JEDDAH, 30 September 2006 — Saudi Basic Industries Corporation (SABIC), with market capitalization of over $100 billion and one of the world’s 10 largest petrochemicals manufacturers, has reached a full and final settlement of its disputes with ExxonMobil arising from technology and a patent that can be used in the production of polyethylene.
Pursuant to the settlement, SABIC and its worldwide affiliates will have the right to use the technology royalties free and will equally share in any third-party royalties from the past or future licensing of the technology by ExxonMobil. SABIC said in a statement to the press that all disputes and litigations between SABIC and its partner ExxonMobil have thus been fully and finally settled. The partners value their long-term business relationship and will continue to focus on their successful ventures in the Kingdom and to explore opportunities to expand on that success.
SABIC on Thursday announced in London that it was acquiring Huntsman Petrochemicals (UK) Ltd., a subsidiary of US-based Huntsman Corporation, in a deal valued at $700 million. The acquisition marks a significant step in SABIC’s global growth plans.
Meanwhile, Standard & Poor’s Ratings Services said yesterday it raised its foreign currency long-term corporate credit rating on SABIC to ‘A+’ from ‘A’, owing to reassessment of its status as a government-related entity and its strong operational performance. The ‘A-1’ short-term rating was affirmed. The outlook is stable.
SABIC is 70 percent owned by the Kingdom, and a significant part of the company’s current funding needs are provided by state-owned investment funds. “SABIC is of key strategic importance to Saudi-Arabia, as it contributes to the value of the country’s huge hydrocarbon feedstock reserves, offers a growing number of jobs, and aids further industrialization of other chemical industries being established in the region,” said Standard & Poor’s credit analyst Tobias Mock. “We now recognize this strategic importance with a one-notch uplift to SABIC’s stand-alone rating. The ratings are also supported by SABIC’s modest financial risk profile.”
The ratings on SABIC reflect its leading market positions in basic and commodity chemicals as the world’s third-largest producer of ethylene and polymers and the Gulf region’s largest steel producer with a current capacity in excess of five million metric tons (mmt). SABIC had sales of SR78.2 billion ($20.8 billion) for the 12 months ended Dec. 31, 2005. The company’s competitive advantage derives mainly from its access to natural gas at a fixed price significantly below market levels outside the Middle East, its favorable geographic location to serve the fast-growing Asian markets alongside the established European and North American markets, and its strong infrastructure at large industrial sites in Al-Jubail and Yanbu.
The ratings are constrained by the cyclicality and high capital intensity in SABIC’s petrochemicals and steel production business units, lower diversification in terms of sales and geographic concentration of plants compared with its large international competitors, and the risk posed by the significant investment program planned over the next few years, which has been further increased in the past 12 months.
