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Dow's JV Finances Sadara Project

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Dow Chemical (DOW) announced that Sadara Chemical Company, its joint venture with Saudi Arabian Oil Company (Saudi Aramco), has secured main financing for the Sadara project. Sadara Chemical has entered into agreements with export credit agencies, commercial banks and the Public Investment Fund of the Kingdom of Saudi Arabia for roughly $10.5 billion of project financing.

The main financing supplements around $2 billion raised through a Sukuk issuance in Apr 2013, bringing the total Sadara project financing to roughly $12.5 billion. The funds raised will be used for the construction and start-up of a world scale chemical complex in Jubail Industrial City II, Kingdom of Saudi Arabia.

The complex will have 26 manufacturing units and will include flexible cracking capabilities. Sadara is expected to produce more than 3 million metric tons of high-value performance plastics and specialty chemical products. Sadara’s first production is expected to commence in the second half of 2015, with full production starting in mid-2016. Financial close of the project financing is expected to occur in the third quarter of 2013.

Dow has formed the joint venture to ensure long-term profitable growth in its downstream, innovation-driven businesses and also in the fast-growing regions such as Asia Pacific, the Middle East and Africa, and Eastern Europe. The joint venture is expected to generate EBITDA margins of 35%-40% and reap average equity earnings of $500 million annually during the first ten years after its start-up. This will also enable Dow to be at a competitive cost position.

Dow currently holds a Zacks Rank #3 (Hold).

Other companies in the chemical industry having favorable Zacks Rank are Shin-Etsu Chemical Co., Ltd. (SHECY), Celanese Corporation (CE) and Methanex Corporation (MEOH). Shin-Etsu Chemical and Methanex retain a Zacks Rank #1 (Strong Buy), whereas Celanese is a Zacks Rank #2 (Buy) stock.

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