OMV and IPIC acquire 100% of Borealis, Europe´s second largest manufacturer of plastics
Posted: 04 July 2005
OMV Aktiengesellschaft, Central Europe’s leading oil and gas group, has acquired the 10% stake in Borealis held by the Norwegian oil and gas company Statoil. Borealis is a leading global producer of plastics. In 2004 the company achieved sales of EUR 4.6 bn, with about 4,500 employees; in Austria its sales were approximately EUR 1 bn. OMV now has a 35% stake in Borealis.
At the same time, the International Petroleum Investment Company (IPIC) from Abu Dhabi , one of the key shareholders of OMV, increased its stake in Borealis from 25% to 65%. In the future, IPIC and OMV will together own 100% of the plastics producer. The contracts were signed on June 30, 2005. OMV Deputy CEO Gerhard Roiss will take over as Chairman of the Supervisory Board of Borealis from Statoil for the current period.
The purchase price for Statoil’s 50% stake was EUR 920 mn, of which OMV pays EUR 184 mn for its 10% stake. Borealis will make a dividend payment of EUR 80 mn to Statoil for 2005. The transaction is subject to the approval of competition authorities. The closing is expected to take place during the fourth quarter 2005.
Gerhard Roiss, OMV’s Deputy CEO, commented: “Borealis’ business is important to OMV’s value chain, from the distillation of crude oil in our refineries, to the production of petrochemicals and the manufacture of plastics. Increasing our stake in Borealis will enable us to take advantage of these integrated growth possibilities on a more effective and sustained basis.”
OMV’s partnership with its key shareholder I P IC, strengthens its synergies with Borealis thanks to the plastics manufactuerers well-positioned production site in the United Arab Emirates . This natural resources rich region of the Middle East is of strategic value, due to its proximity to the growth market of China , the world’s largest plastics importer.
The importance of Austria will increase for Borealis. This will be based on Borealis' existing research centre at Linz , and plans to expand Schwechat’s production facilities, to make it one of the leading production sites for plastics in Europe . The expansion is expected to be completed in 2005. Medium term, OMV and I P IC have agreed to review the prospect of floating a significant stake in Borealis.
Borealis: Major purchaser from the OMV refineries in Schwechat and Burghausen
Borealis processes around 85% of the petrochemical products produced by OMV. This makes Borealis the largest customer of OMV’s refineries in Schwechat and Burghausen ( Germany ). In 2004 the sales of petrochemical products from these two sites was EUR 570 mn. P etrochemical products produced by OMV at the Schwechat and Burghausen refineries are transported via ethylene/propylene pipelines to the nearby polyolefin facilities of Borealis. In 2004 OMV sold around 1.1 mn t of ethylene and propylene at the Schwechat and Burghausen sites, including around 650,000 t in Schwechat. OMV supplies Borealis with 30% of its petrochemical products, and is the plastic manufacturer’s biggest supplier of monomers.
Borealis’ long-term feedstock agreements with the Scandinavian plants of Statoil remain in place.
Schwechat to become one of Europe ’s leading production sites of plastics
OMV’s growth programme at the Schwechat refinery is strengthening the OMV and Borealis value chain. This year the Schwechat refinery is expanding its ethylene and propylene production from 650,000 to 900,000 t per year. Borealis is likewise increasing its processing capacity in Schwechat to around 1 mn t per year. The new facilities are expected to begin operation during the third quarter of 2005. A total of about EUR 400 mn is being invested 50-50 by OMV and Borealis in this upgrading of Schwechat into one of the leading production sites for plastics in Europe . This will result in a long-term strengthening of Borealis’ number 2 position in Europe and of OMV’s petrochemicals business.
Gerhard Roiss added: “This expansion of capacity, which is the biggest single investment at this site, puts OMV and Borealis in a leading position to supply Central Europe with high quality plastic products.” The use of its own Borstar and international state-of-the-art technologies enhances Borealis’ competitive advantage.
Outstanding position in natural resources rich Middle East – proximity to the growth market China
Borealis has an outstanding competitive position in the Middle East – its Borouge plastics production site in Abu Dhabi . Thanks to the competitive costs of raw materials, a significant portion of the plastics industry’s future international investments in new polyethylene facilities will be made in this region. Borealis quickly recognised this trend and is a step ahead of its competitors.
The Abu Dhabi site is of great importance especially with respect to the growth market in China . With Borouge, Borealis is optimally positioned to meet the rising demand for plastic products in Asia . The increase in its stake in Borealis will enable OMV to profit more significantly from the location and resulting cost advantages in the Middle East . “The synergies with our partners in Abu Dhabi will add great value to our joint venture,“ explained Gerhard Roiss.
Borouge, a joint venture of Abu Dhabi National Oil Company (ADNOC) and Borealis, annually produces around 600,000 t of ethylene and 600,000 t of polyethylene. It serves as the exclusive sales channel for Borealis’ products in the Middle East and the Asia- P acific region, a growth area for plastic products.
Posted by Editor Pipeline Magazine
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