JAC to start on mega project by year-end
US$2.3b aromatics complex to come on stream in 2011
Ronnie Lim, Business Times 10 Jul 08;
DESPITE some earlier financing hold-ups - no thanks to the credit crunch and also difficult market outlook - Jurong Aromatics Corporation (JAC) now expects to start construction of its mega US$2.3 billion petrochemicals project by year-end, officials told BT.
Once it completes financial closure - the cause of the project delay - this third quarter, it will start site-levelling. Piling work on the 1.5 million-tonne aromatics complex, which will be built near the upcoming LNG terminal on Jurong Island, is then expected to start before year-end.
The financing delay - JAC had earlier scheduled construction to start in early-2008, when it first announced the investment last October - means the complex will now only come on stream in late-2011.javascript:void(0)
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JAC explained that 'because of the poor credit environment and lenders' concern about the cyclicality of the petrochemical industry', the group has had to restructure its financing arrangements to meet these challenges. Another factor is said to be lenders' lack of familiarity with JAC's main sponsors.
The JAC consortium is 60 per cent owned by Jurong Energy Corporation - a group led by Vijay Goradia and MY Ling, both founding members of the Continental Chemical group.
The remainder 40 per cent is held by Swiss oil trader Glencore, South Korea's SK Energy and Kuwait's Ikarus Petroleum Industries (each holding 10 per cent), and Jiangsu Sanfangxiang Industrial Group (China's largest polyester producer) and Singapore's EDB International (with 5 per cent each).
While over one-third, or 37 per cent, of the project's US$2.4 billion cost will come from equity, JAC needed to secure US$1.55 billion worth of debt financing, of which it has so far obtained close to US$1 billion, or two-thirds.
This is largely thanks to a restructure of the project's original financing arrangements into a so-called 'club deal', where JAC can request specific borrowers to be in on the deal, or at least know who they are.
JAC director Ewe Ee Foong told BT: 'With approximately US$1 billion (of debt financing) already raised and having Royal Bank of Scotland (RBS), one of the world's largest financial services groups, as our coordinating lead-bank, JAC's plans are on track for construction to kick off later this year.'
One of the reasons for the financing delay was that JAC initially received in-principle credit approval from RBS and ABN Amro early this year, but because of the credit crunch plus integration of the two banks, JAC only received the final credit from RBS in May, the company explained.
'Actual financing really started in April, and within one month, JAC has now got three other banks, namely, KBC, Intesa and WestLB joining the ranks, alongside Export-Import Bank of Korea which is providing 40 per cent of the debt financing,' it added.
JAC is currently in talks with several other banks, and the mandated lead arrangers are targeted to be formed by mid-July, before extended lead syndication, which will be coordinated by RBS, thereafter.
'Both JAC and RBS are confident that the financial closure will be completed by the third quarter,' the company said in an email response to BT queries.
JAC's Mr Ewe added that 'our feed supply is fully locked up and our products are fully subscribed for. JAC has secured long term agreements with key international players, each of them leaders in their own fields. This has made the deal attractive to lenders'.
He was referring to JAC's deals like the US$10 billion-plus, combined feedstock/end-product one with British Petroleum, under which the oil major will supply it with raw materials, while some of JAC'S products will go to BP. JAC is also getting some of its feedstock from Glencore and SK Energy, which are its shareholders.
The three feedstock suppliers plus Petrochemical Corporation of Singapore and several others like Mitsui Chemical are understood to have committed to taking about 75 per cent of JAC's output.
JAC's aromatics complex will produce 800,000 tonnes of paraxylene, 200,000 tonnes of orthoxylene and 450,000 tonnes of benzene annually. It also has a condensate splitter - Singapore's first new niche refinery - which will produce about 2.5 million tonnes of oil products.
