Problems at existing facility are set to delay expansion plans
Lenders on the $9.8bn PetroRabigh petrochemicals facility in Saudi Arabia are planning to write to the sponsors to express concern about the companys poor performance and major problems with the power plant associated with the scheme.
The decision to make a formal request for more information on what the exact problems at the plant are and how they will be rectified follows PetroRabighs failure to make a profit so far this year. Expectations are that it will struggle to do so in the rest of 2013.
On 18 September, the company, which is owned by Saudi Aramco and Japans Sumitomo, said it was terminating an agreement with Japans Marubeni and the local Acwa to operate an associated facility as an independent water, steam and power project (IWSPP). The move came after a second failure at the power plant, which is expected to have a significant negative impact on profit in the rest of the year.
The banks are also sending PetroRabigh a reservation of rights statement a legal letter informing the firm of the lenders rights in the event of a breach of the loan agreements.
In late September, banks that financed the construction of the PetroRabigh facility held a conference call to discuss the situation at the troubled plant. There is a broad spectrum of concern among the existing lenders, said one banker on the call. This is mitigated by the fact that Aramco, which controls all of Saudi Arabias oil sales, is backing the project, he added.
Banks have to do their jobs and monitor what is happening, but ultimately Aramco is there so no one is panicking yet, said another banker in the kingdom.
The ongoing problems are now starting to hit plans to develop a $5bn expansion of the scheme. There was a plan to start trying to raise the funding for the expansion before the end of this year, but that now looks unlikely, says one source in Riyadh. They dont want to start trying to raise more funding with so many questions remaining unanswered about what is happening with the first phase.
The expansion of PetroRabigh is already significantly behind schedule, after being postponed in 2011 as the sponsors reconfigured the scheme and conducted a new feasibility study.
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