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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)