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ADNOC forms joint venture, creating new global nitrogen fertilizer leader

June 24/2019

MOSCOW (MRC) -- The Abu Dhabi National Oil Company (ADNOC) announced a new strategic partnership with OCI N.V. (OCI). OCI is a global producer and distributor of natural gas-based fertilizers and industrial chemicals, headquartered in the Netherlands, according to Hydrocarbonprocessing.

The partnership will see ADNOC combine its fertilizer business, ADNOC Fertilizers, into OCIís Middle East and North Africa (MENA) nitrogen fertilizer platform to form a new joint venture (JV).

The JV will become the largest export-focused nitrogen fertilizer platform globally and the largest producer in the MENA region with a production capacity of 5 million tons of urea and 1.5 million tons of sellable ammonia. Annual revenues for the combined entity are USD1.74 billion,  based on 2018 pro forma figures. ADNOC and OCI will own a 42% and 58% stake in the JV respectively.

This combination brings greater geographic diversity to the platform's MENA production channels, enabling greater combined market access to strengthen market share and better serve its customers around the world. It will have a centralized commercial team, supported by a robust storage and distribution infrastructure with access to key ports on the Mediterranean, Red Sea and Arabian Gulf.

The JV will operate a young, state-of-the-art asset base with low maintenance costs and strong free cash flow generation. As a result, the company will be well-positioned to pay its shareholders attractive dividends and to fund future organic and inorganic growth opportunities.

In conjunction with this joint venture, ADNOC Fertilizers has also signed a new long-term gas supply agreement with ADNOC, which will provide its facilities in Ruwais with the required feedstock for its operations based on a competitive pricing formula.

The JV will be based in Abu Dhabi and registered in the Emirateís international financial center, Abu Dhabi Global Market (ADGM), furthering the development of fertilizer expertise and trading in Abu Dhabi. The board of the new entity will consist of 6 members nominated by OCI and 4 nominated by ADNOC. H.E. Dr Sultan Ahmed Al Jaber, UAE Minister of State and Chief Executive Officer (CEO) of the ADNOC Group, will be Chairman of the Board.

Nassef Sawiris will assume the role of CEO of the JV, alongside his current role as CEO of OCI. His leadership will be supported by a joint management team of experienced key executives from OCI and ADNOC, which will drive value creation through the unlocking of substantial operational, supply chain, marketing and trading synergies across the combined platform.

H.E. Dr Sultan Ahmed Al Jaber, UAE Minister of State and ADNOC Group CEO, said: "We are extremely pleased to have created this new joint venture with OCI who are a world leader in nitrogen fertilizers and share our ambition and vision to grow our new combined fertilizer business. Pooling our assets and capabilities is a value enhancing step for both companies, allowing us to leapfrog competitors to become the top nitrogen export platform globally. It will also enable us to access new markets, benefitting both existing and new customers."

He added, "This unique business combination is in line with ADNOCís approach to value-added partnerships and will improve the profitability and cash flow of our fertilizer portfolio. It also supports ADNOCís objectives to attract investors to Ruwais by leveraging its strategic location, world-class logistics and the UAEís abundant gas resources at commercially attractive terms. It is another milestone in the delivery of ADNOCís 2030 strategy and our ambitions to expand ADNOCís Downstream portfolio."

Nassef Sawiris, CEO of OCI N.V. commented: "I am very pleased to start a long-term strategic partnership with ADNOC, a company which has a clear downstream strategy and drive to unlock value. This partnership creates a first-of-its-kind export platform with best-in-class cash conversion metrics. I believe that this platform has significant potential for future growth and value creation, with the support and under the guidance of its two key shareholders".

This new partnership marks another step in ADNOCís group-wide transformation and value creation program that addresses the evolving energy and petrochemicals landscape and ensures ADNOC remains a resilient and flexible company able to take full advantage of emerging market opportunities and trends. The Groupís transformation is driven by an expanded approach to strategic partnerships and co-investments as well as the more proactive management of ADNOCís portfolio of businesses, assets and capital. ADNOC is delivering on its ability to package and structure smart transactions with its partners.

This transaction continues this strategy and follows on from several other recent value creation initiatives, including ADNOCís debut capital markets transaction, the issuance of the Abu Dhabi Crude Oil Pipeline (ADCOP) bond, the IPO of ADNOC Distribution, the recent strategic equity and commercial partnerships between ADNOC Drilling and Baker Hughes as well as ADNOC Refining and Eni and OMV.

Central to ADNOCís 2030 strategy is the significant expansion of ADNOCís Downstream business. In May 2018, ADNOC announced its new Downstream strategy that includes an AED 165 billion (USD 45 billion) investment program that will see the Ruwais Industrial Complex upgraded to significantly increase its flexibility and capabilities to produce greater volumes of higher-value refined and petrochemical products.

The transaction is expected to close in the third quarter of 2019, subject to legal and regulatory conditions.

As MRC reported earlier, in May 2018, ADNOC unveiled plans to invest AED 165 billion (USD45 billion) alongside partners, over the next five years, to become a leading global downstream player, enabling it to further stretch the value of every barrel it produces to the benefit of ADNOC, its partners and the UAE.
Author:Margaret Volkova
Tags:Africa, Near East, fertilizers, ADNOC, OMV, Netherlands, United Arab Emirates (UAE).
Category:General News
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