Dow’s Libya JV has long-term value - analysts

19 April 2007 17:52  [Source: ICIS news]

TORONTO (ICIS news)--Dow Chemical’s planned joint venture in Libya is a modest near-term positive but its longer-term potential lies in possible petrochemicals expansions in the North African country, analysts said on Thursday.


“Should the venture build a world-scale 900,000 tonne/year ethane cracker using low-cost Middle East ethane, assuming a 50% joint venture, we believe that the value to the Dow shareholder is in a range of $1.50-2.00 per share,” JPMorgan said in a research note to clients.


The analysts said that the Libyan operations were currently relatively small, with a 330,000 tonne/year ethylene naphtha cracker and capacities of 170,000 tonnes/year of propylene and 160,000 tonnes/year of polyethylene.


Deutsche Bank said in a note to clients that Dow may have obtained good terms from Libya for the joint venture.


Since Dow was the first US chemical firm to invest in Libya since the US lifted sanctions in 2004 and Libya continued to strive to reintegrate into the global economy, Deutsche said it believed Dow received fairly good terms on its investment.


Both Deutsche and JPMorgan said the Libya venture was consistent with Dow’s “asset light strategy” to improve commodity chemicals earnings through access to low-cost, advantaged feedstocks.


Dow appeared to be the partner of choice of Middle East countries keen on expanding downstream chemical industries.


Apart from Libya, Dow has partnerships in Kuwait, Oman and Saudi Arabia, the analysts said.


Dow's shares were priced at $45.11/share, down 0.42% in Thursday morning trading in New York.


By: Stefan Baumgarten
+1 713 525 2653

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