SOCAR HOPES TO INCREASE THE LIMIT OF UNSECURED BORROWINGS BY REFINANCING THE LOAN FOR INVESTMENTS IN PETKIM

Azerbaijan Business Center
Sept 18 2008
Azerbaijan

Baku, Fineko/abc.az. State Oil Company of Azerbaijan Republic (SOCAR)
has reached the limit on raising unsecured borrowings.

SOCAR Vice-President Suleyman Gasimov said the Company was counting
on raising up to $1.5 billion from European banks for three years to
finance the investments in Petkim (Turkey) as the company has similar
liabilities on borrowings for other projects.

"As a result, the loan size made up $160 million because of the
financing limit built on Company’s reports. We had to apply other
money raising schemes (including guarantees for foreign partner to
Turkish banks). Nevertheless, we are going to increase the limit
through loan refinancing," S.Gasimov said.

SOCAR is ongoing work over the development project of Petkim Neft-Kimya
Holding A.S. (Turkey). Due to that SOCAR’s share at the Turkish market
of chemical industry will increase from 28% up to 40%.

On December 27, 2007 the Turkish Privatization Administration has
halted process of transfer of 51% of shares of chemical concern
Petkim Neft-Kimya Holding A.S. to Socar-Turcas-Injaz alliance
(relevant tender winner) launched in accordance with its decision
made on November 22, 2007.

A reason for process stoppage was an action filed to Economic Court of
Turkey by professional union Petrol-Is. Before verdict is brought the
deal on transfer of the control package of shares has been suspended.

Following the tender conducted this summer this alliance offered
$2.04 billion for the set package of shares, but then the winner
became TransÑ~Aentral Asia Petrochemical Holding Consortium
(Russia/Kazakhstan) including Russian investment & industrial group
Eurasia, Kazakhstan’s Caspian Oil and investment company Troika
Dialog (the owner is Armenian on nationality) that was ready to pay
$2.05 billion.

But because of actions of the US Congress that recognized genocide
of Armenians in the times of Ottoman Empire, Turkish authorities
cancelled its decision relaying on national interests and announced
SOCAR-Turcas-Injaz alliance the Petkim shares holder.

Earlier SOCAR vice president Davud Mammadov said that alliance’s
investments in Petkim will increase shares of this company’s output
at the Turkish market from current 27% up to 40% and reduce import
opf chemical products by Turkey from current 70-75% up to 30%.

Petkim produces plastic packing, fabrics, detergents and exports ¼
of this output, but the Petkim new management in the name of the new
alliance can change manufacturing range. Current charter capital of
Petkim is around $1.6 billion. Alliance’s investments can recoup for
the next five or six years.

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