Zibo Qixiang Tengda Chemical Co. Ltd.

Zibo Qixiang Tengda Chemical HPPO Plant - Euler Hermes Covered Loan

Industry
Chemicals/Petrochemicals/Chemicals/Petrochemicals
Area of finance
Export & Agency Finance
Country
China

Deal Overview

DZ BANK AG is providing a 95% Euler Hermes covered buyer´s credit in the amount of EUR 86.48m for the leading Chinese chemical company Zibo Qixiang Tengda Chemical Co. for their investment in a new wolrd-scale HPPO plant for the sustainable production of propylene oxide. The loan facility has...

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DZ BANK AG is providing a 95% Euler Hermes covered buyer´s credit in the amount of EUR 86.48m for the leading Chinese chemical company Zibo Qixiang Tengda Chemical Co. for their investment in a new wolrd-scale HPPO plant for the sustainable production of propylene oxide. The loan facility has a repayment tenor of 10 years (plus construction period). Proceeds of the loan are used for buying key components, engineering, process design and licenses for the HPPO technology from the German exporters thyssenkrupp Industrial Solutions and Evonik. The new HPPO plant at the Zibo site (in China’s Shandong province), will produce 300kmt of propylene oxide and the amount of H2O2 required for the HPPO process annually. The initial planning phase has already started in August 2019. The plant is currently under construction and expected to come on stream in the second half of 2022.

Qixiang Tengda is a Shenzen stock exchange listed company. The company, with a workforce of more than 2,600 employees possesses a high degree of expertise and has many years of experience in C4 chemistry. Last year it has produced 1,674,800 tons of specialty chemistry products and generated more than CNY 24.686bn revenue.


Q & A with Alexander Franke (Vice President, Export Finance at DZ BANK).

 

Can you highlight the sustainable impact of this deal?

Alexander Franke:  With the Euler Hermes covered buyer´s credit for Qixiang Tengda DZ BANK supports an innovative and environmental friendly technology for the production of high-quality propylene oxide that has no by-products except water.

Propylene oxide is a chemical intermediate that has various application in our every-day lives. It is mainly used for the manufacture of polyurethane foams, which are used for example in automobile components, upholstery, thermal insulation, coating materials, sports shoes and other sporting goods. 

HPPO stands for Hydrogen Peroxide to Propylene Oxide and is the result of a joint development between thyssenKrupp Industrial Solutions (former thyssenKrupp Uhde) and Evonik Industries, starting in the year 2000. In the HPPO process, propylene oxide (PO) is produced directly from hydrogen peroxide and propylene. This is made possible by an HPPO catalyst developed specifically for the process. Compared with conventional production processes for propylene oxide, the HPPO process requires significantly lower investment and is more cost-efficient. In addition, it is extremely environmentally friendly because it is highly selective and no by-products other than water are produced in significant quantities. With the rise of environmental awareness in China HPPO is the eco-friendly and cost efficient technology of choice for the sustainable production of propylene oxide according to the suppliers.


What challenges were faced in structuring this loan, and how were they overcome?

Alexander Franke:  DZ BANK had already successfully closed with Qixiang Tengda a Hermes covered buyers credit for their investment in German supplies for a Methyl methacrylate (MMA project) last year. The previous experience from this transaction was of course a clear advantage for the successful execution of the HPPO project.

However, the financing mandate for the HPPO project was received in January 2020, just in the middle of the COVID-19 outbreak in China and a few month before the lockdown in Europe. This of course had an severe impact on our usual due diligence and structuring process which usually includes site visits and face to face meetings of the DZ BANK team with the customer. 

The trustful relationship between Qixiang Tengda and DZ BANK as well as having export finance team members on the ground in Beijing and Hong Kong helped us to overcome the challenges imposed by COVID-19. Furthermore, we could rely on strong partners on the legal and E&S due diligence side. For example, we have managed to organize an E&S due diligence site visit with the local Chinese team of our E&S consultant despite the travel restrictions due to COVID-19.

For the ECA approval process it was a clear advantage that Euler Hermes had known Zibo Qixiang Tengda Chemical Co. already from our previous transaction. However, for the HPPO project not only the loan amount was substantially higher and split over several supply contracts, but also the intention was to finance not only equipment supplies but also technology in the form of licenses and process design packages. Here we could leverage on our strong track-record and extensive from structuring complex ECA covered financings in China taking into account not only ECA and OECD consensus requirements but also Chinese foreign exchange and tax regulations. 

We are extremely grateful to exporters thyssenkrupp Industrial Solutions and Evonik that have patiently explained to DZ BANK and Euler Hermes the characteristics of the HPPO technology thereby making sure the financing conditions of the Euler Hermes covered loan are customized to the project needs. Without such professional counterparts on the exporter side we would not have been able to successfully close the transaction.

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Deal Volume
$ 105.18m
Financial Close
10 May 2021
Sources
Submitted by participant(s)

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Alexander Franke

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