ADNOC, OCI form global nitrogen fertilizer joint venture
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ADNOC, OCI to form global nitrogen fertilizer joint venture

11:02 AM, 17th June 2019
ADNOC logo

ABU DHABI, UAE: The Abu Dhabi National Oil Company (ADNOC) announced a new strategic partnership with OCI NV (OCI). OCI is a global producer and distributor of natural gas-based fertilizers and industrial chemicals, headquartered in the Netherlands. The partnership will see ADNOC combine its fertilizer business, ADNOC Fertilizers, into OCI’s Middle East and North Africa (MENA) nitrogen fertilizer platform to form a new joint venture (JV).

The transaction is expected to close in the third quarter of 2019.

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. 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 Emirate’s 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.

“This unique business combination is in line with ADNOC’s approach to value-added partnerships and will improve the profitability and cash flow of our fertilizer portfolio. It also supports ADNOC’s objectives to attract investors to Ruwais by leveraging its strategic location, world-class logistics and the UAE’s abundant gas resources at commercially attractive terms. It is another milestone in the delivery of ADNOC’s 2030 strategy and our ambitions to expand ADNOC’s Downstream portfolio,” said H.E Dr Sultan Ahmed Al Jaber, UAE Minister of State and ADNOC Group CEO.

“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,” added  Nassef Sawiris, CEO of OCI N.V.

Citi acted as exclusive financial advisor and Shearman & Sterling as legal counsel to ADNOC on the transaction. J.P. Morgan Securities PLC acted as exclusive financial advisor and Cleary Gottlieb Steen & Hamilton LLP as legal counsel to OCI on the transaction.

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