EQUATE: joint venture gets rolling

23 February 1996

The new petrochemicals complex in Shuaiba is being built by Equate Petrochemical Company, a joint venture between the state-owned Petrochemical Industries Company and the US' Union Carbide, both of which hold a 45 per cent stake. A 10 per cent stake has been taken by Bubiyan Petrochemicals Company, a $50 million public shareholding company established in June 1995. The complex is due to come on stream by July 1997.

The US' Fluor Daniel is project manager for the new complex. The following major construction contracts were awarded in 1995:

The US' Brown & Root has the contract to build the ethane cracker, which will produce 650,000 tonnes a year (t/y) of ethylene. Estimated contract value: $450 million.

Italy's Snamprogetti was awarded the contract to build the 450,000-t/y polyethylene plant in November last year. Estimated contract value: $170 million.

Italy's Foster Wheeler Italiana has the contract to build the 350,000-t/y ethylene glycol plant. Estimated contract value: $165 million.

The local Ahmadia Contracting & Trading Company is carrying out architectural services on the complex including the construction of Equate's headquarters. Estimated contract value: $20 million.

In late January a group of Kuwaiti, regional and US banks was unexpectedly awarded the mandate to raise $1,200 million of project finance to build the complex. Financing for the scheme was originally expected to come from a group of export credit agencies led by the US' Export-Import Bank (Ex-Im Bank).

It is understood that the loan package was arranged by National Bank of Kuwait (NBK) and underwritten by the following institutions:

US banks: Chemical Bank, JP Morgan & Company and Citibank.

Kuwaiti commercial banks: NBK, Gulf Bank, Commercial Bank of Kuwait, AlAhli Bank of Kuwait, Burgan Bank and the Bank of Kuwait & the Middle East.

Regional banks: Gulf International Bank, Gulf Investment Corporation, Arab Petroleum Investments Corporation, The Arab Investment Company and Arab Banking Corporation.

A further $200 million tranche of financing is being underwritten by Kuwait Finance House, an Islamic financial institution.

The $1,200 million loan package is syndicated in two parts. The first, worth $500 million, matures after 10-and-a-half years and is syndicated in Kuwait. The remainder, syndicated by regional and US banks, matures in eight-and-a-half years.

The loan is priced at 1 and 5/8 percentage points above the London interbank offered rate (Libor) if the project is completed by 30 September 1998. If the work continues beyond that date, the loan will be charged at 1 and 7/8 percentage points above Libor. Working capital, which is denominated in Kuwaiti dinars, is priced at percentage points above the Kuwait interbank offered rate (Kibor).

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