KUWAIT - Financing.

The financial advisors for the Equate venture were JP Morgan and Chemical Bank of the US and National Bank of Kuwait (NBK). PIC contracted KPMG Masoud & Co. in September 1994 to manage the BPC share issue. The project's total costs - excluding PIC's polypropylene plant and related copolymers unit - was put at $1.93 bn. Of this, financing came from equity worth $730m and a syndicated loan worth $1.2 bn. In late June 1996, NBK and Gulf Investment Corp. (GIC) agreed to underwrite $540m of political risk insurance for UCC's stake in the project.

The $1.2 bn loan agreement was signed in Kuwait on Sept.15, 1996. The package was made up of two parts: the first worth $500m, provided by Kuwaiti institutions and the second, worth $700m, coming from GCC and international institutions. Included in this was a $200m Islamic loan arranged by Kuwait Finance House, with $100m provided for each of the first and second parts of the package. Of the $200m Islamic loan, $120m was underwritten by the local Islamic finance firm, The International Investor. Apart from the financial advisors of Equate, the institutions which arranged the loan and underwrote debt were Chase Manhattan and Citibank from the US side. Regional institutions involved included Gulf International Bank, GIC, Arab Petroleum Investments Corp. (Apicorp), Arab Banking Corp. and Arab Investment Company. Kuwaiti commercial banks involved, apart from NBK, were Gulf Bank, Commercial Bank of Kuwait, Al Ahli Bank, Burgan Bank and Bank of Kuwait and the Middle East. (Prior to arranging the loan, Kuwait had negotiated with US Ex-im Bank, Hermes of Germany and SACE of Italy to guarantee the funds. But the conditions set by these export credit agencies were considered too stringent and Kuwait abandoned that option).

The whole $1.2 bn loan was re-negotiated in mid-1997, however, as interest rates on international money markets were dropping way below 1996 levels. With the help of its financial advisors, Equate was able to get the interest margin on the loan halved to 80 basis points over Libor under an agreement signed in September 1997.

Most of Equate's output is being marketed abroad by a local subsidiary of Fritz Companies of the US. This is under a three-year contract signed in August 1997. The local unit is a JV with a Kuwaiti firm, Gulf Maritime General Trading & Contracting Co. Domestic marketing is done by Bubiyan (BPC).

The 100,000 t/y polypropylene plant at Shuaiba was completed in September 1997 at a cost of $166m. The EPC contract for it was awarded in February 1995 to Toyo Engineering of Japan. UCC's Unipol is the process for the plant. Providing feedstock for the polyolefins unit of the Equate complex, this is fully owned by PIC.

Toyo's EPC contract included maintenance and the connection of this plant to the Equate complex and to PIC's plants in Shuaiba which are producing fertilisers, salts and chlorine. Apart from feeding Equate's polyolefins unit, the polypropylene plant is used for the manufacture of furniture, films, toys and electronic and electrical products. Its feedstock is provided by pipeline from a revamped FCC at Mina Ahmadi refinery. A unit at the polypropylene plant producing copolymers out of 6,000 t/y of ethylene is supplied by Equate.

In the original 1990 plan, the complex was to include an MTBE unit and an aromatics plant to produce polystyrene, styrene monomer, styrene butadiene and the orthoxylene/paraxylene aromatics.