDINGApplication in small container, Packaging

FILM GRADEApplication in carrier and Garment bags

PIPE GRADE Application in drinking water pipes, sewage and gas transportation lines.

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CableInsulationGrade Heavy DutyFilm

Hygienic Film

High ClarityFilm

GP

Intended Products - LDPE

• Food packaging.• Laboratory containers. • Computer components.• Medicine field.• Dispensing bottles.• Plastic bags.

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Investment Advantage in Gulf Region

Availability of Oil & Gas resources and related industries, has created great business opportunities.

Strong government commitment to derisively the NDG income resources.

Distinguished geographic location closer to the East & Fareast and European markets.

Booming Project Finance Industry has resulted in competent and competitive financing resources.

Steady growth in Global Market Demand on the basic and primary industrial materials.

Established regulatory laws that helped to attract Private Investors (Local and Foreign).

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Investment Advantages in Saudi Arabia

Strong government support by providing feedstock and Utilities at attractive prices, government loans, customs and Taxes waivers etc.

Creation of Industrial cities with strong infrastructure foundation for manufacturing and supporting industries.

Sufficient Power and Industrial Water Requirements.

Availability of experienced resources.

Largest Project Financing Market in the Middle East.

Steady evolution of the legal framework by the Government has facilitated to attract more foreign investments.

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Investor Investor in Saudi in Saudi ArabiaArabia

Investor Investor in Saudi in Saudi ArabiaArabia

Industrial Cities Infrastructure

Feedstock & Utilities Cost

Advantageous

Availability of Government & Commercial

Loans

Evolving of Government

Investment Laws

Experienced resources

Investment Advantages in Saudi Arabia

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SEPC Project Financing Alternatives Ongoing Industrial Boom has stretched the financing capacity of

Commercial Banks in the Region.

Project Sponsors have evaluating other commercial funding options such as Export Credit Agencies (ECA) , which are more economical.

Creation of complex Financing Structure, where different financing tranches are linked together.

Common Term Agreement (CTA) concept would be helpful in compiling different Loan agreements terms and condition in one agreement.

Disadvantage of multi-sourced financing is the complexity of the terms and conditions.

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SEPC Financing Structure

30%

13%16%

41%Equity

SIDF Debt

PIF Debt

Banks and ECAs

Estimated Project Cost is USD 2.5 Billion

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Sources of Government Loans

Saudi Industrial Development Fund is providing loans to industrial investment along with technical, administrative, financial and marketing advices and it is affiliated to Ministry of Finance.

PIF established to provide financing to commercial projects which are strategic for the development of the national economy and it is affiliated to Ministry of Finance

SIDF grants short/medium term loans up to SR 600 Million for each project and charges no interest, but fees for administrative expenses.

PIF grants Long term loans up to $400 Million and following the commercial banks loan structure but with attractive rates.

Total government loans obtained was $720 Million.

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Sources of Commercial Banks and ECA Loans Commercial Banks: Leading foreign and local banks were participating in

SEPC financing structure, total Commercial loans received were $457 Million including working capital.

o Saudi British /HSBC/SAMBA Financial Group/ Saudi Fransio Calyon, London / Societe Generale, France/West LB, London/ Royal

Bank of Scotland. ECA’s: private or semi-governmental bodies that extends credit to local

suppliers and provide necessary Guarantee (buyer receives good or service in advance and makes payment later, as well as provide insurance for export. Total ECA’s loans received were $730 Million.

o HERMES (Germany), SACE (Italy), KEXIM/KEIC (South Korea). Project Information Memorandum was issued to Potential Lenders in

September 2005, and Loan Agreements were signed in June 2006. Bridge loan were arranged until Financial closure was achieved in Dec

2006 before the depletion of equity money.

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Success Factors

Promoting safety culture.

Strong Sponsors commitment from both owners and partners side.

Early identification of project scope.

Experienced EPC Contractors.

Setting dependant project organization IMT with experienced and

diversified team.

Successful loan bridging strategy.

Strong Financing Structure, and timely completion of financial closure.

Early preparation for plant operation activities. Project completion on schedule and within budget.

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Best Deal Award for SEPC Financing SEPC’s Financing has been

awarded ‘Best Deal of the Year 2006’ by Project Finance International, a leading publication in Project Financing

The Award is for Petrochemical Sector in Europe, Middle East and Africa

SEPC won the award ahead of the projects sponsored by Dow Chemical, Saudi Aramco, SABIC, Kuwait Petroleum, Oman Oil Company and LG Group

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Tasnee Main Ranking

11stst Industrialization Joint-Stock Wholly Owned by Private Sector 1985

1313thth Largest Saudi Company

22ndnd Largest Global Producer of Titanium Dioxide

22ndnd Largest Saudi Industrial & Petrochemical Company

11stst Saudi Company of The Year 2008

11stst

TopTopProject Finance Award 2006

Best Work Environment in Saudi Petrochemicals 2008 & 2009

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Global Impact / challenges of project Financing Some of the major factors that impact the project financing are:

World wild recession and the impact of the financial crisis.

The exposure of local banks overseas assets to the financial crisis (subprime mortgage ) has limited the banks financing capabilities.

Bank adoption of stringent lending policies has limited banks growth.

Drop in oil prices limited the government spending which has resulted

in slowing the domestic growth.

Drop in demand for the basis building and manufacturing materials has resulted in major prices turn down and limited growth opportunity.

Changes in Project Economics

Thank You!