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OMV in talks to take controlling stake in Borealis

March 9, 2020
Energy & Chemical Value Chain

Oil and gas firm OMV (Vienna, Austria) said late Friday that it was in discussions to increase its stake in Borealis from 36% to 75%. OMV would purchase the stake from Mubadala, Abu Dhabi’s sovereign wealth fund, for $4.68 billion. Mubadala would maintain a 25% stake in Borealis after the deal closes.

The purchase “would expand the value chain of OMV in the petrochemical sector and would allow OMV to fully consolidate the results of Borealis Group in OMV’s financial statements.” Borealis posted 2019 revenues of €8.1 billion ($9.1 billion) and net profit of €872 million.

Borealis is the second-largest producer of polypropylene and a top-five producer of polyethylene (PE) in Western Europe. The company also has petrochemical production joint ventures (JVs) in the Middle East and US. OMV is a leading merchant olefins player in Europe with capacity for 1.1 million metric tons/year of propylene and 950,000 metric tons/year of ethylene, mostly at refinery sites at Schwechat, Austria, and Burghausen, Germany. OMV also has aromatics and butadiene production.

Borealis owns 40% of Borouge, a petrochemicals JV with Abu Dhabi National Oil Co. (Adnoc). In the US, Borealis holds a stake in Bayport Polymers, which is building a 1-million metric tons/year ethane cracker in Port Arthur, Texas, and a 625,000-metric tons/year polyethylene (PE) unit at Pasadena, Texas. The JV also includes an existing 400,000-metric tons/year PE unit at Bayport, Texas. Total owns 50% of Bayport Polymers. Borealis announced plans in January to acquire Nova Chemicals’ interest in the venture, which would boost its stake in the JV to 50%.

The deal remains subject to approval by the OMV and Mubadala boards, OMV says. Mubadala also has a 24.9% stake in OMV; 31.5% owned by OBAG (Vienna, Austria), an Austrian state holding company, with 43% of the company’s shares traded on public markets.

OMV has previously stated that its strategy was focused on expanding its position in petrochemicals. The company announced plans to invest €1 billion through 2025 at refineries at Schwechat, Burghausen, and Petrobrazi, Romania, to increase petrochemical capacity to offset waning fuels demand.

OMV reported last month that it saw fourth-quarter petrochemical earnings fall 56% year on year (YOY) to €35 million ($38.5 million) from €78 million on a current cost of supply (CCS) basis, due mainly to lower margins, it says. Profit at its petchem business “decreased sharply” as lower margins were only partially offset by lower costs of the feedstock mix, which includes other intermediates besides naphtha, says OMV. The ethylene/propylene net margin and the butadiene net margin also declined considerably, while the benzene net margin “also weakened, but to a lesser extent,” it says.

The ethylene/propylene net margin fell 28% in the fourth quarter to €363/metric ton from €504/metric ton a year earlier and was also down 12% compared with the third-quarter ethylene/propylene net margin of €441/metric ton, confirming the figures from the company’s preresults trading update issued in January. OMV calculates its margin based on Western European contract prices, with naphtha as feedstock.

The earnings contribution from Borealis fell to €50 million in the fourth quarter from €67 million a year earlier, following a lower contribution from the Borouge JV in Abu Dhabi and lower integrated polyolefin margins, adds OMV.

Petchem sales volume in the fourth quarter totaled 590,000 metric tons, flat with a year earlier and up slightly from 560,000 in the third quarter. For the full-year 2019, OMV’s petchem volume totaled 2.34 million metric tons, down 3% on 2018.

By: Vincent Valk

Source: Chemical Week

 

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