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December 14, 2018 www.intellinews.com I Page 4
The problem with the LPGs is they are largely sold in Europe and have to be transported in special compressed tanks mounted on trains. Not only are the gases expensive to transport, the tanks come home empty.
One of the big advantages of olefins and polyolefin is they are granules that are simple to transport. Moreover as polyolefins sell for twice the price per tonne that LPGs do the transport costs are proportionally lower. On top of this, the trucks
and trains carrying the polyolefins can bring other goods back, earning some extra money on their return trip, which will bring logistical costs down further.
“In order to sell LPGs we have to ship it to our consumers in Rotterdam. It is still a 40% margin. We have a lot of this LPG to sell. When we started this ZabSib plant we took roughly half the gas and sold it not to the lighter producer in Rotterdam, but to our own petrochemical plant in Tobolsk,” says Konov.
Climbing the ladder
Winter is closing in Tobolsk with a light snow already covering the ground. Temperatures were still only minus 4°C on the day bne IntelliNews visited the ZapSib site but the project's contrac- tors (including Turkey’s Renaissance and Japan’s Yamata) have been building many of the parts
of the plant elsewhere and shipping them to the site via the grand rivers that run through Russia’s heartland. Because of the extreme cold Tobolsk is only accessible by river for one month a year when all the really big elements of the plant arrived.
Over 20,000 workers are building the final stage, but this will drop to around 1,700 operators once the constriction is complete. A bevvy of faces trudge through the snow and mud: Chinese, Indian, Turk, Russian and others, with large “safety first” signs hanging off the installations overhead in three languages. The Chinese firm Sinopec along with Silk Road Fund bought a 10% stake each in Sibur in 2016 and Chinese contractors are also involved in the construction.
Sibur has already earned a reputation for pulling off these large scale constructions in extreme climates on time and under budget.
In general Russia has moved up a gear. In the 1990s the game was simply to pull minerals out
of the ground any way you could and get the cash. But a decade and half later owners are hiring professional managers and investing in their facilities for the long-term. Konov is a shareholder in Sibur, but only a minority one. Most of the management team have been with the company for more than a decade and the company prides itself on bringing 85% of its investment projects in on time and under budget.
ZapSib is the company’s last big investment project for the meantime, with some $6.5bn already invested of the total $9bn planned as capex. Sibur's YTD capital expenditure was up
by 31% to RUB153bn in the third quarter of this year, with YTD total debt up by 3.4% to RUB322bn and net debt to Ebitda leverage at 1.6x as of 30 September 2018, but that ends next year.
With capex winding down, the company should be throwing off a lot more cash. Konov estimates that the company is already generating around $3bn of Ebitda, which will cover the last phase of investments into ZapSib and also clears the way for a possible IPO.
Talk of a Sibur IPO has been swirling on the market for several years and resurfaced again this summer when analysts started talking about an autumn listing. When it didn't appear, the market started speculating about the reason for the “delay”. Konov says the company has never officially announced a firm intention to IPO, although it has not hidden the fact that it has discussed one with investment banks. The main shareholder, Leonid Mikhelson who also owns and runs the independent gas company Novatek, has said ever since he became the majority shareholder in Sibur in 2010 that he believed Sibur “should be a public company.”