OMV deal signals Neste's end in Borealis
15 Jan 2000
The company named after the Northern Lights is about to take on a much more southern flavour. Neste, the Finnish co-founder of the polyethylene joint venture, is to sell its half-share to Austrian industrial conglomerate OMV and the International Petroleum Investment Company of Abu Dhabi (IPIC), who will each own a quarter of the firm. OMV's polyethylene and polypropylene businesses are to be incorporated into Borealis.
The deal is to cost OMV and IPIC some FMk4billion (£468million), and deepens the ties between Borealis and Abu Dhabi. The company is currently involved in a joint venture project with Adnoc, the Abu Dhabi National Oil Company, involving two polyethylene plants and a world-scale ethane-fuelled cracker. The project has been dogged by delays and details are still not yet finalised; however, production of PE is expected to begin by 2001.
Meanwhile, the OMV polyolefins interests, PCD, boosts Borealis' position in the European polyethylene and polypropylene markets. The transferred capacity include 445,000t/a of PE, both high and low density, and 410,000t/a of PP, as well as compounding facilities and R&D, at sites in Austria, Germany and Italy. With 2million t/a of PE capacity, Borealis is now well clear of its nearest competitor, Polimeri Europa, while in PP, its 1.17million t/a of capacity puts it into third place behind the BASF/Hoechst joint venture, Targor, and the newly-reorganised Montell (see below).
OMV has been trying to shed its polyolefins and plastics businesses for several years to avoid the cyclical swings that characterise the business. An attempt to sell its plastics businesses to Repsol, the recently-privatised Spanish oil-to-chemicals concern, fell through because the companies could not agree on the value of the assets involved.
Neste, meanwhile, is using the deal to concentrate on what it sees as its core businesses of oil production and refining. It first indicated that it wanted to sell its stake in the company - which was formed as a 50:50 joint venture with Sweden's Statoil - as early as 1995, just a year after the company's formation.
Borealis chief executive Juha Rantanen (who is to leave the company in November) commented that consolidation is good for both the company and the industry. `Having fewer and stronger players in Europe ensures the plastics industry's long-term competitiveness in this challenging global market,' he stated.
