Plan to keep pricing low on the project
The project sponsors on the $9.6bn Jubail refinery in Saudi Arabia are considering increasing the riyal-denominated debt from $1.4bn to $2bn to help keep debt pricing on the project low.
The high local currency liquidity in the Saudi banks has enabled Saudi Aramco & Total Refining & Petrochemical Company (Satorp), the joint venture company developing the project, to offer Saudi banks pricing that starts at under 100 basis points above the Saudi interbank offered rate (Sibor).
Saudi banks were offered a return of about 100 basis points above Sibor during the first three years of construction of the project, rising to about 150 basis points above Sibor after three years.
International banks were offered pricing slightly higher than the Saudi banks, with pricing expected to be under 200 basis points above the London interbank offered rate (Libor).
Under the original financing proposals, the $8.3bn debt for the project was split into a $1.4bn international bank tranche, a $1.4bn Saudi bank tranche, and a $2.2bn guaranteed loan from an undisclosed export credit agency. There is also $3.3bn in loans from the Saudi Industrial Development Fund and the Public Investment Fund.
The sponsors were also considering a bond issue to help fund the project and reduce reliance on bank debt. The bond may now be dropped given the low pricing offered on the riyal and dollar bank tranches.
Satorp is keen to complete the financing before the end of 2009.