Alujain clarifies details of NATPET stake sale, deal with Basell International

Alujain plant

Alujain Corp. organized an investor call, on Jan. 17, via Al Rajhi Capital, to discuss the agreement to divest a stake in National Petrochemical Industrial Co. (NATPET) and the strategic partnership with Basell International Holdings B.V., a subsidiary of LyondellBasell Industries N.V. (LYB). 

During this call, Alujain's CEO provided an overview of the transaction, highlighting the integration benefits and synergies expected from integrating NATPET and the new project and operating them as a single integrated complex, according to a Tadawul statement.  

The consolidated production from the two plants is projected to yield approximately one million tons of polypropylene (PP) annually. This integration of the two plants is set to enhance the complex operational reliability, optimize capacity utilization, and reduce overhead costs.  

Additionally, Alujain's partnership with LYB, a global PP leader, will bring technical know-how, advanced technology, market expertise, and potential access to more lucrative markets, further underlining Yanbu's strategic position, being the closest to growing demand markets such as Europe, Turkey, Latin America, and Africa. 

The capital structure for the new project, contingent on the final investment decision, is planned as a typical industrial equity and debt arrangement (30:70), with the Saudi Industrial Development Fund and local commercial banks likely financing the debt. 

In response to queries about the project's feasibility, the management stated that while exact internal rates of return (IRR) are currently indeterminate, given the current project development stage standing, the project IRR is expected to align with recently built similar projects or even better, given the integration with NATPET.  

The management also corrected misconceptions regarding the project's cost comparisons with similar announced projects, clarifying that the comparison failed to recognize the difference between total investment capital and engineering, procurement, and construction (EPC) costs. A revised report to address these inconsistencies will be made by the party that published the initial report. 

The strategic agreement will enhance Alujain's product portfolio, focusing on high-end PP grades and compounds, which will enable the company to target high-end market sectors and achieve better margins than competitors. 

Regarding the utilization of the SAR 1.87 billion proceeds, the management disclosed that options, including the repayment of Alujain's current loans, are under review by the investment committee, with decisions to be based on criteria like diversification and interest rate projections. 

The management also emphasized that the timing of the new project aligns favorably with market conditions, as resource and material costs remain close to initial estimates.

Furthermore, the management confirmed that market analysts are anticipating a balanced supply-demand scenario before the commercial start of the new project and robust PP prices with the beginning of the new market cycle.