Kuwait cancels $17bn deal with Dow Chemical
- Kuwait cancels $17bn joint venture with Dow Chemical
IN A PICKLE: Dow needs to refinance $13 billion of debt following its
acquisition of Rohm & Haas. (Getty Images)
Kuwait on Sunday scrapped a deal to form a $17.4 billion petrochemical
joint venture with U.S. firm Dow Chemical , state news agency KUNA said.
The cancellation of the deal, which had met opposition in Kuwait's
parliament, is a blow to the largest US chemicals firm which had planned
to use the proceeds to repay a large part of $13 billion in debt it will
have to shoulder once its acquisition of rival Rohm & Haas closes in
Several opposition MPs had threatened to quiz the prime minister in
parliament if the deal was not scrapped before Jan. 1 when it was due to
The cancellation of the agreement after the start of the New Year would
have made Kuwait liable to pay a penalty of up to $2.5 billion.
Oil Minister Mohammad Al-Olaim last week defended the deal, saying it
had passed through all proper channels and that Kuwait would greatly
benefit from a partnership with Dow Chemical, one of the world's biggest
The Supreme Petroleum Council, at a meeting headed by Prime Minister
Sheikh Nasser Al-Mohammad Al-Sabah, "arrived at the decision to cancel
the contract", KUNA said.
State-run Petrochemical Industries Co (PIC) signed a deal earlier this
month with Dow to launch the joint venture, K-Dow Petrochemicals, and
was due to pay $7.5 billion. The deal was part of Dow's strategy to
reduce its exposure to the cyclical nature of the commodity chemicals
The deal had angered some Kuwaiti parliamentarians who said the project
was not economically viable in light of the global financial crisis and
slumping petrochemical sales.
Four liberal MPs had threatened to question the prime minister, a senior
member of the ruling family, unless the deal was scrapped.
Another move by some deputies to question Sheikh Nasser on another issue
had prompted the cabinet to resign in November, though the ruler
reappointed his nephew.
Parliament has a history of challenging the government with the same
liberal MPs having opposed building the $15 billion Al-Zour refinery for
which final contracts have not yet been signed despite an award in May.
Dow and other chemical makers around the globe face one of the worst
slumps ever in chemical demand, due to recession in most developed
countries and a sharp slowdown in emerging economies.
Earlier this month, Dow said it would close 20 facilities, divest
several businesses and cut 5,000 jobs or 11 percent of its workforce. It
also plans to temporarily idle about 180 plants.
Kuwait and Dow lowered the value of the joint-venture by more than 8
percent to $17.4 billion earlier this month after the Gulf Arab state
asked to cut its contribution in light of a sharp slowdown in global
The new company had been due to market petrochemicals and plastics such
as polyethylene, polypropylene and polycarbonate, used in products
ranging from plastic bottles and compact disks to computers and
agricultural compounds. In July, Dow said it would acquire Rohm & Haas
for $15.3 billion in a move to broaden its specialty product offerings.
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