Borealis sells Sines, Portugal petchem complex to Spain's Repsol

08 October 2004 12:05  [Source: ICIS news]

LONDON (CNI)--Danish-headquartered polyolefins producer Borealis said Friday it has agreed to sell its Sines, Portugal petrochemicals complex to Spanish energy group Respol YPF.

The deal, signed late Thursday night, is expected to be completed in late November or December, subject to regulatory approvals. It follows the end of lengthy negotiations originally aimed at forging a merger of the Iberian peninsula chemicals assets of the two companies.

Borealis' Sines complex consists of a cracker with 350 000 tonne/year of ethylene capacity, a 180 000 tonne/year propylene plant, a 145 000 tonne/year low-density polyethylene (ldPE) unit and a high density PE plant with a capacity of 130 000 tonne/year.

The physical assets and staff will transfer under the agreement. However, sales lists and customer names were not included in the deal.

Repsol and Borealis said the new agreement will increase Repsol's cracker capacity by 38% and its total polyolefins capacity by 28%, while polyethylene capacity will rise by 55%.

Borealis will concentrate production on four other sites, in Finland, Scandinavia, Austria and Belgium, and will retain a customer-service centre in Barcelona for the Iberian market, which was worth more than Euro400m ($496m) in 2003.

The Sines site buys raw materials from the nearby Galph refinery, and processes it into olefins and then polyolefins using non-Borealis technology.

Clive Watson

It has been regarded as "almost an orphan asset", said Borealis chief financial officer Clive Watson in a telephone interview with CNI.

During the transition period, which could last up to one year for some grades of polymer, Repsol will toll manufacture polymer for Borealis to sell in Spain. There will be logistics costs in supplying the Iberian market from other countries, said Watson, but that will be offset by other savings in not having the site.

Borealis will use the proceeds from the sale, which were not disclosed, to lower indebtedness. This process could see gearing fall from about 68% at the end of June 2004 to between 53% and 58% when the cash proceeds come through towards year end. Borealis spent about DM247m for the onsite cracker in an agreement with the Portuguese government signed in 1996. It has been modernised and upgraded extensively since then, said Watson, and he pledged to continue with programmes that are underway until the deal is closed.

By: Simon Robinson
+44 20 8652 3214

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