SECCO's Ground Breaking Greenfield Finance Deal For Shanghai Petrochemical Park

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The following is an advisory by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). SECCO, a Sino-foreign equity joint venture recently formed by BP Chemicals East China (50%), China Petrochemical Company/Sinopec (30%) and Sinopec Shanghai Petrochemical Company/SPC (20%), is developing a petrochemical complex in the Shanghai Chemical Industrial Park.

The project will include world scale ethylene cracker and derivative production units with production from the plant including 900,000 tons a year (t/y) ethylene, 500,000 t/y aromatics, 150,000 t/y butadiene, 500,000 t/y styrene, 300,000 t/y polystyrene, 600,000 t/y polyethylene, 250,000 t/y polypropylene, and 260,000 t/y acrylonitrile. When the complex comes on stream in 2005, it is expected to be the largest ethylene production facility in China.

The total investment cost of the project is equivalent to $2.7 billion. Sources of funds to be used by SECCO include registered capital and debt finance. Registered capital is equivalent to $901 million, which will be provided by SECCO investors pro rata to their shareholding. Two foreign banks, HSBC and the Industrial Bank of Japan, will participate in the $1.8 billion loan facility, along with nine Chinese banks led by the Bank of China. The loan package consists of a $708 million term loan and $963 million of working capital. The price of the loan is said to be the most competitive and the largest in China since 1997. WTO membership will cause increasing pressure to open domestic currency business to foreigners.

The signing of the SECCO loan agreements has created several market precedents. It marks the first time that all required financing commitments have been received for a landmark, large scale, Sino-foreign Greenfield petrochemical complex. The signing also represents the first time Peoples Republic of China banks have provided US$ and RMB (Yuan Renminbi) committed finance in such volumes to a large scale project. Global Finance magazine awarded SECCO the Finance Deal of the Year for energy' award in 2001.