Aramco seals deals in two facilities
Saudi state-owned firm takes stakes in petrochemical plants
PETALING JAYA: The state oil company of Saudi Arabia, Saudi Aramco, has taken up strategic stakes in two petrochemical plants in Pengerang as part of its estimated US$7bil investment in the project.
The oil giant will be taking up a 50% stake in a plant that produces polymers for US$900mil (RM3.8bil) from Petronas Chemicals Group Bhd (petchem) and also absorb the proportionate share of borrowings tied to the plant.
Following the deal, petchem will be left with a 50% stake in PRPC Polymers Sdn Bhd, which it acquired in November 2015.
Saudi Aramco has also sealed an agreement to take up a 50% equity interest and 50% of the shareholder loans in PRPC Refinery and Cracker Sdn Bhd from Petroliam Nasional Bhd (Petronas) unit, Petronas Refinery and Petrochemical Corp Sdn Bhd (PRPC).
The share purchase agreement for the refinery and cracker plant, which was first announced in February, was finalised on Sept 29, the same day as the polymer plant deal.
In the absence of details for the refinery and cracker plant deal, the total investments by Saudi Aramco for the two facilities is not known.
According to the announcement yesterday, the two stake sales to Saudi Aramco are inter-conditional, whereby the closing and termination of one agreement is dependent on the other.
It is easy to fathom why the two transactions are inter-conditional and tied to Saudi Aramco.
The oil firm will supply 70% of the crude for the refinery and cracker plant and the output will be the feed stock required to run the polymer plant.
Based on petchem’s announcement to the stock exchange, Aramco will take its portion of the shareholders loans in PRPC Polymers, which is still being constructed and due for operations in 2019.
petchem also announced that PRPC Polymers, after the divestment of a 50% stake to Aramco, will have a bridging finance loan of RM1.12bil. The borrowing is proportionate to petchem’s equity stake of 50%.
Saudi Aramco’s portion of borrowings from the external financing is estimated to be of the same value as petchem.
petchem said the divestment of the stake in the unit was mainly to share the project risks with Saudi Aramco “as an equal joint-venture partner” in an integrated project.
“petchem will have a positive cash flow impact by decreasing its capital expenditure commitment as a result of Saudi Aramco’s 50% participation in PRPC Polymers.
“The project is still at its construction phase and the risk will remain high until project completion
in 2019,” it said in an announcement to the stock exchange yesterday.
Subsequently, it added, the deal would provide the company with the financial flexibility to pursue other strategic growth projects.
petchem added that it would be able to leverage on Saudi Aramco’s experience in execution, implementation and operation of similar largescale and integrated petrochemical projects such as the Sadara Chemical Company.
According to petchem’s annual report, its capital commitment to its projects in Pengerang was RM9.3bil for 2016, lower than RM14.46bil in 2015.
With the entry of Saudi Aramco, the company’s capital commitment will be significantly lower.
There are few details available on the transaction related to the PRPC Refinery and Cracker plant, as Petronas owns the plant through its subsidiary, PRPC.
In November 2015, petchem had announced its entry into the Refinery and Petrochemical Integrated Development project with the acquisition of three companies, including PRPC
Polymers, from a unit under its ultimate shareholder, Petronas.
The other two companies acquired at the time were PRPC Glycols Sdn Bhd and PRPC Elastomers Sdn Bhd.
petchem later cancelled the elastomers project, but committed to carrying out the polymers and glycols projects, scheduled to kick off in 2019.
petchem acquired PRPC Polymers at an original cost of investment of RM8,000 based on a willing buyer-willing seller basis, and assumed the assets and liabilities of the company of about US$65mil.
PRPC Polymers has yet to commence operations, and recorded a net loss of RM57mil for the financial year ended Dec 31, 2016. Its net assets stand at RM1.3bil.
petchem shares closed one sen higher at RM7.30.