UPDATE 1-Kuwait cancels $17 bln JV with Dow Chem - Rai TV Sun Dec 28, 2008 9:13am EST
KUWAIT, Dec 28 (Reuters) - Kuwait's cabinet has cancelled a deal to form a $17.4 billion petrochemical joint venture with U.S. firm Dow Chemical (DOW.N), which has met with opposition in parliament, Kuwaiti television station Al Rai said on Sunday.
There was no immediate official confirmation of the report.
The private station said in a news flash the cabinet had scrapped the deal as a result of the global financial crisis and its impact on the OPEC producer which no longer saw any benefit from the joint venture.
State-run Petrochemical Industries Co (PIC) signed a deal earlier this month with Dow, the largest U.S. chemicals maker, to launch the joint venture, K-Dow Petrochemicals. PIC was due to pay Dow $7.5 billion for its stake.
The deal was especially significant for Dow, as it planned to use the proceeds from it to repay a large part of the $13 billion in debt it will have to shoulder once its acquisition of Rohm & Haas (ROH.N) closes in early 2009.
Dow and other chemical makers around the globe face one of the worst slumps ever in chemical demand, with recession in most developed countries and a sharp slowdown in emerging economies which have been the sector's main drivers of revenue growth in recent quarters.
The deal has angered some Kuwaiti parliamentarians who say the project is not economically viable in light of the global financial crisis and slumping petrochemical sales.
Last week, deputies of the liberal Popular Action Bloc threatened to question Prime Minister Sheikh Nasser al-Mohammad al-Sabah unless the government scrapped the Dow deal.
A move to question the prime minister on another issue prompted a cabinet resignation in November, but the country's ruler re-appointed Sheikh Nasser, his nephew.
The deal, part of Dow's strategy to reduce its exposure to the cyclical nature of the commodity chemicals business, was announced in December 2007.
Kuwait and Dow lowered the value of the joint-venture by more than 8 percent to $17.4 billion earlier this month after the Gulf Arab state had asked to cut its contribution in light of a sharp slowdown in global demand. (Reporting by Ulf Laessing; Editing by Jason Neely)
Now with KDOW gone K-boom, what will happen to all those sites and all those people who were to go over to KDOW ?? I think the list of 20 plant clousers, 180 plant shuttered, and 5000 people laid off is going to be revised (upward)! I hear "Chainsaw-Bill" sharpening the blade.....
Interesting that the Kuwait Times has reported today that some members of the Kuwait Parliment were unhappy with $850 MM of "commissions" paid to selected leaders in the Kuwaiti Oil Ministry. Some of the people receiving them might be open to Kuwaiti criminal charges. Andrew L, maybe if you had not paid these these "commissions" to these people you would not have to spend $700 MM to get rid of 10,000 employees and contractors during the first quarter of '09. I hope the US Dept. of Justice/Commerce is watching this. You might be looking at a new home somewhere in a US federal prison.
It will depressing unless it forms the basis to unravel that ridicules ROH deal. Devil is in the details and I wonder if inability to get financing is part of that. Our jerk CEO may have had a bridge loan committment for the billions needed between the proceeds from K Dow (now known as KaPOW)and the ridicules 78 per. I just cannot imagine anyone is going to fund another 7.5B now. One more thing, the 2.5B break up figure bantied about here is only effective if the deal stops AFTER Jan 1st. Kawait beat that by a few days.
I hope our CEO is taking massive amounts of Malox this AM or might I suggest arsenic.