RIYADH, July 25 (Reuters) – Petrochemical firm Saudi Kayan 2350.SE said it was seeking bank financing with the help of main shareholder Saudi Basic Industries Corp (2010.SE) (SABIC) to cover a $2.4 billion rise in the building costs for a production complex.
Kayan has said that up to the end of March it had spent 35.4 billion riyals ($9.4 billion) on the construction of the Jubail-based giant complex, which it projects will have an annual production capacity of more than 4 million tonnes of petrochemical and chemical products.
“It is expected that the gross cost of the project will rise by approximately 24 percent or around 9 billion riyals ($2.4 billion),” Kayan said in a statement to the Saudi bourse.
“The company is working on necessary arrangements to obtain financing from one or several banks to cover the increase in costs and support from the main shareholders to ensure the completion of all plants in the complex within the fixed deadline,” it said.
Kayan Chairman Mutlaq al-Morished told Reuters the company would organise a loan with help from its shareholders, including SABIC.
“They (the shareholders) can either guarantee the loan for Kayan or they can borrow and pass on the funds to Kayan,” he said.
Last Monday, SABIC, which holds a 35 percent stake in Kayan, said it had no plans for a bond issue in the medium term as it had raised 8.25 billion riyals through two loans in June from state-run National Commercial Bank and Alinma Bank 1150.SE. It made the announcement after delaying a planned dollar bond in May. [ID:nLDE66I0LY]
“I cannot tell you if some of the funds SABIC obtained through these two loans will go to Kayan. They may do, they may not,” Kayan Chairman Morished said.
Kayan also said in its statement it had started trial production on Sunday at its olefins plant, which is part of the Jubail-based complex.
Kayan plans to start full commercial operations at 15 out of 16 units before the end of 2011, Mosaed al-Ohali, SABIC’s executive vice-president for manufacturing said last week. ($1=3.750 riyals) (Reporting by Souhail Karam; editing by Karen Foster) (souhail.karam@thomsonreuters.com; +966 1 463 2603; Reuters Messaging:souhail.karam.reuters.com@reuters.net))