GPCA '06: GCC petchems need non-bank finance

16 December 2006 14:36  [Source: ICIS news]

DUBAI (ICIS news)--Gulf Cooperation Council (GCC) companies will have to explore alternative financing methods to meet the high level of investment needed for the region's petrochemical industry, a senior industry official said on Saturday.

Over $40bn will be spent in the Gulf Cooperation Council (GCC) petrochemical industry by 2010, of which SABIC alone would invest at least $25bn from now till the end of 2009, Mutlaq H. Al-Morished, vice president, corporate finance, SABIC, said at the Gulf Petrochemical and Chemical Association (GPCA) forum on Saturday.

SABIC’s expansions and ambitious growth plans would require multi-million dollar project financings, which have historically been structured as hybrid corporate loans, he added.

He said that these spending initiatives would provide a significant opportunity for banks and Export Credit Agencies to participate in the sector’s explosive growth.

He also said that SABIC was committed to diversifying its financing strategies, and fostering innovate Shariah compliant Islamic financing instruments and investment products. 

Al-Morished highlighted the example of Yansab, whereby SABIC clinched the largest petrochemical project financing deal ever in the GCC, during the second quarter of 2006.

The salient feature of the financing of $3.5bn, which worked out to 70% of the estimated project cost, was that it comprised $850m in Islamic financing, the largest ever Islamic tranche in any project financing deal in the world.

He said that SABIC’s thrust for Islamic financing was evident not only in the Yansab deal but also through its debut sukuk (Islamic bond) issuance and its Murabaha facility, the three adding up to a grand total of $2.6bn.

By: Anuradha Rao
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