Finance package in place for $5 billion Yansab petrochemical project

ECGD, the UK’s official export credit agancy, is pleased to announce its support for two major UK export contracts related to an award-winning Saudi Arabian petrochemical “mega-project.”

The Yansab (Arabic for “smooth”) complex, which will be built on the Red Sea coast in the industrial city of Yanbu by SABIC (Saudi Basic Industries Corporation), was recently named Euromoney Middle East Petrochemicals Project Finance Deal of the Year 2006 by Project Finance Magazine.

This is ECGD’s first civil deal in Saudi Arabia. Its support is on behalf of two UK exporters:

Foster Wheeler Energy Limited of Shinfield Park, Reading, is acting as the overall programme management contractor for the project, including preparation of front-end engineering design, bid analysis and award recommendations for engineering, procurement and construction (EPC) contractors, and working in an integrated team with Yansab to manage the EPC phase.

Fluor Ltd of Camberley, Surrey, will design, engineer, procure and plan the construction of the utilities and offsite facilities, pipelines, and port storage, and will also provide training for engineers, operators and maintenance personnel.  Fluor Ltd. is the Exporter of Record for certain UK eligible goods and services, effectively documenting and capturing necessary UK spend for this key transaction.

“We were extremely pleased to participate in this important export order,” said David Seaton, president of Fluor Corp’s Energy and Chemicals business group.

“The order was facilitated by the availability of a suitable credit package provided by ECGD. We see ECGD's support as continuing to play an important role in this type of business, with its involvement providing overseas buyers with the kind of reassurance they need to commit to long-term complex mega-projects such as Yansab.”

SABIC’s Corporate Financing Manager Mohammad AI-Ghamdi added:

“The ECAs played a vital role in supporting the international bank participation by being extremely flexible and putting in place a highly innovative financing structure successfully and quickly. ECGD played a particularly important role in finding solutions to challenges the project presented.”

The Yansab complex, which is due to start production in mid-2008, will contain the world's biggest ethane ‘cracker’ and will be one of the world's largest petrochemical complexes. It will comprise a series of linked plants, producing 1.7 million tonnes of ethylene and propylene and 2.3 million tonnes of derivative polymers and chemicals per year. SABIC will market these offtake products - primarily to buyers in the Far East and the Indian sub-continent.

The Yansab project is the largest ever ‘greenfield’ Project Financing in Saudi Arabia. Despite this, participation in the bank financing tranche was considerably oversubscribed. ABN AMRO acted as Mandated Lead Arranger, syndicating the deal to a well diversified group of local/regional and international banks.

Nadine Budgen of ABN AMRO Structured Loans said:

“Any landmark, innovative transaction like this often brings increased demands on the ECAs involved, and the fact that ECGD worked tirelessly to meet these demands on Yansab is testament to the hard work, co-operation, flexiblility and expertise of its underwriters. The financial structure agreed by ECGD included an extremely complex security package.”

ECGD is providing $150m of support alongside SACE (the Italian Export Credit Agency), which is providing $550m of support.

The innovative financing contains the largest Islamic financing tranche ($850m) in any multi-sourced Project Financing to date. The Saudi “Public Investment Fund” is also providing some $1bn of finance, with total debt amounting to $3.5bn.

Yansab itself is a Saudi joint stock company and following a public subscription process, Saudi citizens own 35% of the company. The IPO was described as the largest of its kind in the Saudi market, where half of eligible local nationals have participated in the IPO.

The financing structure is innovative – for any market – and ECGD is very pleased that the commitment, vision and cooperation demonstrated by all parties  enabled such a large-scale financing to be put in place so successfully and so quickly.

Yansab will directly provide 1500 local jobs, but it will also help the development of key secondary and tertiary associated industries in Saudi Arabia as part of the national strategic drive to diversify the oil-centred economy .

Mohammad AI-Ghamdi said:

“Saudi Arabia welcomes the expertise UK companies and financial institutions bring to these projects. Recent developments in our economy further emphasise the opportunities available to UK exporters in other sectors, such as construction, telecoms, agriculture, power, education and water. I look forward to seeing future projects create more links between our two countries.”

Further SABIC petrochemical "mega-projects" are planned and ECGD hopes that the ground-breaking financing structures developed on Yansab will prove an invaluable framework for these new deals and assist UK exporters to win further business.

British exporters have a strong, long-standing relationship with Kingdom of Saudi Arabia and with some $600bn of total investments projected by 2025 (across all industrial sectors), UK companies will be wanting to keep a close eye on the unprecedented level and range of Saudi Arabian opportunities.

Hydrocarbons form the backbone of these new opportunities. All industrial sectors are benefiting from sustained high oil prices (e.g. power, construction, water, telecoms, agriculture, education, etc). With, for example, WTO membership, the streamlining of investment regulations and an ongoing privatization program, ECGD is very pleased that the Saudi authorities have welcomed the involvement of UK companies.

NOTES TO EDITORS

1. ECGD, the Export Credits Guarantee Department, is the UK's official export credit agency. A Government Department reporting to the Secretary of State for Trade and Industry, it has nearly 90 years' experience of working closely with exporters, project sponsors, banks and buyers to help UK exporters of capital equipment and project-related goods and services. ECGD does this by providing:

•insurance against non-payment risks to UK exporters;

•guarantees for bank loans to facilitate the arranging of finance to buyers of UK goods; and

•insurance against political risks to UK investors in overseas markets.

2. More information about ECGD, including other press releases, visit the website at www.ecgd.gov.uk.

3. SABIC (www.sabic.com) is the biggest company in the Middle East outside the hydrocarbon production sector, with major interests across the petrochemical, fertilizer and steel sectors and a global presence. Yansab will be a flagship affiliate for the company and forms a key part not only of SABIC’s impressive growth plans but also of Saudi national development plans.

4. Fluor Corporation (NYSE: FLR) provides services on a global basis in the fields of engineering, procurement, construction, operations, maintenance and project management. Headquartered in Irving, Texas, Fluor is a FORTUNE 500 company with revenues of $14.1 billion in 2006. For more information, visit www.fluor.com.

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