KNM Group Bhd and Zecon Bhd signed preliminary deals worth RM17bil in total with Gulf Asian Petroleum Sdn Bhd (GAP) yesterday to build an integrated petro-chemical complex in Teluk Ramunia, Johor.
In a Bursa Malaysia filing yesterday, KNM said that the engineering, procurement, construction and commissioning contracts were for a 150,000/200,000 barrels per day petroleum refinery and 400,000/525,000 million tonnes per annum polypropylene unit with a total project value of US$5bil (RM15bil) and also, a RM2bil petroleum storage terminal facility comprising four terminals with a total storage capacity of 2.328 million cu m.
GAP is 50%-owned by Mubadala Capital Sdn Bhd (MCSB) and the balance owned by Abdul Aziz Hamad Al-Dulaimi who is the president of Gulf Petroleum Ltd, an integrated oil and gas group based in Doha, Qatar.
MCSB's controlling shareholder is Datuk Zainal Abidin Ahmad, who is also the group managing director and chief executive officer and controlling shareholder of Zecon.
Under the deal, KNM Group and Zecon together with an international Korean or Chinese contractor will form a consortium to undertake the petroleum refinery and polypropylene unit projects.
The consortium will take up to 20% equity in GAP, which is estimated at US$180mil (RM540mil).
The petroleum refinery and polypropylene unit projects will be funded by 30% equity and the balance through project financing using export credit agencies or other financial instruments including sukuk issuance. The facilities are due for completion in 40 months from the financial close of the deal, which should be finalised within the next three months.
Meanwhile, another consortium will be formed by KNM Group and Zecon for the petroleum product storage terminal facility project via a special purpose vehicle (SPV) company.
KNM Group plans to take up to 30% equity in the SPV company, and the balance will be held by GAP and its nominated parties. The SPV has a estimated equity value of RM200mil.
Also, KNM and GAP will form a joint-venture company to undertake the operations and maintenance of the facilities upon project completion for 25 years, with a reputable operator as a partner in the first five years.
The petroleum product storage terminal facility is due to be completed in 18 months from the financial close of the deal, which should be finalised within the next three months.
GAP will arrange for a financial guarantee from a local investment fund for up to RM1.5bil during the construction period, to be converted into a long-term loan thereafter, and a facilitation fund of up to RM300mil, while KNM will arrange a sukuk issuance of up to RM1.5bil to cover project financing during construction.
The Johor state government has given its approval for 650 acres in Teluk Ramunia for the projects.
GAP, which has appointed Evercore Partners New York as its financial adviser, is in discussion with the Johor state government concerning its equity participation which has yet to be finalised.
The projects are expected to contribute positively to both KNM Group and Zecon's earnings for the next four financial years. Approval from Zecon shareholders will be required for the deals, and its proposed investments in the equity of GAP and the SPV company as it is a related-party transaction.
