The utilization of construction payment… Expected to benefit around 90 domestic companies with $600 million, “[Edaily Song Juo Reporter] Korea Export-Import Bank announced on the 23rd that it will provide a $1 billion PF finance for Hyundai Construction’s project to build the Amiral petroleum chemical plant in Saudi Arabia, which was awarded to the project.”
PF (Project Finance) differs from Corporate Finance in that it relies on the future cash flow of the project for loan repayment sources and uses project assets as collateral to raise construction funds.
The Amiral project involves expanding the petroleum chemical plant at the Jubail Industrial Complex in eastern Saudi Arabia.
The project, commissioned by SATORP, a joint venture between the world’s largest state-owned oil company Saudi Aramco and French TotalEnergies, has a total project cost of approximately $14.8 billion.
In June last year, Hyundai Construction won the Olefins production facility package and utility facility package for a total of $5.1 billion. This is the second-largest project that a Korean company has secured in Saudi Arabia after the Sadara gas expansion project ($7.2 billion) won by Samsung E&A and GS Construction.
Since supporting the oil refining project associated with the petrochemical facility in 2010, Korea has maintained a friendly relationship with Aramco. Leveraging this Saudi network, the Export-Import Bank issues letters of intent to the client from the project bidding stage and expresses active financial support to assist Korean companies in securing this project.
Previously, the Export-Import Bank had provided $2 billion in PF finance for a total of 5 projects commissioned by Aramco, such as the Sadara and Marigold petrochemical facilities, and signed a $6 billion Basic Credit Agreement (F/A) in March last year. F/A is a limit-style financial agreement to proactively promote our companies’ issuance in anticipation of multiple project orders from major clients, enabling rapid financial support for our companies’ export transactions.
The PF finance that the Export-Import Bank provides for the Amiral project is expected to be used for the payment of construction fees by Korean companies. As a result, it is anticipated that there will be a high foreign exchange acquisition effect, including the export of approximately $600 million worth of domestic goods and services, including equipment from around 90 small and medium-sized Korean companies.
An Export-Import Bank official stated, “This project is a key cooperative project mentioned in the joint declaration of the South Korea-Saudi Summit last October, and through financial support, we expect to contribute to the government’s policy of strengthening economic cooperation with Saudi Arabia.” Additionally, they mentioned, “We will play a bridging role to allow Korean companies to secure upcoming Middle East projects using agreements such as the F/A agreement signed with Aramco.”
In January, the Export-Import Bank established a “Saudi Desk” to provide various services for consulting with companies, initial financial discussions, and managing client networks for supporting Middle East project acquisitions.