Financing Industrial Projects

2. Financing Industrial Projects By: Fawaz M. Al-Fawaz Vice President, Finance Dammam, October 12, 2010

3. Critical success factors “PRIMO-F” for the industrial projects... P people Rresources I innovation M marketing O operations F financing SABIC successfully executed the critical success factors…over the last 30 years … to become a global company 3

4. SABIC runs a global corporate finance function Sittard Enkhuisen Raamsdonksveer Woodbridge Felixatowe Amsterdam Wallhamn Gainsborough Rotterdam Grangemouth Copenhagen Gelsenkirchen Thomaby Dusseldorf Tesside Bergen op Zoom Cheshire Bay St. Louis Geleen Redditch Cobourg Ipswich Kutno Antwerp Weiner Neustadt Long Sault Fosses Warsaw Roermond Paris Prague Wixom Budapest Columbus Pontirolo Selkirk Ottawa Vlissingen Bologna Mt. Vernon Pittsfield Lavera Ravenna Istanbul Little Ferry Washington Barcelona Zhong Shan Livorno Gebze New York Harbour Tarragona Lynchburg Chung-Ju Chiba Milan Tianjin Exton Huntersville Cartagena Mersin Moka Ulsan Seoul Malta Thorndale Shelby OligateOlona Beirut Tokyo Wilmington Geismar Ube City Tehran Burkville Aichi Schwarzheide Houston Cairo Shanghai Carville Al-Jubail Sugarland New Delhi New Orleans Dammam Huangpu Yanbu Dubai Baroda Taipei Tampico Vadodara Nansha Jeddah Manama Hong Kong San Luis Potosi Riyadh Mumbai Chennai Manila Rayong Ho ChinMinh City Bangalore Klang Seremban Singapore Benoi Jakarta Campinas Durban Dandenong Tortuguitas Manufacturing sites R&T Centers Other sites • partner with businesses for global growth and support SABIC 2020 vision • manage SR 300 bln of assets…deliver quality returns to the stakeholders 4

5. Corporate finance provides the fuel for growth... … delivers verdict on: • long-term strategic investments • strategic financing and debt raising to fund strategic investments and growth • liquidity and risk management • managing returns to the stakeholders • financial and management reporting Corporate Finance ‘shapes-up’ the corporate balance sheet 5

6. SABIC lead the corporate ratings in GCC... …SABIC maintained its corporate credit ratings throughout the credit crisis • SABIC has A1 from Moody’s; A+ from S&P; and A from Fitch – all with Stable outlook • SABIC’s ratings reflect its global leadership in sustaining sound financial and business profiles • Maintaining a corporate credit rating is vital for regional and international funding Corporate credit ratings “matter a lot” in global markets 6

7. Corporate Finance has admirably supported strong asset growth of SABIC... • …in the last 5 years SABIC’s asset base increased from SR 125 bln to over SR 300 bln • Asset base growth has come from investment in: • international acquisitions • expansion of existing complexes • new projects like Yansab, Saudi Kayan SABIC has the globally largest asset base of over $80 bln… 7

8. SABIC funds its aggressive growth on a global scale innovatively and competitively • …SABIC is one of the largest industrial borrowers in GCC…over SR 100 bln, tapping variety of funding sources • ECA financing • Project finance including Islamic tranches • Acquisition finance • IPOs • Sukuk, private placements, and international capital markets • Corporate bilateral funding Our funding costs are most competitive on a global scale 8

9. Managing industrial projects and development... • …despite the credit crunch, banks and investors have liquidity to invest in GCC industrial ventures • Industrial projects need to demonstrate: • strong sponsorship • financial and economic viability • managerial, execution and operational track record • safety and environmental standards • returns to the stakeholders There is strong credit appetite for viable industrial projects in GCC 9

10. SABIC has introduced innovative concepts in financing its industrial projects... • …focusing on Islamic Finance and developing GCC markets • Pioneering Sukuk market in KSA • Innovative project financing incorporating Shariah compliant structures • Executed project financing to support world-class projects ( Yansab and Saudi Kayan)…with globally largest Islamic tranches in project financing Sizable portion of SABIC debt is structured around Islamic products 10

11. SABIC led development of sukuk market in KSA...with innovative financing structures • Shariah Compliant Sukuk structure… • Assets: investment in SABIC’s marketing business for 20 years • Quarterly Distributions: from income generated via marketing agreements • Market determined pricing • Highest standards of disclosure • Standard covenant package • Freely tradable in the secondary market SABIC is committed to Islamic Financing 11

12. SABIC strives to set standards on financing with competitive and innovative structures... • SABIC has executed world-class deals: • IPOs for green-field projects – Yansab and Saudi Kayan • debt raising of over $30 bln in global markets …in the the last 5 years to fund growth • manage global treasury operations of over $40 bln • Delivered consistently superior returns to the shareholders Investor relationships & sustainable credibility…key elements 12

13. SABIC led world-class IPOs to partially fund its multi-billion $ green-field projects... • …IPOs provide for private sector participation • IPO for Yansab for $525 mln was a resounding success …. globally first ever for a green-field petrochemical project • Saudi Kayan IPO for $1.8 bln…. the biggest ever IPO for a green-field petrochemical project • These IPOs were landmark transactions by global standards The success of IPOs hinges on the quality of sponsor and owners 13

14. Saudi Arabia and UAE drive major GCC projects going forward... …$1.4 tln worth of construction and infrastructure projects in GCC at design stage or underway: • $715 bln, are in the UAE ($450 bln worth of projects have been stalled) • $285 bln of KSA projects in the pipeline…$100 bln more on the drawing board! • Kuwait has $185 bln • Government projects driving Saudi construction market 14

15. Industrial cities support world-class industrial development environment... • …facilities at Jubail, Yanbu, Jebel Ali are ideal to support industrial projects • Industrial investments made in Jubail and Yanbu exceed SR 500 bln • Royal Commission currently contributes 7% of the Kingdom's GDP and 60% of the gross industrial product • Industrial cities of Jubail and Yanbu account for 70% of the Kingdom's industrial exports and 85% of non-oil exports 15

16. Opportunities for industrial projects in GCC are very significant... …and challenges are NOT insurmountable • GCC Governments have established a world-class infrastructure • Rising population create consumer demand • Focus on education being well-recognized • Private sector engagement should be further encouraged • Financial and capital markets in place • Single GCC currency will be a further boost Infrastructure, industrial harmony and education workforce… pillars for industrial development 16

17. SABIC’s experience can serve as a model for financing industrial projects... …projects must focus on: • commercial, operational and financial viability • strong sponsorship and ownership are vital elements • credit ratings “matter” • strong management with a track record of execution and delivering returns Negotiate competitive, simpler, and flexible conditions 17

18. Thank You 18