Saudi Petrochemicals - NCBC

Company descriptionOverviewEstablished in 2005, Yanbu National Petrochemical Company (Yansab) is 55%owned by SABIC which holds 51%. GOSI holds 9.2%, while a 35% stake is with thepublic. The company’s IPO in January 2006 was about 2.8 times over subscribedand the proceeds totaled SR5.63bn (USD1.5bn).Yansab has a total annual production capacity of more than 4mn mt ofpetrochemical products. Basic chemicals (olefins, aromatics and oxygenate)accounts for about 50% of the total product mix, while intermediates and polymerscontribute about 19% and 31%, respectively. On 12 July 2009, Yansab startedexperimental runs at its petrochemical complex in Yanbu Industrial City. Productionat its ethylene and mono ethylene glycol plants started during the month of July2009.While the current capacity is around 4mn mt per annum (mtpa), capacity expansionof 10-30% with minimal investments has been pre-designed into the complex. Forexample, the olefins cracker’s current capacity is about 1.3mn mtpa of ethylene,while the designed capacity is of 1.7mn mtpa. Similarly, the LLDPE and MonoEthylene Glycol plants have designed annual capacity of 500,000 mt and 800,000mt, however the current annual capacity is of 400,000 mt and 700,000 mt,respectively. The complex started commercial operations in March 2010 andcontributed to Yansab’s 1Q 2010 quarterly results.Project cost overruns bring total to over SR21bnWe believe the total project cost has increased to SR21.15bn (USD5.64bn) from theSR18.75bn (USD5bn) announced in 2005. The project has been funded with debtand equity split in a 70:30 ratio. Debt financing includes SR4.0bn from the PublicInvestment Fund (PIF), a loan worth SR5.95bn from Commercial and Export CreditAgencies and an Islamic finance tranche of SR3.18bn.Moreover, during 2009, Yansab received a term loan worth SR2.2bn from itspartner, SABIC. We believe this was to cover the increase in project cost and debtrepayments due during the year.27 April 2010 YANSAB – INITIATING COVERAGE44