In early June, international and local banks were sent a teaser to gauge their interest in participating in the financing of the integrated Rabigh refining and petrochemicals project. Apparently they were amused. Despite the tendency of foreign banks to pass up Saudi project finance opportunities in favour of the easier markets of Qatar or Oman, a strong response was reported. The project's location seems to have been eclipsed in the minds of potential lenders by the impeccable credit record of the sponsors, Saudi Aramco and Japan's Sumitomo Chemical Company.
In light of the project's escalating cost, now put at around $8,000 million rather than the $4,300 million originally envisaged, the sponsors need all the cash they can lay their hands on. Fortunately, other lenders are also coming forward. The current split will see the Public Investment Fund providing $1,000 million, Japan Bank for International Co-operation (JBIC) extending $2,500 million - its biggest ever project loan to the region - and commercial lenders contributing $2,000 million. The debt package will, contrary to initial expectations, also finance the captive independent water, steam and power project (IWSPP). According to the tentative schedule sent to banks, the preliminary information memorandum (PIM) was to be sent out by the end of July. However, bankers now regard this as highly unlikely. 'The PIM won't come out until a final decision has been taken by JBIC, which has yet to happen,' says one international banker. 'I can't see it being issued before the end of the summer.' The sponsors are looking at a blend of conventional and Islamic finance, with a tenor of about 15 years, and banks were sounded out on underwriting positions of $150 million and final hold positions of $100 million. Sumitomo-Mitsui Banking Corporation is acting as financial adviser. The teaser documents highlighted the strength of the sponsors, the existence of long-term feedstock and offtake agreements, firm completion guarantees and the buoyant state of the global refined product and petrochemical markets. The pitch seems to have worked. 'This could be the project to test the Saudi market and to entice in the international banks, which want to diversify and anticipate a yield pick-up,' says the banker. 'I can see front-end pricing ending up not far off similar deals in more popular regional markets.'
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