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Entry Into a Material Definitive Agreement. |
On March 2
5
, 2021, Sadara Chemical Company (“Sadara”), a joint venture formed in 2011 between Dow Saudi Arabia Holding B.V. (“DSAHBV”), an indirect wholly-owned subsidiary of The Dow Chemical Company (the “TDCC”), and Excellent Performance Chemicals Company (“EPCC”), a wholly-owned subsidiary of Saudi Arabian Oil Company (“Saudi Aramco”), entered into an Amended and Restated Shareholders’ Agreement (the “Amended and Restated Shareholders’ Agreement”).
Sadara was formed to construct and operate a world-class petrochemical complex at Jubail Industrial City II in the Eastern Province of The Kingdom of Saudi Arabia (the “Sadara Complex”). The Sadara Complex comprises 26 manufacturing units and flexible cracking capabilities, producing over three million metric tons of high value-added chemical products and performance plastics per year. The Sadara Complex achieved full commercial operations in 2017.
The Amended and Restated Shareholders’ Agreement provides for certain changes to Sadara’s operations. Currently, Sadara markets its products within a geographically restricted region and TDCC and its subsidiaries market the remainder of Sadara’s products elsewhere in the world. Beginning in
mid-2021,
TDCC and Saudi Aramco (or their subsidiaries) (the “Marketers”) will begin to market finished products produced by Sadara, consistent with each Marketer’s equity ownership interest. Sadara will cease marketing and will instead pay marketing fees to both Marketers under related marketing and lifting agreements. The transition will begin in
mid-2021
and gradually increase over the next five years. An agreement will be entered into as to the specifications of the products to be marketed. Other changes include the formation of an executive sales and operations planning committee and changes to the way annual operating and marketing plans will be implemented.
The Marketers will leverage their marketing and sales expertise to ensure Sadara’s world-class assets, technologies and products reach their full potential.
The transition of marketing rights to the Marketers is part of shareholders actions to improve Sadara operating results. This includes the finalization of a debt restructuring agreement with Sadara’s agency creditors and commercial lenders. The restructured debt repayment has been better aligned to match Sadara’s expected future cash flow generation. Key provisions of the agreement include a debt maturity extension from 2029 to 2038, a principal grace period until June of 2026 and a new $3.7 billion sponsor pro rata guarantee of principal, in addition to all interest due during the grace period, in proportion to Dow’s and Saudi Aramco’s ownership of Sadara. Sadara will also benefit from longer-term structural operating and feedstock improvements, further enhancing its crackers’ flexibility and improving Sadara’s position on the global cost curve.
In connection with the Amended and Restated Shareholders’ Agreement, TDCC (or its subsidiaries) have entered into certain other agreements in relation to the Sadara Complex, including guarantees of subsidiaries’ obligations under key agreements with Sadara, as well as amended and restated technology license agreements and related technical services agreements previously entered into.
The foregoing description of the Amended and Restated Shareholders’ Agreement does not purport to be complete and is qualified in its entirety by reference to the text of the Amended and Restated Shareholders’ Agreement. TDCC intends to redact certain confidential portions of the Amended and Restated Shareholders’ Agreement because such confidential portions are not material and would be competitively harmful if publicly disclosed.
