Allen & Overy in Hong Kong has advised the project company, CNOOC and Shell Petrochemicals Company Limited, on the US$4.3 billion CSPC Nanhai Petrochemicals Project in China, a joint venture between China National Offshore Oil Corporation (45%), Royal Dutch/Shell Group (50%) and Guangdong Investment and Development Company (5%). The deal was signed on 1st August, 2003.
On completion the project which is expected to produce 2.3 million tons of products, generating around $1.7 billion in annual sales. Over 90% of the complex’ sales will be inside the PRC, focused mainly in Guangdong Province and the eastern seaboard.
40% of the total project cost will be funded by shareholders’ equity and 60% from limited recourse debt. The debt financing comprises:
* US$1.977 billion (equivalent) sourced from PRC banks by way of senior secured RMB and US$ base and standby debt facilities; and
* US$700 million in offshore financing provided by eight international
commercial banks, of which US$400 million is sourced from five export credit agencies (ECA) from Germany, Japan, the Netherlands and the USA.
This project is significant as it:
* It is the largest Sino-foreign joint venture project financing and
the largest private sector project financing in Asia.
* It involves an innovative guarantee provided by the project
sponsors, CNOOC and Shell, which steps-down in percentage terms and eventually falls away as the project is completed and meets certain financial and other tests. Standby sales and feedstock supply arrangements were also required to mitigate the feedstock supply and sales risks.
* It involves the largest ECA financing to date in the PRC, with the
ECAs and banks accepting market risk in the cyclical petrochemicals sector.
Simon Black, Asian Projects Group partner commented, “We are delighted to see the financing successfully closed and congratulate all parties on their tremendous efforts. Our team has been involved in the overall structuring of the project and its financing including the finance structure, PRC regulatory matters, foreign exchange and security matters, the product marketing aspects and construction aspects. Closing a complex project financing in the PRC requires equal measures of patience, innovation, commitment and humour.”