Page 16 - DMEA Week 41 2022

DMEA NEWS IN BRIEF DMEA

On energy transition, Minister Al Kaabi called companies benefit from cost competitiveness and capitalised at $1.9bn with participation
for a responsible transition in which natural gas and long-term supply agreements with the from large government entities. Currently, 20%
is a destination fuel accompanied by carbon region’s national oil companies (NOCs), which of ETHYDCO’s shares are owned by Sidpec,
sequestration and storage as well as methane have access to large and abundant gas reserves. with another 20% owned by Petrochemicals
abatement. These advantages should provide them with Holding Co. and 11% by Egyptian Natural Gas
QatarEnergy, October 6 2022 further cash flow visibility amid energy supply Co. (GASCO). Meanwhile, the National Bank
concerns in other regions, S&P said. of Egypt, Banque Misr and National Invest-
bne/IntelliNews, October 13 2022 ment Bank hold stakes of 21%, 10% and 14%
PETROCHEMICALS respectively.
bne/IntelliNews, October 13 2022
Chemical companies Sidpec plans to merge with
ETHYDCO, creating Egypt’s Fitch makes note of
operating in GCC countries leading polyethylene maker Petkim’s liquidity

set for strong performance Egyptian Stock Exchange-listed Sidi Kreir Pet-

S&P Global has said that chemical companies rochemicals (Sidpec) has said it will appoint the constraints and shrinking
operating in Gulf Cooperation Council (GCC) investment bank NI Capital to assess various petrochemical margins
countries have solid expectations for strong options for a merger with a much bigger pet-
performance and a resilient credit matrix due rochemical producer, a privately held company Fitch Ratings has kept a “Negative Outlook” on
to competitively low prices for feedstock, long- known as Egyptian Ethylene and Derivatives largest Turkish petrochemical producer Pet-
term security of supply and solid bases of cus- Co. (ETHYDCO), through a share swap, Al Mal kim Petrokimya Holdings, citing the company’s
tomers and shareholders. newspaper reported. “liquidity constraints and expected deterioration
As a result of these advantages, GCC-based Sidpec chose to make an offer for its larger in credit metrics due to shrinking petrochemical
chemical companies are expected to survive in rival in the form of a share swap because it margins, weakening demand and rising costs”
the current environment of rising interest rates lacked the cashflow to make an outright offer for The Long-Term Foreign-Currency Issuer
and higher energy costs, the ratings agency ETHYDCO, which was valued at $675mn. Default Rating (IDR) of Fitch—ultimately
wrote in a report released earlier this week. Both companies aim to achieve significant owned by the Azerbaijani state via national oil
Beyond their overall healthy balance sheet synergies through the merger in the form of company Socar—was kept at B, while Fitch also
positions, the region’s larger chemical compa- reduced production costs, increased market affirmed its senior unsecured rating at B’
nies generally benefit from competitively low share and improved pricing power for its prod- Fitch said: “We forecast funds from opera-
prices for feedstock. In the GCC region, natural ucts on the local and international markets. tions (FFO) net leverage to rise above 4x over
gas is typically priced at significant discounts to Post-merger, Sidpec is to have combined pro- 2022-2024. The Negative Outlook also mirrors
the European benchmark rate, the Dutch TTF, duction capacity of 800,000 tonnes per year (tpy) that on Turkiye [Turkey] (B/Negative) due to
which temporarily exceeded the $70 per mmBtu of ethylene and 650,000 tpy of polyethylene with the company’s sizeable exposure to the Turkish
level in mid-August 2022, more than double the a turnover of EGP15bn ($762mn). This would economy. All operating assets are located in Tur-
figure of $25 per mmBtu posted at the beginning make it by far the largest player in Egypt’s poly- kiye and around 50% of revenue is derived from
of June 2022. ethylene market. the domestic market.”
Additionally, the report noted, GCC chemical ETHYDCO was established in January 2011 bne/IntelliNews, October 13 2022

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