Aramco JV not to impact Dow's credit rating - S&P

15 May 2007 10:33  [Source: ICIS news]

MUMBAI (ICIS news)--Dow Chemical’s announcement of a joint venture (JV) with Saudi Aramco would impact neither its A-/stable/A-2 rating nor its outlook, Standard & Poor’s (S&P) said on Tuesday.

 

US-based Dow signed a memorandum of understanding (MoU) with Aramco, the world’s largest oil exporter, to build a world-scale integrated chemicals and plastics production complex at Ras Tanura in Saudi Arabia.

 

The project, valued at $22bn (€16.2bn), would require a sizeable equity investment from the US major, which is likely to consume a significant portion of the company's cashflow during the next several years, S&P said.

 

The credit rating agency said Dow's 2006 discretionary cashflow of $1bn would decline as the petrochemical cycle is expected to enter a downturn by the end of the decade.

 

S&P added a note of concern and said that the project is likely to be financed with a more aggressive capital structure than Dow's current balance sheet, particularly if the JV is not able to deleverage the project in the years following its completion in 2012.

 

($1 = €0.74)

By: Aarti Kapoor
+65 6780 4359

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