LONDON (Project Finance International) – Aramco and its joint venture partner on the new US$10bn Yanbu refinery project ConocoPhillips (COP.N) have received a slow response from international banks on the proposed financing for the project. A bank group of 6-8 banks is putting put together on the international tranche of the financing, although others could come in later.
The market has been slower to respond as Aramco currently has a similar size deal in the market, the new Jubail scheme which is being developed in joint venture with Total (TOTF.PA). Fifteen international banks plus six local Saudi banks have been mandated to arrange a US$2.5bn dollar loan tranche on the Jubail deal. However those banks have yet to hear how large their allocations will be on the export credit agency backed tranches and on the local riyal tranches. This has made some reluctant to put forward commitments on the Yanbu scheme. Another factor is loan pricing.
Aramco is seeking margins on Yanbu below the 150bp to 190bp over libor level it has set on Jubail. The bank bid deadline for Yanbu was March 19th. The Jubail deal was bid out to banks last September. Given Aramco’s pull as a significant corporate it is assumed both deals will be financed. The local banks are currently very liquid. However the process is likely to take longer than expected. The planned local sukuk financing for the Jubail scheme has yet to emerge in the market.
The Jubail deal was launched to the bank market last year at the same time as two other mega energy project financings – Gazprom’s (GAZP.MM) Nord Stream and ExxonMobil’s (XOM.N) Papua New Guinea LNG, both of which have already signed. Both Jubail and Yanbu will have finance from local institutions SIDF and PIF plus funds from the various ECAs, linked to contracts on the schemes. Japan’s JBIC will play an important role on J 1969381737
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